Can someone explain the pricing of digital movies?

[Underseer]

I'm thinking of getting Guardians of the Galaxy.

The digital version on Google Play costs $20 for HD (720p max) and comes with no bonus materials.

The cheapest Blu-Ray version comes with one bonus feature, a deleted scene. It has a max resolution of 1080p. It costs more money to manufacture the disks, package it, and ship it out to retail stores, yet it costs around $15 dollars.

Who the hell came up with this pricing? The digital version obviously costs the studio far less to produce and distribute, yet costs five bucks more? Obviously, I'm going to end up buying a physical copy and ripping it myself for digital use, but why the fuck do studios do this crap?

Do they think they're going to discourage people from purchasing digital versions of their films? Everyone knows that the idea of shipping movies to customers on physical media is eventually going to be obsolete. If it's to prevent piracy, any monkey can download ripping software from the Internet and produce a higher resolution digital movie from the Blu-Ray. If anything, piracy is easier with the physical disk than with a digital service like Google Play.

Nothing about this pricing makes any sense to me.

 

[Tom Sawyer]

The price is set at the point where they feel they'll make the maximum profit off of their product. The costs put into creating the product are only one of the factors used to set it.

 

[bigfield]

I'm thinking of getting Guardians of the Galaxy.

The digital version on Google Play costs $20 for HD (720p max) and comes with no bonus materials.

The cheapest Blu-Ray version comes with one bonus feature, a deleted scene. It has a max resolution of 1080p. It costs more money to manufacture the disks, package it, and ship it out to retail stores, yet it costs around $15 dollars.

Who the hell came up with this pricing? The digital version obviously costs the studio far less to produce and distribute, yet costs five bucks more? Obviously, I'm going to end up buying a physical copy and ripping it myself for digital use, but why the fuck do studios do this crap?

Do they think they're going to discourage people from purchasing digital versions of their films? Everyone knows that the idea of shipping movies to customers on physical media is eventually going to be obsolete. If it's to prevent piracy, any monkey can download ripping software from the Internet and produce a higher resolution digital movie from the Blu-Ray. If anything, piracy is easier with the physical disk than with a digital service like Google Play.

Nothing about this pricing makes any sense to me.

Pricing is ultimately about what the market will bear.

The downloadable offers value that the disc version cannot: after you watch the movie you can delete it from your device until the next time you want to watch it, saving you storage costs. You can access it from multiple devices, including mobile devices in situations where having a disc or HDD on hand would be difficult. So people are willing to pay the $20.00. In comparison, the disc is not worth as much to the average consumer (who would not even try to rip a Blu-Ray), therefore the price is lower.

As you have pointed out, the profit margin on disc copies is much lower than that of the downloadable, but for the time being there is enough marginal profit in producing the discs that studios will continue to do so.

Mind you, the lack of a 1080p download and bonus goodies is still bizarre.

FWIW, the cheapest I can buy GotG (Blu-Ray) online is AUD$19.99, same price as the Google Play download. Which is USD$16.30.

 

[Davka]

Companies charge whatever they think they can get. Once the suckers have purchased a product at its initial price, and the "sucker market" has become saturated, the prices will be dropped.

 

[ronburgundy]

Companies charge whatever they think they can get. Once the suckers have purchased a product at its initial price, and the "sucker market" has become saturated, the prices will be dropped.

And there are fewer markets with more "suckers" than the digital market in which sad people place "value" in having the latest gadget or the latest hi-tech method before others do, even if affords zero real advantages beyond that imagined social status.
This is the sole reason why anyone would camp out to buy a phone, or why most people buy the new I-phone when there current one does everything they actually need. Digital allows you to watch it on your I-phone, but if you are watching Guardians on an I-Phone, you probably should be slapped in the face anyway.

 

[thebeave]

I blame it on the conservolibertarians (/libtard).

 

[Underseer]

I'm thinking of getting Guardians of the Galaxy.

The digital version on Google Play costs $20 for HD (720p max) and comes with no bonus materials.

The cheapest Blu-Ray version comes with one bonus feature, a deleted scene. It has a max resolution of 1080p. It costs more money to manufacture the disks, package it, and ship it out to retail stores, yet it costs around $15 dollars.

Who the hell came up with this pricing? The digital version obviously costs the studio far less to produce and distribute, yet costs five bucks more? Obviously, I'm going to end up buying a physical copy and ripping it myself for digital use, but why the fuck do studios do this crap?

Do they think they're going to discourage people from purchasing digital versions of their films? Everyone knows that the idea of shipping movies to customers on physical media is eventually going to be obsolete. If it's to prevent piracy, any monkey can download ripping software from the Internet and produce a higher resolution digital movie from the Blu-Ray. If anything, piracy is easier with the physical disk than with a digital service like Google Play.

Nothing about this pricing makes any sense to me.

Pricing is ultimately about what the market will bear.

The downloadable offers value that the disc version cannot: after you watch the movie you can delete it from your device until the next time you want to watch it, saving you storage costs. You can access it from multiple devices, including mobile devices in situations where having a disc or HDD on hand would be difficult. So people are willing to pay the $20.00. In comparison, the disc is not worth as much to the average consumer (who would not even try to rip a Blu-Ray), therefore the price is lower.

As you have pointed out, the profit margin on disc copies is much lower than that of the downloadable, but for the time being there is enough marginal profit in producing the discs that studios will continue to do so.

Mind you, the lack of a 1080p download and bonus goodies is still bizarre.

FWIW, the cheapest I can buy GotG (Blu-Ray) online is AUD$19.99, same price as the Google Play download. Which is USD$16.30.

But again, if the disks cost more money to produce, why charge less for it? That's the part I don't get.

In fact, I don't understand it in circumstances where the digital copy is the same price as the physical disks (much more common than what's going on with this movie).

Theoretically, the cheaper to distribute one should be cheaper, and that's exactly what the case would be if there were more competition. I think this is a case of the market not having enough competitors.

- - - Updated - - -

Companies charge whatever they think they can get. Once the suckers have purchased a product at its initial price, and the "sucker market" has become saturated, the prices will be dropped.

But even with older movies, the digital price is comparable to the physical media price.

 

[bilby]

Pricing is ultimately about what the market will bear.

The downloadable offers value that the disc version cannot: after you watch the movie you can delete it from your device until the next time you want to watch it, saving you storage costs. You can access it from multiple devices, including mobile devices in situations where having a disc or HDD on hand would be difficult. So people are willing to pay the $20.00. In comparison, the disc is not worth as much to the average consumer (who would not even try to rip a Blu-Ray), therefore the price is lower.

As you have pointed out, the profit margin on disc copies is much lower than that of the downloadable, but for the time being there is enough marginal profit in producing the discs that studios will continue to do so.

Mind you, the lack of a 1080p download and bonus goodies is still bizarre.

FWIW, the cheapest I can buy GotG (Blu-Ray) online is AUD$19.99, same price as the Google Play download. Which is USD$16.30.

But again, if the disks cost more money to produce, why charge less for it? That's the part I don't get.

In fact, I don't understand it in circumstances where the digital copy is the same price as the physical disks (much more common than what's going on with this movie).

Theoretically, the cheaper to distribute one should be cheaper, and that's exactly what the case would be if there were more competition. I think this is a case of the market not having enough competitors.

Or it could be that 'market forces will ensure that all goods are sold at close to their cost of production' is a total myth.

Anyway, a movie is inherently uncompetitive as a product - unless the audience don't care about the content, which seems odd. If people frequently say things like, "I wanted to buy Casablanca, but it's a bit expensive, so I will get Die Hard III instead", then there might be some competitive forces at work; but my guess is that people decide that they want to see a movie based on liking that particular movie, and are unlikely to accept a different movie just because the studio or distributor who owns the movie they want to see is setting their prices higher than a distributor who is selling a movie they don't want to see.

Ultimately the problem here seems to be that you anticipate that the 'laws' of economics should apply; but the reality is that the 'laws' of economics rarely apply even in textbooks - and even less often in the real world.

Prices have little or nothing to do with costs. This is particularly true in entertainment, which is why singers, movie stars and sports stars get very, very wealthy, despite working fewer hours than the rest of us, and working a lot less hard than most people for those few hours that they do work.

- - - Updated - - -

Companies charge whatever they think they can get. Once the suckers have purchased a product at its initial price, and the "sucker market" has become saturated, the prices will be dropped.

But even with older movies, the digital price is comparable to the physical media price.

Both drop as the number of suckers left to fleece falls. But the Chivas Regal effect tends to prop prices up quite a bit. If you don't know much about a movie, except what's in the trailers, then price is a good proxy for quality (and by 'good' I mean 'fucking awful, but the studios and distributors know it's all you've got).

They know that people who are looking at two DVDs neither of which are new releases, and nether of which the mark potential buyer knows much about, will assume that the $10 movie will be better than the $8, and that the assumption will be that the $3 movie is a total dog.

This happens despite there being zero basis for this assumption; because the market isn't full of rational actors seeking to maximise utility; it is full of morons who don't know what they want until the marketeers tell them.

 

[Underseer]

Actually, I do own a few disks because they happened to be cheaper than the one I was looking for. *cough*Blade*cough*

*looks sheepish*

I'm not sure if I buy some of your other points there. By the time a movie is available on disk, people have a pretty good idea if they will like it or not. If they're thinking about buying a movie, they probably already saw it somewhere, and even if they didn't, there's word of mouth, Rotten Tomatoes, etc. Heck, you can whip out your smartphone, scan the UPC, and in seconds be reading reviews of both the movie and the disk itself (e.g. the quality of the transfer).

 

[bigfield]

But again, if the disks cost more money to produce, why charge less for it? That's the part I don't get.

The sell price isn't based on a fixed markup on top of the cost of the goods, it is based on maximising profit, which is determined by both the price and the quantity sold:

for example, for a product that costs the retailer $10:

[TD="bgcolor: #FFC443, align: center"]Price[/TD]
[TD="bgcolor: #FFC443, align: center"]GP per Unit[/TD]
[TD="bgcolor: #FFC443, align: center"]Quantity Sold[/TD]
[TD="bgcolor: #FFC443, align: center"]Gross Profit[/TD]

[TD="align: right"]$15[/TD]
[TD="align: right"]$5[/TD]
[TD="align: right"]125[/TD]
[TD="align: right"]$625[/TD]

[TD="align: right"] $20 [/TD]
[TD="align: right"] $10 [/TD]
[TD="align: right"] 110 [/TD]
[TD="align: right"] $1,100 [/TD]

[TD="align: right"]$25[/TD]
[TD="align: right"]$15[/TD]
[TD="align: right"]65[/TD]
[TD="align: right"]$975[/TD]

[TD="align: right"]$30[/TD]
[TD="align: right"]$20[/TD]
[TD="align: right"]50[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$35[/TD]
[TD="align: right"]$25[/TD]
[TD="align: right"]40[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$40[/TD]
[TD="align: right"]$30[/TD]
[TD="align: right"]25[/TD]
[TD="align: right"]$750[/TD]

The retailer will choose the price that they estimate will yield them the highest profit for their total sales.

 

[bilby]

But again, if the disks cost more money to produce, why charge less for it? That's the part I don't get.

The sell price isn't based on a fixed markup on top of the cost of the goods, it is based on maximising profit, which is determined by both the price and the quantity sold:

for example, for a product that costs the retailer $10:

[TD="bgcolor: #FFC443, align: center"]Price[/TD]
[TD="bgcolor: #FFC443, align: center"]GP per Unit[/TD]
[TD="bgcolor: #FFC443, align: center"]Quantity Sold[/TD]
[TD="bgcolor: #FFC443, align: center"]Gross Profit[/TD]

[TD="align: right"]$15[/TD]
[TD="align: right"]$5[/TD]
[TD="align: right"]125[/TD]
[TD="align: right"]$625[/TD]

[TD="align: right"] $20 [/TD]
[TD="align: right"] $10 [/TD]
[TD="align: right"] 110 [/TD]
[TD="align: right"] $1,100 [/TD]

[TD="align: right"]$25[/TD]
[TD="align: right"]$15[/TD]
[TD="align: right"]65[/TD]
[TD="align: right"]$975[/TD]

[TD="align: right"]$30[/TD]
[TD="align: right"]$20[/TD]
[TD="align: right"]50[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$35[/TD]
[TD="align: right"]$25[/TD]
[TD="align: right"]40[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$40[/TD]
[TD="align: right"]$30[/TD]
[TD="align: right"]25[/TD]
[TD="align: right"]$750[/TD]

The retailer will choose the price that they estimate will yield them the highest profit for their total sales.

That's all very well for a retailer, who at least has a good handle on most of his costs. But even there, the pricing decision is much more strongly dependant on the sales estimate at each price point; slightly different sales estimates could lead to radically different pricing - for example if at $30 he can actually sell 56 units, then a 50% price increase will yield higher profits, all else being equal. Costs are not all that important; if the cost estimate of $10 is out by +/- $1, the optimum price point will likely remain unchanged.

Sales estimates are hard to judge; so many managers concentrate on the cost element of the equation, which is easier to get a grip on; but that is a mistake - the best results are to be had by improving the quality of the sales forecasts, despite the difficulty of that task.

For manufacturers, the cost of a unit is also difficult to determine; there are armies of industrial accountants employed to work out what proportion of the cost of everything (eg. the wages for a clerk in human resources; the cost of waste disposal; the electricity bill; the water and sewerage charges; rent for the buildings, etc.) should be assigned to each of the products coming out of a factory gate - and even with a huge (and costly) effort, the final guess at the total cost contained in a final product is pretty woolly.

The story becomes even murkier when we look at marketing and advertising costs; because those costs are, by their nature, going to vary as some (probably complex) function of the volume that can be sold at a given price - if your advertising agent is good at his job, you might be able to add a few percent to costs, and get an increase in sales volume despite increasing your prices.

At the end of the day, in my experience, small and medium sized businesses set prices based on the boss's gut feelings, and modify them over time using the same technique. If they hit the magic point where profits are maximised, it is more by luck than judgement; although in mature markets looking at history of sales at different price-points can give you an edge in making the decision to raise, lower or keep prices on hold (notice that this historical technique doesn't require any knowledge of costs to implement, either).

Large enterprises, in contrast, hire an army of planners, cost accountants, and sales estimators, to try to get the right answers. Having done all three jobs at one time or another, I can say from experience that this replaces the boss's 'gut feel' for where the optimum pricing point lies with a more technical and mathematical approach, which incorporates as its strongest influence, the 'gut feel' of the planners, cost accountants, and sales estimators.

So in summary, prices are not set at the level that maximises profits, so much as they are set at a level that a bunch of guys guess might probably if they are lucky and with a following wind be close to the point where profits are maximised. Economics isn't called 'the dismal science' for nothing.

If physics was on a similar basis, the speed of light would have been determined by Léon Foucault saying "Well, it has to be more than 10⁵m.s^-1; and it seems to be less than 10¹²m.s^-1; so lets plump for 5x10⁸m.s^-1 for now, and see how we go for a few months".

Estimates of error are rare in economics; not because such estimates are particularly hard to make, but because anyone making such estimates with any degree of accuracy or honesty would scare the pants off everyone, and probably get fired.

 

[bigfield]

The sell price isn't based on a fixed markup on top of the cost of the goods, it is based on maximising profit, which is determined by both the price and the quantity sold:

for example, for a product that costs the retailer $10:

[TD="bgcolor: #FFC443, align: center"]Price[/TD]
[TD="bgcolor: #FFC443, align: center"]GP per Unit[/TD]
[TD="bgcolor: #FFC443, align: center"]Quantity Sold[/TD]
[TD="bgcolor: #FFC443, align: center"]Gross Profit[/TD]

[TD="align: right"]$15[/TD]
[TD="align: right"]$5[/TD]
[TD="align: right"]125[/TD]
[TD="align: right"]$625[/TD]

[TD="align: right"] $20 [/TD]
[TD="align: right"] $10 [/TD]
[TD="align: right"] 110 [/TD]
[TD="align: right"] $1,100 [/TD]

[TD="align: right"]$25[/TD]
[TD="align: right"]$15[/TD]
[TD="align: right"]65[/TD]
[TD="align: right"]$975[/TD]

[TD="align: right"]$30[/TD]
[TD="align: right"]$20[/TD]
[TD="align: right"]50[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$35[/TD]
[TD="align: right"]$25[/TD]
[TD="align: right"]40[/TD]
[TD="align: right"]$1,000[/TD]

[TD="align: right"]$40[/TD]
[TD="align: right"]$30[/TD]
[TD="align: right"]25[/TD]
[TD="align: right"]$750[/TD]

The retailer will choose the price that they estimate will yield them the highest profit for their total sales.

That's all very well for a retailer, who at least has a good handle on most of his costs. But even there, the pricing decision is much more strongly dependant on the sales estimate at each price point; slightly different sales estimates could lead to radically different pricing - for example if at $30 he can actually sell 56 units, then a 50% price increase will yield higher profits, all else being equal. Costs are not all that important; if the cost estimate of $10 is out by +/- $1, the optimum price point will likely remain unchanged.

Sales estimates are hard to judge; so many managers concentrate on the cost element of the equation, which is easier to get a grip on; but that is a mistake - the best results are to be had by improving the quality of the sales forecasts, despite the difficulty of that task.

For manufacturers, the cost of a unit is also difficult to determine; there are armies of industrial accountants employed to work out what proportion of the cost of everything (eg. the wages for a clerk in human resources; the cost of waste disposal; the electricity bill; the water and sewerage charges; rent for the buildings, etc.) should be assigned to each of the products coming out of a factory gate - and even with a huge (and costly) effort, the final guess at the total cost contained in a final product is pretty woolly.

The story becomes even murkier when we look at marketing and advertising costs; because those costs are, by their nature, going to vary as some (probably complex) function of the volume that can be sold at a given price - if your advertising agent is good at his job, you might be able to add a few percent to costs, and get an increase in sales volume despite increasing your prices.

At the end of the day, in my experience, small and medium sized businesses set prices based on the boss's gut feelings, and modify them over time using the same technique. If they hit the magic point where profits are maximised, it is more by luck than judgement; although in mature markets looking at history of sales at different price-points can give you an edge in making the decision to raise, lower or keep prices on hold (notice that this historical technique doesn't require any knowledge of costs to implement, either).

Large enterprises, in contrast, hire an army of planners, cost accountants, and sales estimators, to try to get the right answers. Having done all three jobs at one time or another, I can say from experience that this replaces the boss's 'gut feel' for where the optimum pricing point lies with a more technical and mathematical approach, which incorporates as its strongest influence, the 'gut feel' of the planners, cost accountants, and sales estimators.

So in summary, prices are not set at the level that maximises profits, so much as they are set at a level that a bunch of guys guess might probably if they are lucky and with a following wind be close to the point where profits are maximised. Economics isn't called 'the dismal science' for nothing.

If physics was on a similar basis, the speed of light would have been determined by Léon Foucault saying "Well, it has to be more than 10⁵m.s^-1; and it seems to be less than 10¹²m.s^-1; so lets plump for 5x10⁸m.s^-1 for now, and see how we go for a few months".

Estimates of error are rare in economics; not because such estimates are particularly hard to make, but because anyone making such estimates with any degree of accuracy or honesty would scare the pants off everyone, and probably get fired.

Agree on all that, and I know that my example was simplistic. I work for a small retailer and the estimates are almost completely based on figures pulled out the bosses' ass. Nevertheless the point remains that the retail price is determined by projected profit, regardless of the accuracy of the projections.

 

[prideandfall]

Nothing about this pricing makes any sense to me.

fundamentally, you're making 3 essential mistakes in the way that you're looking at this:
1. the assumption that digital is cheaper on the back end than physical media.
2. the assumption that price has anything to do with production cost of physical materials.
3. that the human eye can even tell the different between 720p and 1080p (it can't), that most TVs can properly display in 1080p (they can't, even when they say they can) or that 720 vs. 1080 mean *anything whatsoever* to production costs (it doesn't).

we're to the point in terms of production technology that between bulk purchase of blank DVDs, bulk purchase of plastic cases, and bulk printing, it costs somewhere in the general area of about 7 cents per unit to physically manufacture a DVD and its cover.
(last i checked, CDs are running at about 3 cents per unit, just for the sake of comparison)
for digital distribution, there's either an enormous up-front cost to purchase the hard drives and servers and IT infrastructure needed to maintain them in order to host your own servers for customers to download from (not to mention ongoing service provider costs and bandwidth concerns), or there is the monthly cost of hiring some other firm to do that for you.
this is far more difficult to accurately pin down to a per-unit price - and as anyone with a shred of understanding of corporate-think knows, any ambiguity (real or imaged) is an immediate excuse for price gouging.

so really what it comes down is: digital prices are fucking stupid because "they can" - the prices were jacked up to ridiculous levels, people paid it, and the cost just stayed there.

 

[dystopian]

But again, if the disks cost more money to produce, why charge less for it? That's the part I don't get.

They've already made the disks; it represents an investment that they need to get back; so they use lower profit margins in order to ensure they get through as much of their stock as possible. For the digital copies there's less of an investment loss if they don't sell copies of a specific movie; so the executives in charge may feel it more viable to set a higher price.

This of course doesn't always make the most economic sense; they might well reach more people and bigger profits if they lowered their prices (something that is especially true in a digital environment): but businesses are generally risk averse, and lowering prices to increase profits seems counter-intuitive to many business types. Putting prices as high as possible is the traditional wisdom. Of course with that reasoning it's no surprise why piracy is as high as it is. It doesn't take a genius to figure out why software piracy is much higher in Australia and Europe than it is in the US: these continents continuously get shafted in the price department. If a game costs 49.99 dollars as a digital download for Americans, it costs 49.99 euros as a digital download for Europeans.

And that's pretty reasonable compared to what the Australians are often faced with. Just look into the price differences Adobe (for example) products between the US and Australia, if you want your head to explode: not sure what the current situation is, but as recently as 2 years it was actually cheaper to fly to the US from Australia and buy Creative Suite in a store than it was to buy it online from Australia itself.

 

[dystopian]

3. that the human eye can even tell the different between 720p and 1080p (it can't),

Uhm... it clearly can. This sounds like the same nonsense about how the eye can't tell the difference between 30 and 60fps; even though that's obviously not true and has been debunked.

The idea that the human eye can't tell the difference between 720p and 1080p is preposterous. Sure, if you're sitting more than 3 meters away from a screen and it's small enough then you can't tell the difference. But if you're sitting closer, or the screen is big enough, you absolutely *will* notice the difference. Unless you have seriously poor eyesight.

we're to the point in terms of production technology that between bulk purchase of blank DVDs, bulk purchase of plastic cases, and bulk printing, it costs somewhere in the general area of about 7 cents per unit to physically manufacture a DVD and its cover.
(last i checked, CDs are running at about 3 cents per unit, just for the sake of comparison)
for digital distribution, there's either an enormous up-front cost to purchase the hard drives and servers and IT infrastructure needed to maintain them in order to host your own servers for customers to download from (not to mention ongoing service provider costs and bandwidth concerns), or there is the monthly cost of hiring some other firm to do that for you.

This seem an incomplete analysis. First off, you're completely leaving out physical distribution costs; which is where most of the cost is going to be. Secondly, there's no "enormous" up front cost to purchase servers, hard drives, and IT infrastructure. Sure, if you're running gaming servers those costs would be significant, but we're talking about your run-of-the-mill distribution servers. Setting those up and maintaining them isn't free to be sure, but the costs are hardly 'enormous'. Plus, those servers will be used to distribute many different products instead of just one. The costs of the servers become very manageable when you're distributing hundreds or thousands of products through them. A DVD by comparison will only have a single product on it.

 

[prideandfall]

The idea that the human eye can't tell the difference between 720p and 1080p is preposterous. Sure, if you're sitting more than 3 meters away from a screen and it's small enough then you can't tell the difference. But if you're sitting closer, or the screen is big enough, you absolutely *will* notice the difference. Unless you have seriously poor eyesight.

several things here:
1. most televisions, as in the vast overwhelming majority of them, do not have the capability of truly displaying in 1080p, even when they say they do.
2. most media, as in the vast overwhelming majority of it, does not display in 1080p, even when it says it does.
3. 99.999% of "1080p" content people think they're watching is actually 720p, whether because that's what it's actually playing it (despite claims to the contrary) or because most TV convert 1080p to 720p anyways automatically.
4. most people don't have the knowledge to be able to tell the difference in terms of knowing which is which, even if shown two examples side-by-side, and almost nobody knows what the difference is with their home entertainment system.

aside from all that, most just can't tell the difference. yes, the way i worded that bullet point originally was overly broad and generalized, but you completely missed the point.

This seem an incomplete analysis. First off, you're completely leaving out physical distribution costs; which is where most of the cost is going to be.

what does distribution have to do with the manufacturing cost? the point i was addressing wasn't about distribution anyways so it's irrelevant - just because i didn't specifically mention it doesn't mean i'm positing that it doesn't exist.

and no shit it's an incomplete analysis, it was a brief reply to a broad and functionally unanswerable question on an internet forum, were you expecting me to write a fucking doctorate thesis?

Secondly, there's no "enormous" up front cost to purchase servers, hard drives, and IT infrastructure.

you either have a very bizarre and inexplicable definition of 'enormous' or else you have no idea what you're talking about.

Sure, if you're running gaming servers those costs would be significant, but we're talking about your run-of-the-mill distribution servers. Setting those up and maintaining them isn't free to be sure, but the costs are hardly 'enormous'.

using hostmonster to get 50 people to download the 'remix' you made with your new editing software a pirated dubsteb synth off youtube to kick off your DJ career across europe doesn't count as a run-of-the-mill distribution server.

Plus, those servers will be used to distribute many different products instead of just one. The costs of the servers become very manageable when you're distributing hundreds or thousands of products through them. A DVD by comparison will only have a single product on it.

you act like facts or practical application has any relation whatsoever to price... it doesn't, and it wasn't the point of my reply, nor of the original question.
if you'd be so kind as to get on track with the conversation actually taking place before replying, that would be awesome.

 

[Jimmy Higgins]

I presume it has to do with obtaining long term streaming rights from different portals. Also, are the discs coming from the studio where as the streaming video is coming from a third party who is taking a cut?

This is why I prefer to rip DVDs and/or get UV with the disc.

 

[Underseer]

Nothing about this pricing makes any sense to me.

fundamentally, you're making 3 essential mistakes in the way that you're looking at this:
1. the assumption that digital is cheaper on the back end than physical media.
2. the assumption that price has anything to do with production cost of physical materials.
3. that the human eye can even tell the different between 720p and 1080p (it can't), that most TVs can properly display in 1080p (they can't, even when they say they can) or that 720 vs. 1080 mean *anything whatsoever* to production costs (it doesn't).

we're to the point in terms of production technology that between bulk purchase of blank DVDs, bulk purchase of plastic cases, and bulk printing, it costs somewhere in the general area of about 7 cents per unit to physically manufacture a DVD and its cover.
(last i checked, CDs are running at about 3 cents per unit, just for the sake of comparison)
for digital distribution, there's either an enormous up-front cost to purchase the hard drives and servers and IT infrastructure needed to maintain them in order to host your own servers for customers to download from (not to mention ongoing service provider costs and bandwidth concerns), or there is the monthly cost of hiring some other firm to do that for you.
this is far more difficult to accurately pin down to a per-unit price - and as anyone with a shred of understanding of corporate-think knows, any ambiguity (real or imaged) is an immediate excuse for price gouging.

so really what it comes down is: digital prices are fucking stupid because "they can" - the prices were jacked up to ridiculous levels, people paid it, and the cost just stayed there.

I'm still not buying the idea that digital distribution is more expensive than physical disks, particularly as you have not even discussed the costs of physically shipping the product to retailers, the cost of storing the physical disks in warehouses, and the various costs of dealing with disks that didn't sell.

As for your claim about 720p vs 1080p, that is a function of screen size and distance to the screen. To claim that the difference is not noticeable under all cases is simply false.

 

[prideandfall]

I'm still not buying the idea that digital distribution is more expensive than physical disks, particularly as you have not even discussed the costs of physically shipping the product to retailers, the cost of storing the physical disks in warehouses, and the various costs of dealing with disks that didn't sell.

well, long-term, it certainly isn't - but a relatively new distribution method vs. a well established one is going to have up-front costs, and any company is going to use that as an excuse to justify price gouging as much as possible.
you keep acting like price has anything to do with cost, or rational logic, or demand... these things are only constraints that inhibit how much a company can get away with robbing you.

As for your claim about 720p vs 1080p, that is a function of screen size and distance to the screen. To claim that the difference is not noticeable under all cases is simply false.

and to claim you any of the millions of average shlubs looking at buying either the blue ray or the digital HD copy of captain america off amazon can tell the difference (or indeed have the equipment and setup required to physically capable of telling the difference in the first place) is not only false but blatantly disingenuous.

 

[Jimmy Higgins]

As for your claim about 720p vs 1080p, that is a function of screen size and distance to the screen. To claim that the difference is not noticeable under all cases is simply false.

I think one problem we have is the actual comparison, seeing an actual 720p vs an actual 1080p, which I believe is only possible via Blu-Ray as no one actually broadcasts (except OTA?) in 720p / 1080p due to compression of signals. Kind of why 4k is silly, because no one streams true HD.