Digital Playground: Consumers accepting Blu-ray faster than DVD

Posted by Wolfgang Gruener

Van Nuys (CA) – In the end, it was not the adult film industry that decided the high-definition format war between Blu-ray and HD DVD. However, this segment faces appears to be taking a lead role in the promotion of high definition as DVD sales are down dramatically and customers apparently are shifting to Blu-ray quickly. The new format opens new opportunities for large studios, but will bring massive challenges for smaller companies in the business, Digital Playground co-founder Joone told TG Daily.

Joone is one of the lucky people in the adult film industry these days. Not only does his company currently control about 40% of the adult DVD business, he has also made some good bets on the future of movie technology that may save him from making tough choices in the months and weeks ahead.

It is no secret that the adult segment always explored ways of new content distribution paths ahead of the rest of the movie industry. Porn producers have figured out years ago how to best leverage the Internet as a distribution platform for their content and it appears that the segment is already seeing the next challenges emerging from the defeat of HD DVD – which is quite remarkable, considering the fact that we cannot say that the movie industry in general has come up with a convincing model to market and sell content through the Internet yet.

According to Joone, the adult segment is starting to see tremendous pressure from the Internet as a distribution platform: 2007 DVD sales were down 40%. Affected are especially low- and medium quality productions in standard resolution, which customers are now acquiring more and more through the Internet and not by purchasing a DVD. On the other side, customers are looking for the highest quality of content and it seems that higher resolutions and more features give Blu-ray a critical advantage over the DVD and the Internet, giving publishers and opportunity to bring their revenues back up. Digital Playground is currently the only significant adult film production firm that has announced 1080p Blu-ray movies and can crank out Blu-ray discs in volume.

“The fact that Blu-ray won [the format war] was not really a surprise,” Joone said in a phone call with TG Daily. “The [sales] numbers weren’t there: We were selling two Blu-ray discs for every HD DVD.”

He told us that Digital Playground made the decision to move to Blu-ray and leave HD DVD behind long before Warner announced its stunning announcement that it would drop support for HD DVD. “Our intention was to keep producing HD DVDs until the end of the March.”

However, Digital Playground was caught by surprise how quickly Toshiba pulled the plug on HD DVD. “The Betamax battle lasted about 10 years. We did not think that this battle would be over so early,” Joone said. And while he feels that Toshiba should have given publishers a heads up on its intention to cancel the format, he is happy with the fact that Blu-ray won. “I have always liked Blu-ray. I think the best format has won.” Why? Simple: Blu-ray offers much more space than HD DVD:  “As time goes by, you will always run out of space. Our movies are up to two and a half hours long and we want to put a lot of extras on the disc. We are filling up 50 GB already today.”

The fact that Toshiba did not inform publishers that it would drop HD DVD left companies such as Digital Playground with a substantial HD DVD inventory. But Joone isn’t worried about getting rid of those movies: “There are a lot of people who are buying these discs. The demand is definitely there.”  For now, he does not intend to drop the price of HD DVD movies.

Digital Playground released its first Blu-ray disc in January and, if we believe Joone, the format is off to a great start. “Blu-ray sales are growing every month. DVDs are still larger in volume, but we are seeing consumers accepting Blu-ray much faster than they accepted the DVD.” Towards the end of the year, Digital Playground will be adding BD-Live features to its content.

The reason why the company is able to move quickly to Blu-ray (and most other adult film studios cannot) is that it has been shooting its movies in HD for four years, providing it with a complete HD library today - while many of its competitors have to start essentially from scratch. Digital Playground also has the financial resources to make the transition: Movie shoot, mastering, editing and replication carry a much higher cost on Blu-ray than on DVD: According to Joone, the production of a movie on Blu-ray is about three times as expensive as the same movie on DVD.

Those firms that stick to the DVD and cannot move to Blu-ray, are seeing a mounting problem: “Low-end and medium [quality] productions are hit pretty hard [by the DVD sales downturn],” Joone said. As standard resolution is gaining popularity on the Internet and cuts into DVD sales, Blu-ray can be sold with a premium price tag: At least for now, Joone believes that 1080p resolution “isn’t feasible” over the Internet. While it isn’t clear whether when U.S. service providers will be offering enough bandwidth to allow the Internet to compete more seriously with Blu-ray over HD distribution, Blu-ray may be the most important tool to protect adult film producers from falling DVD sales today.

Joone did not want to make a prediction how this battle may end, but he said that today’s strategy is clear: “We need to be everywhere: DVD, Blu-ray and on the Internet.”