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Panelists at 2017 LAES Discuss State of the Home Entertainment Industry

19 Jul, 2017 By: Stephanie Prange



Content owners and retailers discussed physical and digital content strategies, as well as new distribution models and formats, such as premium VOD, 4K and virtual reality, during a “State of the Industry” panel at the Los Angeles Entertainment Summit July 17.

The LAES is presented by the Entertainment Merchants Association.

The physical business is still an important player in the entertainment ecosystem, panelists said.

“Our eyes are clearly fixed on the future, which is clearly SVOD,” said Bill Sondheim, president of Cinedigm Entertainment Group, which has several over-the-top channels. “But for many of us in this room, the physical business still is meaningful and a business that we need to continue to support because it’s delivering very important margins and it’s delivering the profitability and infrastructure, frankly, that we’re leveraging to help us into this new [digital] world.”

“Physical is holding its own at this point in the marketplace,” added Jim Wuthrich, president of the Americas and Global Strategy for Warner Bros. Home Entertainment Group, citing 2017 statistics.

“We survey people all the time and we have a lot of people who transact only in digital,” he noted. “We have a lot of people who transact in both physical and digital and then the vast majority — 60% in the first half of the year — was on physical alone. We think those consumers are going to be around for a long time.”

Despite the growth of over-the-top services, transactional entertainment is down only slightly, he added, with film electronic sellthrough up 21% year-to-date.

While stressing his company’s support of transactional entertainment, Jonathan Zepp, of YouTube/Google Play, noted its “inherent challenge” in that the consumer is being asked to “click a lot of buttons.”

“We’re trying to reduce that friction inside the transactional environment,” he said, by “trying to understand what the consumer wants and putting it front and center.”

Wuthrich noted OTT services help in forwarding the digital business at large.

“SVOD has done a great job of getting people to connect their televisions to this on-demand content, but once they do have that connection it creates the opportunity for transactional to come into it,” he said.

Still, SVOD services are competing with other entertainment options for consumers’ time.

“What OTT has done is it has changed the overall ecosystem and what it’s changed more than anything else is people’s time,” Wuthrich said. “There is plenty of high-quality content in the SVOD services where somebody can settle down on a Friday or Saturday night and be perfectly content.”

Panelists also talked about company strategies to stay competitive as the entertainment landscape shifts.

Bill Miller, VP at retailer Trans World Entertainment, said his company is focusing on “engaging the fan that’s very loyal.” That can mean looking at niches and franchises with rabid followings and bringing in more products in those areas.

“Our main goal is to keep getting customers to come into our store,” Miller said. “With the decline of packaged, we over the last couple of years have taken steps to almost reinvent ourselves, tying into a lot of the product categories and franchises that our customers have loved, expanding into consumer products … really going after the fan who has been a customer for a long time and really taking them to another level.”

Sondheim noted that while OTT providers such at Netflix may offer broad content options, Cinedigm’s strategy is to go deeper into the markets in which it has expertise, such as faith and Christian (in part through its OTT Dove channel) and documentaries (via its Docurama OTT channel). With that expertise, Sondheim said Cinedigm plans not only to license and acquire, but also produce content that the bigger players aren’t producing.

Panelists also discussed new formats and windows, including the concept of premium VOD, in which consumers get early access to theatrical releases.

Miller said the move would concern a physical retailer such as Trans World, as consumers might not buy as much physical product.

“I look at the challenges that packaged has faced over the past years,” he said. “This one to me feels a little bit different, a little bit concerning. I see this as bringing the home entertainment window up.”

“I don’t think any given channel has to suffer as this evolution continues,” said Warner’s Wuthrich. “There are just as many different ways that people want to interact with content as there are people and people aren’t consistent on any given title.”

And collectors will always crave that physical product, he noted.

“If they really like that product, we’re still going to create that great boxed set or that collector’s version,” Wuthrich said, adding “I have yet to see a good substitute for a gift [on the digital content side] for a physical object.”

Zepp recognized the need to include the many different players in the entertainment industry, while satisfying consumer demand.

“The industry is not as simple as you just cut out a window or cut out a constituent,” Zepp said. “This is a dynamic that is built on a balanced ecosystem that’s evolved over the last 20, 40, 50 years. It’s a delicate situation. The consumer data that we see on our side certainly suggests that there’s a demand for the product [premium VOD]. … Our philosophy is ‘launch and innovate.’ We probably aren’t as an industry going to nail the exact price point or window structure today, but we don’t think that should hold up experimentation or innovation.”

Wuthrich noted that, in discussing the move to premium VOD, Warner Bros. Entertainment chairman Kevin Tsujihara “has been very vocal about the fact that we want to do something that works for the ecosystem.”

When will premium VOD take off?

“It will happen,” Wuthrich said. “I just can’t predict when.”

As for new formats, virtual reality is in the experimental stage, according to Zepp, while 4K is ready to take off, according to Sondheim.

“I think we are at the very early days of virtual reality as a format,” Zepp said. “I think what we’re seeing now, especially on the YouTube side, is a lot of trial and error. I think, in terms of monetization, the monetization will follow the experience. We at Google, we’ve made a bet that the experience will primarily be driven by a mobile environment.”

He noted the launch of Google’s Daydream VR platform.

“If you’re asking when are you going to be buying a virtual reality movie, I don’t even want to guess — because you’re really dependent upon an ecosystem that’s really just incubating right now,” he said.

Sondheim, on the other hand, said the new format 4K was ready to go, even from the perspective of an independent studio.

“As an independent, you never want to be the first in innovation,” he said. “You never want to be the last in innovation. You want to be third or fourth because a lot of the time, things get launched and they fizzle out and you, as a lesser capitalized entity, can’t take that risk. So we took a little bit of a step back and waited for 4K to start to really show it’s potential and in a very short amount of time, it’s done so — a little surprising that another prerecorded format was so embraced by the consumer. I think that’s driven by the TV sets that are evolving, but it’s more than that and the data proves that.”

He noted that Cinedigm has four titles lined up for 4K release and that the company is looking into releasing recent catalog on 4K as well.

“When we go out to retail and we see the displays, the commitment being made by mass merchants, by Best Buy, by F.Y.E., by the major retailers, we know this is a format that we have to support,” he said.


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