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Where are the setup fees?
Yesterday I posted pricing information on the wholesale per disc costs associated with replicating Blu-ray and HD DVD media. The article has generated a lot of discussion and debates around the web. From the article comments and other discussions, I found that the number one item that people missed in the first article was the costs associated with the replication “setup” fees, which includes the mastering fee. This fee is normally waived or inconsequential for larger quantity replication batches, but it does bare some significance on smaller replication runs. After receiving some requests in the comments section of the last article, I spoke with one of my replicator contacts and he provided me with approximate setup fee costs. I have posted these setup fees in the comments section of the last article and have also included these in a table image below. My contact also reaffirmed a few pieces of information on pricing costs, numbered below.

#1) The setup or mastering fee is waived on larger orders
#2) The per disc cost of HD DVD-ROM DL is approximately equal to the per disc cost of BD-ROM SL (~$1.30).
#3) The per disc cost of BD-ROM DL is approximately 15 cents more than the HD DVD DL cost.
#4) These costs are likely to go down as time goes on and service (demand) increases.
#5) These are wholesale costs for the industry, going through a reseller or replication broker (such as ProActionMedia) will lead to higher costs.

Blu-ray vs HD DVD replication cost break down



The table image above shows the per disc costs and setup fee costs from replication plant #1. Remember that larger quantity orders of discs will have setup fees waived. From this we can see that Blu-ray SL discs cost more than HD DVD SL discs. But HD DVD SL is not often used, as the capacity is maxed at 15GB. A more interesting comparison would be to look at Blu-ray SL vs HD DVD DL costs or Blu-ray DL vs HD DVD DL costs.

Replication Example Costs Calculated

I have been told that the setup fees are waived at approximately 10,000 discs or more. With this in mind, let us look at the total costs for a theoretical batch quantity of 5,000 discs (setup fee applicable) and a batch quantity of 10,000 discs (setup fee waived). These examples only apply at this one replication plant, who happens to replicate both HD DVD and Blu-ray discs. Costs will most certainly vary at other replication facilities.

Replication costs for smaller batches

Looking at the calculated example costs in the table above, we can see that HD DVD SL would be the most inexpensive media type to replicate in a 5,000 disc unit run. HD DVD SL is not often used though, so what is the next most inexpensive media type to replicate at this quantity? Looking at the calculated data, we can see that Blu-ray SL is less expensive than HD DVD DL ($9,000 vs $9,500) on a smaller batch where setup fees are required. And although Blu-ray SL is a bit less expensive in this situation, opting for this type would lead to a smaller capacity (25GB) compared to the HD DVD DL (30GB). A difference of 5GB might not matter much to content producers though, as most HD films should be able to fit on a 25GB disc. Blu-ray DL (50GB) comes in as the most expensive option ($12,250) at the 5,000 quantity run, but we probably all expected BD-ROM DL to be the most costly option. All in all, it is interesting to see that replicating on the Blu-ray SL format is not more expensive than HD DVD DL on small production runs. Using these example calculations we can see that if a content manufacturer was looking for the least expensive HD disc replication option, they would probably go for BD-ROM SL (25GB) unless only 15GB of capacity was needed.

Replication costs for larger batches



Again, looking at the calculated example costs in the table above, we can see that HD DVD SL would be the most inexpensive media to replicate on in a 10,000 disc unit run. HD DVD SL is not often used though, so what is the next most inexpensive media type to replicate at a quantity of 10,000? At this quantity, HD DVD DL and Blu-ray SL have an equal cost of $13,000. BD-ROM DL (50GB) again comes in at the most expensive option, with a total cost of $14,500 for 10,000 discs.

Blu-ray does NOT cost significantly more than HD DVD

Using the pricing data and example calculations in this article we can make a few conclusions on replication costs at this plant. Replicating on HD DVD SL (15GB) will always be the most inexpensive option at any quantity. Replicating on Blu-ray DL (50GB) will always be the most expensive option. But the pricing of the other two media types (HD DVD DL and Blu-ray SL) is where the most interesting information is. Looking at the pricing and calculated data we can conclude that replicating content on the Blu-ray format is not significantly more costly than HD DVD. In fact, replicating on Blu-ray SL (25GB) can actually be less expensive than replicating on HD DVD DL (30GB). Hopefully this article will help to dispell the myth that Blu-ray disc replication is significantly more expensive than HD DVD replication. If you have any comments please post them in the reply section of this article below and thank you for reading.

Quick Intro: The blue wars are on!
The war between the Blu-ray Disc and HD DVD formats is still in full swing. Each next generation format camp has heavy hitting supporters from powerful tech companies around the world. Each side of the war also has their fans, supporters, proponents and dedicated enthusiasts. Debates, opinions and arguments are flying all over the net over who will “win” this next generation format war.

The replication cost issue
I decided to take a look at one of the oldest standing issues in the blue laser format wars, the difference in cost between Blu-ray and HD DVD disc production (also known as replication). The topic of Blu-ray vs HD DVD production cost has long been a highly debated and frequently brought up issue in the format battle. HD DVD supporters are quite often found stating that “Blu-ray costs more” to manufacture than HD DVD. But how much more and why does Blu-ray have an increased cost? The reason most often put forward is that “Blu-ray production requires completely new hardware”, while HD DVD media can be produced by modifying existing DVD manufacturing hardware. But is there a significant cost difference? Is Blu-ray replication really that much more expensive than HD DVD replication? I certainly did not believe that Blu-ray was 3 or 4 times more expensive than HD DVD, as claimed by Vivid Entertainment. I spoke with optical disc industry contacts and researched online to find the following Blu-ray vs HD DVD replication costs. The results might surprise you.

HD DVD replication vs Blu-ray replication at Plant #1
My confidential industry source revealed that one large replication company is currently charging approximately $1.15 per single layer HD DVD (15GB) and $1.30 per single layer Blu-ray Disc (25GB), assuming a quantity of 25,000. For comparison purposes, a run of 25,000 Dual Layer DVD (DVD9) discs would cost about $0.50 per disc at this same facility. DL HD DVD (30GB) was right inline with SL Blu-ray (25GB) pricing, but an exact figure was not provided. This translates to a cost of approximately $0.077 per GB on HD DVD SL media and $0.052 per GB on Blu-ray SL media.

Blu-ray replication costs Plant #2 (Blu-ray only)
I received quotes on Blu-ray single layer (25GB) replication at plant #2 between $1.35-$1.45 USD per disc on runs of 25K or more. Blu-ray DL (50GB) was quoted between $2.15 - $2.25 per disc on a 25,000 quantity run. Taking the high end on this range, this translates to approximately $0.045 per GB for Blu-ray DL media.

Blu-ray replication vs HD DVD replication reseller costs (ProActionMedia)
One of the only replication companies that actually lists their pricing publicly is ProActionMedia and we found the following replication costs listed on their website. Their prices were significantly higher than the private, customer-only quotes that we received from the other 2 replication plants. I have included images here that break down the ProActionMedia pricing for Blu-ray and HD DVD.

Sticking with the 25,000 run quantity, we can see that ProActionMedia is quoting $1.59 per disc for Blu-ray SL (25GB), $1.45 per HD DVD SL (15GB) and $1.69 per HD DVD DL (30GB). This translates to approximately $0.064 per GB for Blu-ray SL, $0.097 per GB for HD DVD SL and $0.056 per GB for HD DVD DL.

Cost comparison conclusions
From these figures taken from 3 different replication sources, we can see that Blu-ray media replication does not cost significantly more than HD DVD. In fact, we found that Blu-ray is actually cheaper per GB in many situations! It is also interesting to note that at this point, most HD DVD-ROM movies are DL, while most BD-ROM movies are SL, which would make HD DVD more expensive to replicate in most situations. I did not include fees associated with authoring, setup, AACS protection, packaging and other costs in the quotes above, so keep in mind that the final cost of replicating an HD DVD or Blu-ray disc will definitely be a bit higher than the per disc pricing noted above. Also, according to our sources, the Blu-ray setup fee is only slightly more than the HD DVD setup fee, but it depends on the specific manufacturing plant. Looking at these numbers and pricing information, we can now dispell the myth that Blu-ray replication is significantly more costly than HD DVD.

*UPDATE: Blu-ray vs HD DVD replication costs PART 2

The guys over at Gizmodo posted an article detailing the top ten reasons why movie downloads suck. They listed some valid points and I agree with many of them. Here are their main points, reworded, with a few comments of my own included.

1) Price (equal to a tangible, retail box DVD)

2) Lacking selection (movie studios are still resisting movie downloads or have formed agreements with only one or a couple services)

3) Portability transporting the movie download to a TV (consumers have trouble getting their downloaded movie to their main TV)

4) Quality options (sometimes less than DVD, no HD options)

5) Adoption difficulties (long standing purchase and delivery habits are tough to change without significant new features or advantages)

6) DVR competition (Why pay for a movie download when you can record that movie off HBO HD?). DVR = Digital Video Recorder. e.g. TiVo.

7) Download speed (movie download delivery can take a while, why not drive to the store instead?)

Broadband limitations (bandwidth quotas, throttles and other limitations can decrease the attrativeness of movie downloads)

9) Digital Rights Management DRM (download a movie to find that you can’t burn it to disk or have other restrictions that make it a hassle)

10) Complicated processes (movie downloads often require new software, players or other processes that make it more complicated than just popping in a DVD)

While they addressed some very good points, they also left out additional complications and barriers to potential movie downloaders such as Hard Drive space requirements, competition from BitTorrent / peer to peer networks and a few other items.

With all of these complications and barriers to downloading movies, Gizmodo predicts that these type of services will not take off until 2010. Personally, I have yet to purchase a movie download, as I prefer renting with Netflix or Blockbuster in order to get my movie fix.

$1 DVD Rentals kiosk machines now at your local Supermarket

Yesterday, I stopped in at my local Fry’s grocery store to pick up some food. On the way in, I noticed a “$1 DVD Rentals” sign. I took a camera phone photo of the promotional sign and have included it below.

I proceeded in to the store and found a $1 DVD rentals kiosk near the stuffed animal claw machines (pictured below). The DVD kiosk machines are owned by “The New Release” (TNR), a DVD rental company. I also found a flyer on the kiosk machine, which pointed me towards thenewrelease.com. Apparently TNR has just injected 174 new kiosks into the western United States (California, Arizona and Nevada). The new machines were installed on February 5th.

The concept is remarkably similar to “Redbox”, the DVD rental kiosk service that is owned and operated by McDonalds. Rent a DVD for $1 using your credit card, and have it back the next day to avoid any additional fees. But is a grocery store a better place for an automated DVD rental machine compared to a McDonalds fast food store? Possibly, although I have no personal experience with the McDonalds Redbox service or DVD kiosk renting. Intriguing concept though.

$1 for a DVD rental is pretty cheap! Can this new kiosk service compete with Redbox, Blockbuster or Netflix and what are the details of the service exactly? We found a FAQ and other pertinent information on the companys’ website.

$1 DVD Rentals Service Information

For just $1 a day, you can choose from hundreds of titles, including the latest new releases, all conveniently located in premier supermarkets and grocery stores nationwide — more than 3,000 sites this year. TNR currently serves customers across the country in such leading grocery chains such as A&P, Dillon’s, Food 4 Less, Food Lion, Fry’s, H-E-B, Kroger, King Soopers, Publix, Quality Food Centers, Ralph’s, Roundy’s/Pick ‘N Save, and Spartan/Family Fare.

Founded in 2002, The New Release already dominates the self-service DVD rental category in the grocery channel, having served 1.3 million customers and rented more than nine million DVDs since its inception. In addition to its unbeatable price, The New Release pioneered a “No Late Fees” policy, eliminating many of the frustrations and headaches associated with traditional rental methods.

More information can be found on The New Release company website and on their FAQ page. Has anyone tried this “The New Release” kiosk rental service? If so let me know what you thought of it and how it compares to Redbox, Blockbuster or Netflix.

Walmart.com has just launched a movie download service , which is currently listed with a “beta” status. The new Walmart service is the first digital distribution provider to offer movie titles from ALL 6 major Hollywood movie studios. Those studios include Disney, Fox, Paramount, Sony, Universal and Warner. Unfortunately the Walmart movie download website was not rendering properly in Firefox when I visited, so Internet Explorer may be required.

So why have we not seen movie downloads from all of the major studios sooner than this? Probably because the major Hollywood studios have always been skeptical of the digital form factor, fearing that the digitial DRM or encryption mechanisms were not strong enough. Their concerns are not very valid though, as almost any form of encryption or copy protection can be broken or circumvented with enough time and effort. Interestingly enough, Walmart.com actually encourages their customers to protect their investment by backing up the downloaded movie files! Check out the Backup Your Files page screenshot below. The Backup page also states that your Walmart Video Downloads account will be linked to any backup DVD discs that you burn. This means that Walmart is probably including a customer number or other unique identifier embedded within the video download to help trace any abuse or illegal distribution.

Gizmodo also has some excellent coverage on the launch and discusses the movie download pricing. Gizmodo says that “Movies will run from $12.88 to $19.88 on the day the DVD drops, while older flicks start at $7.50. All movies will have roughly the same price as the actual DVD at Wal-Mart stores, though. This is also the deal’s biggest flaw in our view—why pay almost what you’d pay for the actual DVD? Intriguingly mentioned is the possibility of discounts for people who buy both DVDs and digital videos.”

Great point from Gizmodo on the pricing. With Walmart saving or eliminating the costs of DVD replication, retail box production, printing, shipping and other aspects, why should the downloads cost almost the same amount as a retail DVD? This probably has to do with the movie studios wholesale pricing, which they are most certainly trying to keep as high as possible in order to maintain maximum profits. Perhaps we will see the movie downloads pricing drop in the future, but for now a download will cost you almost the same price as a retail boxed DVD movie.

Today, February 6th 2007, the Blu-ray camp wins another small victory in the next generation format war. According to EngadgetHD, Blu-ray now has 159 movie titles available, while the HD DVD format is totaling up with one less, at 158 movie titles. This means that Blu-ray now has more movie titles, more players, more market-share and is maintaining a lead over HD DVD in many key areas. This could all change soon though, as Universal Studios has committed to 100 exclusive HD DVD titles for 2007, with the specific release dates currently unknown. Lionsgate is the studio responsible for pushing the available Blu-ray movie totals above HD DVD totals this week by releasing titles such as Reservoir Dogs and others.

Major movie studios have given their consent for B&M (Brick and Mortar) retail stores to begin utilizing DVD burning kiosks, which can be used to burn a DVD movie on demand while customers wait in store. Supposedly these kiosks will allow retail stores to carry a much larger selection of movies, without devoting additional physical shelf space that would otherwise be needed for stocking retail versions of the enormous back catalog of movies that are available to stores. We have already heard of DVD burning kiosks that produce Linux distribution disks, but now we will finally see the same type of burning stations for Hollywood blockbusters. And while these movie burning stations will allow stores to carry a much greater selection, they will also significantly decrease the cost of manufacturing a DVD movie title. Costs that could be reduced or eliminated by using the DVD burning stations include the DVD armory case, label printing, disk pressing, shipping, and others. Pricing information has not been communicated as of yet, so we will have to wait and see what they will be attempting to charge for an on-demand movie DVD-R. With the reduced product cost, I surely hope the savings will be passed on to the customers, as I am sure no one is going to want to pay $20 for a movie DVD-R that does not come in a retail package.

These DVD movie burning stations would have been available much sooner if it were not for the fears and hesitations of the movie studios. Movie studios have been reluctant to approve the kiosks due to copy protection concerns. We now know that the stations will utilize CSS for DVD-R, also known as DVD Download. The Content Scrambling System (CSS) was broken long ago, so I do not see why the movie studios waited for CSS for DVD-R before approving these burning kiosks. DRM and encryption mechanisms can not be updated on DVD’s due to long established specifications and standards. The DVD-R burning and CSS implementation will be provided by Sonic Solutions and their Qflix technology. Mark Ely from Sonic Solutions also stated “In the next three to four years, we expect 15-20 percent of DVDs will become on-demand rather than being displayed on retailers’ shelves.” Interesting indeed. I predict that these DVD-R movie disks produced at the burning stations will be extremely easy to backup using the currently available DVD backup tools. I will be looking out for the stations as I am interested in finding out exactly who the manufacturer will be for the DVD-R media utilized inside.