Many companies with disappointing results to report like to distract us from the numbers with a whole lot of irrelevant noise. The tactics they employ are as varied as they are annoying, from the Openwave (NASDAQ:OPWV) press release blitz, to the Accentia (NASDAQ:ABPI) New-Year's-after-hours bad news juke, to the Dell (NASDAQ:DELL) rose-tinted spin move.
Digital media creation expert Sonic Solutions (NASDAQ:SNIC) tried another classic move last week, when management spent most of its earnings conference call describing the state of the industry, rather than the reasons behind its own lackluster performance. This is my favorite maneuver, because it gives us a rare glimpse into a popular but often misunderstood sector. So let's see what these guys had to say.
Captain Obvious speaks
First of all, Sonic CEO David Habiger pointed out that his company had hoped for a quicker adoption of the rival high-definition media formats than it actually got. He said that the format war is hurting HD player adoption and slowing down actual movie releases; both of these trends reinforce the other in a vicious cycle.
The release of Sony's (NYSE:SNE) PlayStation 3 console, with its built-in Blu-ray player, as well as the HD-DVD add-on for Microsoft's (NASDAQ:MSFT) Xbox 360, have put a couple of million players in homes around the world, but the consumers buying them are gamers, not movie enthusiasts. So they buy a bunch of games, then a movie or two, and that's about it. Hollywood doesn't like that model, and there are only about 300 high-def movies available today between the two formats, compared to 80,000 DVD titles, according to Habiger.
Still, the CEO put an optimistic spin on the future. "We are now more certain than ever that HD disc formats will be accepted by consumers," he said, based on the increased market presence of digital, high-definition television sets. But, "having two formats is causing people to wait on purchases, and there are not players out there, and the studios do not really have a lot of incentive to spend time and money making titles and are not driving the sales of our pro product. What we are saying is it is getting extremely difficult to predict when this will be resolved."
Habinger didin't speculate on whether HD-DVD or Blu-ray would eventually win out, and he doesn't really care -- Sonic's professional software can handle either format. Personally, I'm keeping an eye on the dual-format players demonstrated at the Consumer Electronics Show in Las Vegas last month, but they'll have to come down in price considerably before becoming an everyday addition to our home-entertainment setups. Today's players cost considerably more than $800, a far cry from the DVD player you might find in your next cereal box.
Download-to-burn coming soon
Habinger had another tidbit to share. He thinks that we'll be allowed to burn downloaded movies to universally playable discs, and sooner rather than later. "Virtually every major retailer negotiating download-to-own rights with the studios is also securing the right to download and burn," he said. "Our Qflix initiative will make this possible."
He wants to see online movie distributors make the switch from today's heavily restricted, feature-light download models to burnable, full-release disc images, "powered by Sonic." I couldn't agree more.
What we have today is a plethora of crippled services, selling impaired versions of the DVDs we've gotten used to for the full retail price -- and sometimes even more. And then executives from Sony Pictures and Viacom's (NYSE:VIA) Paramount act surprised when nobody's buying.
So the changes Mr. Habinger is talking about are truly necessary if we're ever going to have serious download options in glorious high-def. The fact that none of this tells us anything about Sonic's business today, well, we're supposed to ignore that. Want some steak with that sizzle? Sorry, but the kitchen is closed.
Further Foolishness:
- Get It Together, Sonic: Fool by Numbers
- Made You Blink
- Want Movie Downloads? Pay Up!
- Thinking Outside the Unbox
Dell is both a Motley Fool Inside Value pick and a Stock Advisor selection; Microsoft is another Inside Value choice, and Openwave is a Rule Breaker. Read all about it with a handful of 30-day trial subscriptions.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always worth a read.
