DVD sales have declined causing a current problem for Sony Corporations subsidiary Sony Pictures Entertainment. Sony Pictures Entertainment Inc. has seen a severe decline in revenue in the past recent months. DVD sales have declined to a level of severe concern, and as such left financial analysts and specialists in the industry deeply worried. We have taken to the field and conducted a number of interviews to decipher the basis of the rationale behind lack of DVD sales. Through the course of the following entailed research and our detailed interview analysis’s, we hypothesis that the drop in sales is due to a number of interrelated reasons including the current economic state and an advance in technologies giving consumers many alternative options to the DVD.
In the past, Production companies could predict how well a film would sell on DVD by how well it performed at the box office. This is no longer the case as box office hits such as “Indiana Jones and the kingdom of the crystal skull” and “Hancock” sold far below the expected amount of DVDs. This is a relevant problem due to DVDs being a big center of revenue for Sony Pictures Entertainment. Chairman and CEO Michael Lynton stated the following about the DVD market decreases, “it isn’t just contracting, and it’s becoming more volatile and unpredictable than it used to be”. Consumers are not only buying fewer DVDs but have also developed a new quality consciousness that is unforgiving. (Goldstein, 2009)
Unlike its competitors, Sony Pictures Entertainment gave in to Red Box in the first round and signed a contract to provide DVDs for rental on the same day they are released for sale. This was a potentially harmful decision considering the other producers who lobbied against Red Box enforced a 28 day sale only period that Sony will never hold. Consumers can rent a DVD at any red Box location for a dollar a day. Red boxes are stationed nationwide at businesses like Wal-Mart and McDonalds.(Fritz, 2010)
Netflix has also moved in on the DVD revenues, shipping over 2.2 million packages a day. As President of Sony Pictures Entertainment David Bishop stated in an interview with USA Today, “The try before you buy mentality is coming back because of the recession, and at the same time there are more and more ways to access rental, and that plays into the equation as well”.(Arnold, 2009)
Sony Pictures Entertainment is laying of 450 employees this first week of March. Co-chair Amy Pascal explains, “Our industry is affected by two things: Its affected by the economy, of course, and its affected by technology, Over the last two years, its changed the buying habits, which has had a huge effect on our company and the industry at large”. The demand for DVDs is decreasing due to these advancements in technology and the poor state of our economy, and the production company’s must cope with these changes. (CBS News, 2010)
In order to recognize current views of this decline in...