ESCA | Apr 3, 2006, 09:12
Subhankar Bhuttacharya is a senior consultant with Infosys' media practice. Co-author of a much-downloaded article white paper, "DVD Supply Chain: The Emerging Challenge to Media Profitability," Mr. Bhuttachayra will be among the speakers at the Entertainment Supply Chain Academy (ESCA) in June.
Current returns of new release DVDs are very high for many home video companies. What are the causal factors and what can we do about it?
We have to acknowledge that forecasting demand for new releases is an extremely tricky affair. A new title has a very short shelf life. If the title does not do well in first couple of days the retailers are quick to push some other title in the space. Now if you consider the fact that 50 percent of the product placement of the entire sales plan is happening upfront, it becomes imperative that the title do well to start with. So, to begin with, the marketing effort needs to be immaculate. Any mistake in the marketing front can be disastrous. The point here is that if the initial take off for the product is bad, it will cause high return. The take off could be bad for many reasons and bad marketing can be one of them. The Solution: Make sure that the marketing machinery is working perfectly.
But what happens when the forecast is wrong?
There are instances when the entire production and placement process is driven by budgeted numbers, and the budget exercise is often carried out well in advance of season. There is no guarantee that the market environment at the time of the release has remained the same as when the budgeting exercise is carried out. Fundamentally, this is a problem of following a purely "Top Down" approach of demand planning and not factoring in a correction for market reality. So, it is important to use a mix of both Top Down and Bottom Up approaches. There are instances when people use a wrong baseline product to forecast. This usually happens for sequels. The first movie came in 2001. To imagine that the sequel in 2006 is going to follow the same pattern of the 2001 release may not be a valid assumption.
So, what is the solution?
Markets in these days are changing so fast that it is much better to baseline using a recent equivalent title rather than original of the sequel. At best you can use two baseline products. Choose the right baseline product to model demand. There are also pure technical reasons for a poor forecast. One of them is that you do not have a good, reliable forecasting engine to begin with and your parameters/factors are all outdated.
Further insighst from Mr. Bhuttachayra will be forthcoming in future ESCA newsletters. In the meanwhile, he may be reached by email at subhankar_bhuttacharya@infosys.com
Current returns of new release DVDs are very high for many home video companies. What are the causal factors and what can we do about it?
We have to acknowledge that forecasting demand for new releases is an extremely tricky affair. A new title has a very short shelf life. If the title does not do well in first couple of days the retailers are quick to push some other title in the space. Now if you consider the fact that 50 percent of the product placement of the entire sales plan is happening upfront, it becomes imperative that the title do well to start with. So, to begin with, the marketing effort needs to be immaculate. Any mistake in the marketing front can be disastrous. The point here is that if the initial take off for the product is bad, it will cause high return. The take off could be bad for many reasons and bad marketing can be one of them. The Solution: Make sure that the marketing machinery is working perfectly.
But what happens when the forecast is wrong?
There are instances when the entire production and placement process is driven by budgeted numbers, and the budget exercise is often carried out well in advance of season. There is no guarantee that the market environment at the time of the release has remained the same as when the budgeting exercise is carried out. Fundamentally, this is a problem of following a purely "Top Down" approach of demand planning and not factoring in a correction for market reality. So, it is important to use a mix of both Top Down and Bottom Up approaches. There are instances when people use a wrong baseline product to forecast. This usually happens for sequels. The first movie came in 2001. To imagine that the sequel in 2006 is going to follow the same pattern of the 2001 release may not be a valid assumption.
So, what is the solution?
Markets in these days are changing so fast that it is much better to baseline using a recent equivalent title rather than original of the sequel. At best you can use two baseline products. Choose the right baseline product to model demand. There are also pure technical reasons for a poor forecast. One of them is that you do not have a good, reliable forecasting engine to begin with and your parameters/factors are all outdated.
Further insighst from Mr. Bhuttachayra will be forthcoming in future ESCA newsletters. In the meanwhile, he may be reached by email at subhankar_bhuttacharya@infosys.com