The DVD market is beginning to change what’s a “success” or “failure” in Hollywood.
Hollywood’s basic strategy is a familiar one: invest a huge amount of money in films that have the potential to be blockbusters, target teen-agers as a core audience, and spend enormous amounts of energy and money trying to get people to the theatre on the first weekend. This is a high-risk, high-reward strategy, and it can work, but it makes less sense in a world in which DVDs are the main source of revenue. While many blockbusters do very well on DVD, they generally make less that way than at the box office. Instead, the weekly lists of DVDs are full of movies that Hollywood has traditionally considered mediocre performers — small-to-mid-budget comedies, horror films, and dramas, like “Friday Night Lights,” “The Notebook,” and “Hide and Seek.” Unlike blockbusters, these movies often earn more from DVD sales than at the box office. The bio-pic “Ray,” for instance, earned seventy-five million in the theatre but a hundred and twenty million in DVD sales.
In recent weeks, business pages have been full of dire predictions about slowing DVD sales, based mainly on news that the numbers for “Shrek 2” and “The Incredibles” came in well below expectations. But while there?s some evidence that the performance of the biggest hits appears to be slumping (though only slightly), smaller movies are picking up the slack: over-all sales are still rising briskly. This year, they are on a pace to top twenty billion dollars.
One reason is because the DVD audience isn’t the same as the VCR audience was, let alone the movie-going audience.
What’s becoming increasingly clear is that the people who buy DVDs are, for the most part, not the people who go to the movies on opening weekend. According to research from Fox Home Entertainment, DVD buyers tend to be older than your typical theatregoer. More of them are women, and most of them don’t see movies in theatres before buying them. Most important, the new DVD audience is so diverse that companies can target niche markets and still sell millions of disks. Because specialized markets are more predictable, the risk of failure is much lower, and so small-to-mid-budget movies can be very profitable indeed. In the U.S., a big-budget epic like “Troy” may have earned nearly twice as much money at the box office as “Ray” did, but, once DVD sales are included, that ratio drops to just 1.2 to 1. And, once you take into account the difference in production and marketing costs, “Ray,” a far cheaper film to make, starts to look like a truly excellent investment.
But when will the studios begin to realize it?
It will be hard, of course, for Hollywood to break itself of the habit of fetishizing opening weekends, but some studios seem to have done it, most notably New Line Cinema (which made “Wedding Crashers”). Over the past four years, the company has flourished by combining lots of small- and mid-budget movies — including DVD hits like “The Notebook,” and “Harold & Kumar Go to White Castle” — with one big “tent-pole” investment (“The Lord of the Rings”). Over time, other studios are bound to adopt similar strategies.
(via Kottke)