The DVD Marketplace Is Officially Dead!

[Lee]

LOS ANGELES (Reuters) - Playboy Enterprises Inc, which publishes the world's most widely read adult entertainment magazine, will stop making DVDs to save about $12 million a year, and focus on distributing its content online, the company said in a regulatory filing.

Shutting its DVD operations will cost 80 jobs and $2 million in restructuring charges, according to the filing on Wednesday with the U.S. Securities and Exchange Commission.

With another $4 million taken against archival materials and a receivable, the company anticipates taking $6 million in charges against operating income for the third quarter ended September 30, which is expected to result in a net loss for the quarter.

Playboy spokeswoman Martha Lindeman said the DVD business was accounted for on the company's earnings statements under "Other" along with Playboy radio and its Alta Loma production company. In the first half of 2008, that line item was $2.9 million, compared to the first half of 2007 when it was $3.4 million. Lindeman said the DVD business was the largest of the three in that classification.

Playboy said in the filing that it expects to see some benefits from the cuts in the fourth quarter of 2008, and the full effects next year.

The company announced restructuring plans two months ago with an eye on saving $10 million a year.

In August, Playboy posted a second-quarter loss of $2.1 million, or 6 cents a share, compared with net income of $1.9 million, or 6 cents a share, a year ago. Revenue fell 14 percent to $73.4 million.

In a memo to all Playboy employees that was appended to the filing, Christie Hefner, the company's chairman and chief executive, said the goal was to return the company to profitability in 2009.

Hefner said in the memo that some savings would come from Playboy doing its own magazine pre-production work, outsourcing some non-core functions, and outsourcing newsstand sales for Playboy magazine and special editions.

She said the company was acting to meet the challenges of increased competition for consumers' attention, the migration of advertisers to other platforms, and higher costs of paper, ink and other expenses.

The company will continue to deliver more content digitally, she said in the memo, as it exits the DVD business in phases over a few months to concentrate on selling that content online. Hefner said of the 80 jobs being eliminated, 25 were already open.

Playboy will cut overtime, travel and entertainment, and find environmentally sound ways to save energy and money, including using lighter magazine paper and energy efficient light bulbs.

Hefner said Playboy's balance sheet is strong, its debt level is reasonable with a below market interest rate of 3 percent, and "we have a solid cash position of more than $25 million and access to a $50 million revolving credit agreement."

"Unlike other companies that began in print, we have profitable television, online and mobile businesses, which have domestic and international growth potential," she said in the memo, adding Playboy expects growth in its licensing business to continue, that business was good at Playboy's Las Vegas club, and that it was building an even larger project in Macau.

She said Coty, the world's largest fragrance company, would begin global launch of Playboy fragrances this fall.

http://news.yahoo.com/s/nm/20081015/...saeF_0pnD6VbIF

With a huge company such as PlayBoy dropping their DVD line, this should be ample proof that the DVD market is dwindling, if not already dead/dying.

What are your thoughts on this? Are we going to start seeing more and more studios going the digital product route only as physical product sales start to decline even further?

im now waiting for the usual DVD distributors to post saying 'sales are strong'....

Regards,

Lee

[Squirt]

I'll step out on a limb and say there's something fishy here, perhaps not a well run operation? I hate to say that but they are the king and they've made mistakes in the past.

They have a huge demographic that fits the DVD market, the same one that fits the magazine market, and notice they didn't outsource the DVD rights to continue making money on that aspect of the industry with no overhead, they shut it down completely.

I dunno, with Christie Hefner cutting DVD's out completely but increasing the cost of Playboy magazine to be composed of environmentally friendly materials you have to wonder what they're thinking. But I'm nobody and it's their business. :maxpower:

[gaybucks_chip]

I'm so tired of people trumpeting that DVDs are dead. MORE adult DVDs were sold in 2007 (by a tiny amount, 1 or 2%) than in the previous year, and from what I understand, 2008 is on scheduled to increase yet again.

Yes, the market will eventually die or become about as large as the market for carbon paper, but I agree something is fishy with Playboy... perhaps they just didn't market product people wanted.

[derekt]

I agree with both Lee and Chip, something does indeed sound fishy there.
There will always be a "need" for DVD Products for consumers. They will always want the DVD, the artwork, the physical product in their hands.
On another note, are they dying? Yes, I do believe so. But I do not think that the DVD production aspects of the adult industry will ever stop.
What I think is happening here is that the consumers can access all of the porn they want on the internet for a cheaper cost IE: AEBN. And not have to leave the house to get their porn, they can do it right from online.
Is it dropping, yes I would say it is. But dead, nah.. never.

[abostonboy]

I'm so tired of people trumpeting that DVDs are dead. MORE adult DVDs were sold in 2007 (by a tiny amount, 1 or 2%) than in the previous year, and from what I understand, 2008 is on scheduled to increase yet again.

That is the main problem with the DVD market right now. Supply and Demand. The supply of DVD's that hit the market is way more than 1-2%.

The DVD market now reminds me of the video game crash of 84. At that time supply far outweighed demand. Games were heavily discounted. Quality sucked. The same is happening in the DVD market now.

With the economy tanking, people will think twice about shelling out $60 for a DVD. Yet, with demand for most titles shrinking (some are the exception), it will be hard to see profit margins unless quality takes a nose dive.

[abostonboy]

I agree with both Lee and Chip, something does indeed sound fishy there.
There will always be a "need" for DVD Products for consumers. They will always want the DVD, the artwork, the physical product in their hands.

Agreed.

http://dvd.shop.ebay.com/items/Laser...=p4522.c0.m239

[gaybucks_chip]

What is already happening is a lot of the smaller, second rate studios have discontinued shooting new content and are blowing out old titles at ridiculous rates and then dropping them entirely. This is, temporarily, flooding the market, dropping the quality, and lowering prices.

A lot of the smaller studios will end up going out of business because they won't be able to survive selling 300 copies of a title at $5 wholesale.

The bigger studios who understand the market may have to scale down productions somewhat, but they will survive, continue to produce quality product, market it effectively, and people will continue to buy quality product for a decent price (probably not $60, maybe $30 or $40)

The other thing is... the straight market is a lot more impacted than the gay side because there's 10 times the product from a bazillion small studios, and an even greater amount of absolute crap.

That's why the Playboy deal (dropping DVDs) might, in retrospect make some sense... I know someone who was doing some contracted work for them and he told me that the quality of a lot of the stuff they were putting out was technically good (meaning, good camera and sound) but the content he was working on was crap, stuff like girls playing volleyball topless... and there isn't that big a market for that sort of thing when you can get tons of hardcore stuff for $15 retail.

It will definitely be interesting in the next year or two and I think a lot of smaller players, both in DVDs and websites, will go under or will be bought for next to nothing by bigger companies.

[nickbaer]

"Quality" is defined by the consumer, no one else.

Is "quality" the same old porn star in his 50th title, with extra make up, costuming, and exotic location, or is "quality" a new dick getting sucked or a new ass getting topped?

The consumer gets tired of the same actors, the same director, shooting the same repetitive scenes...

A couple of years ago, after editing about 100 projects for a company, I suggested that they buy a new couch that was featured in half or more of the projects. That's a big reason why I like to travel and shoot on location.

The consumer is looking for "variety", in specific niches. Whether a DVD is produced with effects, special lighting, make up, costuming, exotic locales, the consumer is looking first for "niches" that he can identify with.

[citiboyz]

The Independent published an excellent article regarding the decline of Playboy. I think, as far as that company is concerned, it may explain the reasons, although declining dvd sales don't appear to have been a factor.

http://www.independent.co.uk/news/pe...oy-960143.html

[abostonboy]

"Commercial magazine and DVD porn have been devastated by the internet. "

http://www.independent.co.uk/news/pe...oy-960143.html

[gaybucks_chip]

"Quality" is defined by the consumer, no one else.

The consumer gets tired of the same actors, the same director, shooting the same repetitive scenes...

A couple of years ago, after editing about 100 projects for a company, I suggested that they buy a new couch that was featured in half or more of the projects. That's a big reason why I like to travel and shoot on location.

The consumer is looking for "variety", in specific niches. Whether a DVD is produced with effects, special lighting, make up, costuming, exotic locales, the consumer is looking first for "niches" that he can identify with.

Couldn't agree with this more. The same models in the same setting (or even same models, different setting, or different models/same setting) seems to get old after a while and customers get annoyed.

Of course there are always exceptions and there's a few studios that have used the same setting and always manage to make it fresh... but that's the exception rather than the rule.

Quality is a combination of many factors, and also a difficult thing to describe, since it varies from one person's opinion to another. The main thing I'm talking about is the glut of DVDs with very poor production values, bad lighting/camera work/editing, less-than-attractive models, etc. Well produced DVDs with hot scenes, appealing models, and good production values continue to sell well.

[shaun]

Also keep in mind the type of content Playboy is producing. Playboy, once upon a time, was considered shocking....

Thanks to pornmeisters (like me) - what has become acceptable is so FAR harder - that Playboy seems passe.... not so interesting at all anymore.

I think that playboy simply cannot compete in a world where kink.com has made rape an acceptable turn on.

[LavenderLounge]

If DVD is dead, why is Disney doing a direct to DVD release of the new Tinkerbell? They could have just as easily debuted it on TV instead.

[citiboyz]

We've been involved in BOTH the online and dvd (vhs, previously) business for many years. I can appreciate the opinions of those who come down on both sides of the issue. From my own experience, though, I think our dvd sales decline has more to do with an oversaturation in the market than a move to the online delivery model. We have customers who prefer one over the other, so we offer both. Dvd is still completely viable for us. I'm just speaking for myself, of course.

[Lee]

If DVD is dead, why is Disney doing a direct to DVD release of the new Tinkerbell? They could have just as easily debuted it on TV instead.

Because you cant download Disney movies online on PPV

You simply cant compare mainstream media to online porn, there is no comparison at all, its not even like comparing apples to oranges because mainstream and porn arent even in the same food group

Regards,

Lee