Commentary

Network-Delivered Video Still Sliver of the Market

DVDS

Just a quick reality check. Those of you renting or buying movies over Apple TV or Amazon On-Demand may be on the cutting edge of the market, but it is still a thin edge. Even as the old DVD sales and rental market collapses, consumers are still embracing next-gen tangible media. According to new forecasts and figures from Screen Digest, the share of the $18.5 billion (for 2010) home entertainment market coming from subscription TV VOD, Internet-based VOD and digital sell-through of film and TV amounted to 12.2% or $2.3 billion. In fact, the growth curve for Blu-ray disc sales and revenues was steeper than digital delivery. BD sales were up 64.2% and rentals of the format were up 105.5%. Meanwhile network-delivered media was up 21.9% for the year.

To be sure, the home entertainment software segment is being battered even as the hardware makers push out new HD and 3-D methods of consuming that content. The market has gone from $22.3 billion in 2006 to $18.4 now. It was down 6.5% in 2010 alone. Driving the decline is the lifecycle end of a massively important DVD retail sales piece, which has tanked: down $1.5 billion last year for a loss of 15.6% in that dying market. DVD rentals was also down 12.4%. Blu-ray is taking off to a degree but not nearly enough to make up for the old discs.

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Network delivery of digital home entertainment media is growing at a fair clip, nonetheless. This year will be the first that it breaks the 10% market share barrier. The studios' preoccupation with Blu-ray and DVD release windowing and driving complex bargains with digital delivery services over when their properties appear for download is being driven by the basic math. About 88% of home entertainment revenue continues to come from hard copies. That segment may be in decline, but digital delivery, while no doubt working on higher margins at lower costs, cannot replace the revenue losses that would come from abandoning discs.

If my family's media rental habits are any indication, the film and TV industry are not only facing declining disc sales but also waning interest in personal collecting. The ready access to digital downloads, and the dense libraries accruing at many services, makes me do the math before I actually buy either a disc or even my own digital copy of something. How many times will I actually watch this?

If you buy a disc for its immediate accessibility, streaming rentals like Apple TV or Amazon usually are a cheaper solution. Disc extras? Well, maybe in the case of special film experiences I truly covet, but generally knowing that the full runs of many TV series or films are accessible anytime for a few bucks a view is enough to quell my desire to buy another boxed set. I still haven't gotten through all the seasons of Rocky and Bullwinkle.

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