[opendtv] Incrementalism
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 8 Jan 2014 08:40:42 -0500
Bert thinks the media conglomerates are missing a huge opportunity with the
Internet. I think they are moving in measured steps to control a new
distribution medium that has been incredibly disruptive to other media
businesses - just look what the Internet did to the music business...
Bert also struggles to understand why the congloms use so many "middlemen" to
sell their content, choosing to widely license this content rather than using
the Internet to sell directly to consumers.
History tells us that while the politicians have helped to create the media
oligopoly, they have also used their regulatory partners to prevent the
congloms from monopolizing distribution. Examples include:
The FCC Fin/Syn rule, which opened up the prime time access time slots to
syndicated programming, rather than allowing the broadcast networks to program
the 6:30 - 8:00pm time slots.
The FCC syndication rules that required the congloms to license content carried
by cable systems to the new DBS distribution systems. These rules may be
extended to "Internet MVPDs."
One need only look at how the feature film segment of the media congloms have
used evolving technologies to monetize secondary markets after the theater
release window.
Remember when broadcasters used theatrical movies to attract viewers during
ratings season? Then the VCR made it possible to sell movies directly to
consumers, which begat the "Blockbuster era" when we drove to a store to rent a
movie, eventually on DVDs. Then the MVPDs used HBO and Showtime to attract
cable subscribers; later the DBS systems attracted subscribers with near video
on demand, and cable systems added real VOD after the upgrade to a digital
infrastructure.
Then the Internet threatened the industry with pirated digital distribution,
and the politicians stepped in to protect the congloms with the DCMA, and a war
over copy protection derailed the successors to DVD.
Then Internet distribution became the next challenge...
Bert recently questioned why consumers download content, when they can stream
it from the cloud? The following WSJ article sheds some light on how the
congloms are using the Internet to monetize movie distribution, selling bits
rather than shiny discs...
Regards
Craig
http://online.wsj.com/news/articles/SB10001424052702304887104579306440621142958
MEDIA & MARKETING
Sales of Digital Movies Surge
Delaying Availability of DVDs, Rentals Nudged Consumers
After years of trying to convince consumers to buy movies online, Hollywood
found a solution in 2013: Make it the only option.
Digital movie purchases surged 47% last year to $1.19 billion, according to
data released by Digital Entertainment Group, an industry trade group. It was
the fastest-growing category as total home-entertainment revenue inched up 0.7%
to $18.22 billion.
Digital growth just barely made up for ongoing declines in sales and rentals of
physical discs. The total U.S. home-entertainment market remains well below its
peak of more than $22 billion 2004, a drop that has squeezed the profits of
every studio and led to widespread cost cutting.
Still, strides in digital-movie sales are encouraging to studios. And a primary
reason for the accelerating growth in online sales is the widespread adoption
of a new release window marketed as "Digital HD." For one to four weeks before
a movie becomes available on DVD or to rent online, studios make new movies
available to purchase from digital stores like Apple Inc.'s iTunes Store and
Amazon.com Inc. in high definition.
"That's a significant portion of the growth we've seen," said Jim Underwood, an
executive vice president of home entertainment at Sony Corp.'s Sony Pictures
Entertainment.
"We've seen a fundamental shift in consumer behavior based on that early
digital availability," said Ron Sanders, home entertainment president for Time
Warner Inc.'s Warner Bros. Although some people are now buying movies online
who might otherwise have bought a DVD or Blu-ray disc, studio executives said
the biggest change is people who would have rented a movie but now, unwilling
to wait, are buying it instead.
Online movie sales are studios' highest-profit-margin transaction, along with
Blu-ray discs, which is why they have aggressively pushed the format.
On most new releases, digital purchases now make up between 10% and 15% of home
entertainment revenue, said Mike Dunn, home entertainment president for 21st
Century Fox's Twentieth Century Fox. Only a few years ago, the business was
virtually non-existent.
(21st Century Fox and News Corp, owner of The Wall Street Journal, were until
late June part of the same company.)
"Despicable Me 2," which was available to buy online for two weeks before its
DVD release, was the best-selling title online of 2013. Universal Pictures, the
ComcastCorp. studio that released the animated sequel, declined to share exact
sales figures, but Craig Kornblau, the studio's home-entertainment president,
said sales were more than double those of his studio's "Ted," the No. 1 online
seller in 2012.
Sony was the first company to offer a movie for sale online before the DVD,
with the comedy "Bad Teacher" in 2011. But the experimental practice became
widely accepted only last year, as studios also all adopted the "Digital HD"
branding first pushed by Fox.
Despite widespread speculation that studios would do away with so-called
release windows, and instead release movies in multiple formats simultaneously,
they have been doing just the opposite. In addition to the early digital
window, several studios have pushed back on buck-a-night DVD rentals from
kiosks, making them wait four weeks after a DVD is released. That form of DVD
rental, a business dominated by Redbox, a unit of Outerwall Inc., formerly
called Coinstar Inc., slipped in 2013. After growing 16% in 2012 and 31% in
2011, the kiosk-rental category fell 1% last year to $1.92 billion.
A Redbox spokeswoman didn't respond to a request for comment.
Also helping digital sales, executives said, have been price cuts that mean
most releases are now offered for $15 to $20. Studios typically charge
retailers a wholesale price that's $1 to $2 cheaper than the retail price.
Several companies also started selling movies online for the first time in
2013, including Comcast's cable business and Target Corp.
Meanwhile, physical media sales—a category that includes both DVDs and
high-definition Blu-ray discs—dropped 8% to $7.78 billion.
DVD rental subscriptions, the category that Netflix Inc. pioneered, dropped 19%
to $1.02 billion, while rentals at stores fell 14% to $1.04 billion.
Subscriptions for movie streaming, a category dominated by Netflix, remained
increasingly popular, though, with revenue up 32% to $3.16 billion.
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