Here’s a New York Times story on Dreamworks Animation SKG’s stock drop and general financial woes, due in part to sluggish DVD sales of Shrek 2 and Shark Tale. There seems to be a CGI-on-DVD malaise at the moment: Pixar has also been disappointed with The Incredibles’ performance.
I’m not sure if this is all a blip or an indication that folks are losing interest in computer animation. Clearly, the gigantic profitability of Dreamworks and Pixar’s films is predicated as much as them doing well in home video as at the box office. If they’re starting taper off on DVD, it could cause the studios to greenlight fewer features and slash the budgets of the ones they do make.
And one wonders how less surefire upcoming films–Disney’s Chicken Little, say–will fare if hits like Shrek 2 and The Incredibles disappoint.
Then again, maybe Dreamworks and Disney just stuffed too many copies of these discs into the channel. Anybody out there have a guess what’s going on here, and whether it’s a trend?
I think the problem is not initial sales, I think the problem has to do with the sales curve. Once upon a time, a movie would be released to theaters and would play for six months. Often, the movie would increase it’s weekly box office over time. Now, movies play for six weeks (if they’re lucky) and they make a third of their box office revenue in the first weekend.
A similar thing is happening with DVD sales. Where once they were steady sellers, they now sell the bulk of their units in the first few weeks of release. After that, sales are down considerably. What happened with DreamWorks is that they expected the quarter after the release of Shrek 2 on DVD to basically match the sales of the quarter when it was released. That didn’t happen and DreamWorks had to downgrade their sales estimates and profitability as a result.
I think that the large number of new DVD releases every week has caused this situation. Stores that retail DVD’s constantly have new stock to put out and promote, so older stock doesn’t get the same positioning within the store. Lower visibility equals fewer sales.
And on top of that, DVD’s are basically impulse purchases. If you want to buy a DVD, you just buy it. You don’t save up for more than three months to make the purchase. That means that anybody who’s really interested in buying a DVD is going to do it in the first quarter it’s on sale. After that, a DVD might be a steady seller, but it’s never going to be a high volume item like it was during the first few weeks of release.