Fewer People Copy DVDs Than Once Thought

MasterOfMagic writes "According to a survey reported at the NY Times, very few people actually have and use DVD copying software. The survey reports that only 1.5 percent of computer users have DVD copying software, and of those 1.5%, 2/3rds of them don't even use it. The survey also revealed that users were more likely to download DVDs than copy DVDs that they borrowed or rented, and that about half of all downloaded DVDs are pornography. According to the survey's lead analyst, 'With music, part of the appeal is sharing your own playlists and compilations with your friends ... I'm not sure people share their porn the way they share their music.'"

Comments

Re:1.5 percent?

[Kadin2048]

What? If you have a computer with a dvd writer, surely you also have something like nero installed. Maybe I've been away from windows for too long, but I don't remember seeing some form of protection to do a 1:1 copy of a DVD. Thinking about it, that would have made sense. Is there such a protection in commercial burning application?

Yes, there is. Although the people who put together CSS weren't incredibly bright, they weren't that stupid, either.

First, most commercial programs like Nero won't even make an image of an encrypted DVD. There's no technical limitation preventing them from doing so, but they just stop you. I think that's a lawyer-imposed limit.

Anyway, if you did make a block-by-block copy of an encrypted DVD, and burn it to a new disc, it would not play back on normal hardware. This is because the key to the content is stored on the disc in a special location, which is always made unwritable on blank DVDs. (Actually, I'm not sure if it's that the blanks don't let you write there, or if the consumer writers aren't capable of writing there, or both.) But anyway, you can copy all the encrypted data, but without the key your player will just barf on it.

However, DVD playback systems that don't rely on retrieving the key from the disc will play it just fine -- this includes every DVD player on Linux that I'm aware of, once you get the libdvdcss package installed. This is because if the drive fails to hand over the key, libdvdcss will proceed and recover the key through several other methods (one of which is just brute force, and is pretty speedy because of the braindead way CSS is implemented).

Apple's "DVD Player" application will also play an encrypted VIDEO_TS folder, even if it's not on a disc with the key on it. (Though I've never tried it off of a DVD-R disc; it will work just fine if you copy the VIDEO_TS folder from a DVD to your hard drive and play it, which is nice if you want to watch a movie on an airplane without draining your battery or something.)

But anyway, one of the only things that CSS actually does is prevent 1:1 copying onto DVD-R discs. Or at least it did until it was cracked eight ways from Sunday. (The biggest thing that stops people from copying movies, or stopped them while it was still an interesting thing to do [before you could go out and get hard drives at a lower cost-per-MB], was that most feature films won't fit on a 4.7GB DVD blank.)

Re:Really not surprised

[shark72]

"You hit it right on the head here. It is amazing a movie that typically costs X million to produce costs about as much as a CD. Somewhere, somebody is not understanding the economics of this."

I'm sorry to say that it is you. But, take heart -- you're not the first person to miss this point, by far.

This boggles a lot of people who haven't studied much economics or who don't work in the retail industry, but items are typically priced according to the law of supply and demand, and not the cost of sale. Consider these examples:

• Kenneth Cole pays about the same price for materials for a shirt or a pair of shoes as Sears does, and their costs of production are about the same. Yet Kenneth Cole is able to sell shirts for $150.00, while Sears would be likely to get $40 for a shirt with the same material cost. This is because Kenneth Cole sells a shirt for the price they can get for it.
• An iPhone costs something like $500, and requires two years of service. It's not a good value at all considering what else you can get for the money. The cost of the materials in the iPhone isn't much different than many phones and PDAs, and even the R&D cost isn't too far out of line with that of other, far cheaper, electronics goods. Yet people were literally lining up overnight to buy them!
• You might know somebody who makes a pretty good living. His actual cost of living might be $60K a year, but since he's worked hard at his craft -- gone to school, or just gained experience -- he's in higher demand and thus he earns a salary that's considerably higher than $60K. If he had set his "price" according to his cost of living, he would be missing out on all that money. He is the supply, the employers have the demand.

I hope this helps you understand the economics of how DVDs are priced. In case it isn't clear, they're set at the price they are because that's the price at which the movie companies make the most money overall. If they sold them for more, they might make more per sale, but the reduction in the amount of people who buy them might be too much to make it worth it. Likewise, if they lowered the price, they might get more sales, but not enough to offset the lost money per sale.

You expressed surprise at the difference in price between a DVD and a CD. You appear to be surprised since they use the same materials (plastic and metal) and have a similar manufacturing process. But, keep in mind that software is also distributed on CD and has pricing that's all over the board. Why does some software cost $9.99 while other software can command a price of $500, even though both are distributed on the same medium? The answer is our old friend supply and demand.

You've probably noticed that all DVDs cost about $10 - $20, despite the fact that their production costs are all over the board. Indy films that cost $20MM to make often cost the very same on DVD as films costing $100MM or more. Evan Almighty cost around $175MM to make, but when it goes on sale on DVD, you can be sure that you'll see it on the shelf for $20 or so next to films that cost around the same price. At the point of being redundant, this is again because the DVD is priced at the optimal point on the supply/demand curve -- and not based on the cost of the plastics or even the production costs.

I hope this helps you understand the economics. Let me know if it's unclear.

Most of the revenue is from DVD sales

[Solandri]

According to the MPAA (PDF warning), theatrical sales brought in $25.82 billion worldwide in 2006 (page 5, includes the U.S.). Distributed over 607 films released (page 10) this works out to $42.5 million per film. But on average each film cost $65.8 million to make (PDF warning) (page 17, production and advertising costs).

In the same year, DVD sales numbered 1.3247 billion (page 28) in the U.S. alone, at an average price of $22.40 each (page 33). That works out to $29.7 billion in DVD revenue in the U.S. U.S. theatrical sales by comparison were $9.49 billion (page 4). DVD sales in the U.S. alone exceed worlwide theatrical sales.

Per film released (yeah I know they're not the same films, but we're doing an annual tally here) that works out to $48.9 million per film, for the U.S. alone. If the sale ratio of theatrical vs. DVD sales in the U.S. holds for the rest of the world (unlikely, but let's just say), then global DVD sales would be $80.8 billion, or $133 million per flim.

So to recap for 2006:
# of releases: 607
US theatrical sales: $9.49 billion
Global theatrical sales: $25.82 billion
US DVD sales: $29.7 billion
Global DVD sales (hypothetical): $80.8 billion
Average cost to make each film: $65.8 million
Average theatrical sales per film released: $42.5 million
Average DVD sales per film released (hypothetical): $133 million

I think it's safe to say that DVD sales are the lion's share of their revenue. The theater side of the industry could disappear entirely and there's probably still plenty of room for profit. Draw what conclusions you will from this about the RIAA's pricing. (Also note that the $10 DVD is a myth - yes some are sold for $10, but the average price is about the same as a music CD.)

One final footnote. The MPAA only claims $6.1 billion in losses to piracy (PDF warning) in 2005. So they're claiming piracy only accounts for 6%-11% of their total sales (depending on what figure you use for DVD sales). The RIAA claims $4.5 billion in piracy losses in 2005 versus $12.3 billion in total retail music sales. A whopping 37%