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2014 Home Entertainment Visionary: Digital HD

24 Feb, 2014

From the Publisher

By Thomas K. Arnold

For the first time in the dozen-year history of Home Media Magazine’s annual Home Entertainment Visionary Award, we are honoring a concept, not a person.

The honoree: Digital HD, the official brand name the studios are applying to content available via electronic sellthrough.

Studios for years have wanted to sell their movies, TV shows and other content digitally. Much like the packaged-goods business — VHS, and then, in particular, DVD and Blu-ray Disc — studios generate a much higher profit when consumers buy something rather than rent it, or stream it.

Digital sales have always looked especially appealing because of the huge audience of content buyers that was developed during the golden days of DVD. The concept of huge sales, with none of the hassles of physical product — manufacturing, packaging, distribution and returns — has always held high appeal, but remained elusive even as the streaming side of the business grew significantly.

Try as they might, studios simply couldn’t get consumers to buy downloads — even as these same consumers embraced streaming, Netflix and VOD.

Last year, things finally jelled. Studios shrewdly realized they needed to give consumers an incentive to buy a movie or TV show digitally rather than on disc, so they began releasing titles early, generally two weeks before the DVD and Blu-ray Disc release. Sony pioneered the practice back in 2011, but it wasn’t until 2013 that the exception fast became the rule.

Studios also agreed on common branding — Digital HD — and worked to widen distribution channels. A major coup occurred in November 2013 when Comcast began selling movies and other content through its Xfinity TV store. Within three months, the giant cable company owned 15% of the market.

As a result of these efforts, Digital HD is all of a sudden the home entertainment industry’s hot little comer. And it is for this reason that we bestow our 2013 Home Entertainment Visionary Award on Digital HD, the details of which are explored, recounted and mused upon in this exclusive White Paper.


Executive Summary: What Is Digital HD?

Digital HD (previously referred to as electronic sellthrough, or EST) is the home entertainment industry’s agreed-upon marketing term for digital sales — digital ownership of movies, TV shows and other content, which like physical sellthrough is much more profitable, and thus desirable, for studios than streaming and video rental.

The major studios in October 2013 settled on Digital HD as the standardized branding for all digital sellthrough.

The branding was designed to enhance the value of digital home entertainment offerings and brought consistency to the way digital products are marketed to consumers, according to DEG: The Digital Entertainment Group, the home entertainment trade group.

The branding appears on physical packaging, digital downloads, advertising, social media outreach, publicity and merchandising. It also complements the UltraViolet brand for those studios participating. UltraViolet — with solid backing from several major Hollywood studios, key retailers, consumer electronics manufacturers and various other product and service providers — lets consumers access the rights to movies and other content in a digital locker in the cloud, whenever they choose, on whichever device they choose.

The new Digital HD terminology has started to appear on new-release titles from all participating studios, including Blu-ray Disc combo packs, which allow consumers to own both the physical and digital versions of a film or TV show. In addition to physical products, the new Digital HD and Digital branding can also be applied to movie and TV content (with the UltraViolet logo where applicable) purchased via digital stores.

Studios adopting the terminology on their products include Anchor Bay Entertainment, HBO Home Entertainment, Lionsgate, Paramount Home Media Distribution, Sony Pictures Home Entertainment, 20th Century Fox Home Entertainment, Universal Studios Home Entertainment, Walt Disney Studios and Warner Bros. Home Entertainment.

20th Century Fox introduced the brand Digital HD in 2012 with the home entertainment release of Prometheus. Its strategy related to Digital HD-branded films involves debuting titles in high-definition across digital platforms two weeks before they’re available on disc. Sony Pictures Home Entertainment pioneered this practice, also referred to as early EST, with its release of Bad Teacher in 2011.

Thus, Digital HD has evolved to mean several things, but first and foremost, it connotes a digital sale to the consumer — often earlier than they can buy it physically. And it’s a format that is taking off.


Digital HD Is Growing

Digital HD has been steadily growing, particularly over the past year, when more studios decided to give digital content an early window and, thus, provide consumers with an incentive to buy entertainment digitally instead of on disc.

The category sold 18.6 million movie units in 2010, growing 3.9% in 2011 to 19.3 million units, 30.4% in 2012 to 25.2 million units; and 46.8% in 2013 to 37 million units, according to research firm IHS.

The category saw a 47.1% increase in consumer spending in 2013 to surpass $1 billion for the first time ever, according to DEG: The Digital Entertainment Group. Consumers spent $1.2 billion buying movies and TV shows digitally, up from $808 million in 2012.

Pricing ranges from $16 to $19 a title for high-definition, with standard-definition titles hovering around $15.

“The price factor not only makes [Digital HD] look more appealing, it’s also a more natural thing for many providers to promote because it makes their service look better,” IHS analyst Dan Cryan said.

Studios began to release titles early digitally beginning in 2011 with Sony Pictures Home Entertainment’s Bad Teacher. Other studios soon followed, and the practice gained more traction in 2013 when Fox began incorporating the window on all new retail releases in an effort to brand the practice as Digital HD (a term since adopted by the industry).

Indeed, since bowing movies early on Digital HD, Fox has seen a 400% uptick in ownership of digital content, said Vincent Marcais, EVP of worldwide brand marketing with 20th Century Fox Home Entertainment.

“We’ve been using [Digital HD] branding basically as a replacement for electronic sellthrough,” Marcais said. “Now we’re applying that branding to everything.”

The industry is using tips from the DVD playbook to grow sales of digital copies. In an effort to create awareness and wider adoption of digital sellthrough, service operators are emulating strategies studios used to convince consumers to buy — not rent — DVDs in the mid-2000s.

IHS analyst Cryan said DVDs at the time afforded studios new technology (compared to VHS) that was slick and easy to use. The analyst said a key driver for Digital HD is linking that same feeling (and exclusivity) with a few alterations to a digital purchase of a movie compared to rental.

The analyst said studios could target audiences with unique bonus features, in addition to pricing. Unlike discs, studios have no physical inventory issues with digital content. As a result, prices can fluctuate depending on the target audience, release date, geographic location, etc., with little impact on inventories and shipping.

“There’s almost no risk in trying dynamic, demand-based, very window sensitive pricing,” Cryan said.

The analyst said iTunes has been experimenting with bundling products to make them more attractive to consumers. Specifically, with recent “Star Trek” and “Die Hard” releases, iTunes bundled earlier movies of the franchise at a premium price.

“That’s money that wasn’t going to be spent beforehand,” Cryan said, adding it’s a retail strategy brick-and-mortar stores have adopted for years. He said studios can target specific retailers in geographic locations with added content and limited content runs without incurring incremental costs if done with packaged media.

“[Digital sellthrough] brings a whole suite of tools the Internet gives you,” he said. “There’s no physical liabilities where you’ll be stuck taking back unsold DVDs. You’ve got far more tools to experiment with the kind of pricing the market can bare.”

Another factor behind the growth in Digital HD sales is wider availability. One of the most significant developments in Hollywood’s push for bigger movie download sales was the decision by Comcast last November to start offering movies for sale through its Xfinity TV store. Subscribers are able to buy select movies several weeks ahead of their release on Blu-ray Disc and DVD, just as they can on iTunes, Amazon and Walmart’s Vudu, among other services.

In a recent conference call with analysts, Lionsgate CEO Jon Feltheimer noted that less than three months after Comcast began selling movies, it already controls 15% of the Digital HD market.

“Comcast’s recent entry into the EST business is already proving to be a catalyst for accelerated [digital] growth,” Feltheimer said. “We expect additional growth as other MSOs follow suit.”


Who Is Buying?

In 2013, 35% of Internet users surveyed said they bought a movie or TV episode on a digital platform in the prior six months, compared with 33% in 2012, according to SNL Kagan. The majority of those consumers purchasing digital content were under the age of 45. Notably, young people — that is 18- to 24-year-olds — were not the dominant EST buyer. Less than 50% of that demo said they had purchased a digital movie in the past six months.
“EST is not heavily skewed toward age,” said SNL Kagan consumer analyst Keith Nissen. “It’s largely a function of the content available on digital channels.”

Notably, 84% of people who bought a digital video in the six months before the survey also purchased packaged media. Among those consumers, a smaller subset known as “video junkies,” representing 7% of all Internet users, bought a majority of the digital content. About 82% of those buyers were also UltraViolet users, according to Kagan.

“They are driving most of the volume of EST purchases,” Nissen said, adding that this group also disproportionately buys the most discs.

Another 20% of Internet users, dubbed “video enthusiasts,” purchased digital titles infrequently in the past six months, resulting in lower volume of purchases spread out over a large user base than “video junkies.” Of this group, only 36% are UltraViolet users.


Cloud Storage

A key component to digital content ownership is cloud-based storage, in addition to competitive pricing and windowing. Apple, Google and, to a lesser extent, Microsoft have incorporated cloud-based storage. Hollywood also has a cloud-based service, UltraViolet, that spans several platforms, including Walmart’s Vudu, Target Ticket, Barnes & Noble’s video service and Best Buy’s CinemaNow.

“The ability to watch movies on a variety of connected devices [via the cloud] has boosted EST because consumers don’t have to look around to see where the file is,” Cryan said.

Digital sellthrough platforms iTunes, Google Play and Amazon, which control double-digit market share of electronic sellthrough, currently do not facilitate UltraViolet, which has hampered the service, according to IHS.

The analyst said UltraViolet at the moment remains tethered to the traditional packaged-media retail market. Cryan said it is no surprise Target Ticket, Vudu and Barnes & Noble have embraced UltraViolet in an effort to bolster and link their traditional brick-and-mortar retail footprints.

“It tends to revolve around the traditional home entertainment business, rather than being more digitally focused,” he said.

The analyst said that wider adoption of UltraViolet hinges on whether consumers trust the platform to store their digital purchases. Cryan said Apple, Amazon, Microsoft and Google have strong brand recognition surrounding cloud-based storage.

“After [them], it gets a bit harder,” Cryan said. “Of all things Target and Walmart are known for, custodians of the things that consumers own is not one of them.

“If there’s a role for UltraViolet, it’s to allow [third parties] who don’t have the brand recognition as suitable repositories for digital content a means to convey to consumers that they are on board. In other words, your stuff is safe,” Cryan said.

The analyst said UltraViolet’s ultimate success does not require adoption by Apple, Google and Amazon. Instead, the studios must remain committed to UltraViolet for it to resonate with consumers.

“I’m not sure UltraViolet has to be connected to every major digital service provider to succeed,” Cryan said.


Studio Strategies

While all the major studios have employed early EST, or Digital HD, each has entered the market at different times with different strategies.

■ Sony Pictures Home Entertainment

After experimenting with digital-before-disc concepts as early as 2008, Sony Pictures Home Entertainment (SPHE) was the first studio to institute an early, pre-disc EST digital sellthrough window, which it did with Bad Teacher in 2011. Now, the release pattern is employed for the heavy majority of SPHE theatrical releases.

“We have been quite happy with its success and its broad adoption as an important revenue stream in the industry,” said Jason Spivak, EVP of worldwide digital distribution for SPHE. “We feel that the early release pattern increases digital sales significantly across the board.”

The studio sees young male audiences especially attracted to the early EST option for content (the success of the concept with 21 Jump Street, This Is the End and Looper being prime examples), but even family titles such as Hotel Transylvania and Cloudy With a Chance of Meatballs 2 have performed well in the early EST model.

“We look at a range of factors, including optimal release date, genre, box-office and sales potential when assessing a title’s desirability for early release,” Spivak said.

The early release strategy has more than one benefit: it offers incentive for consumers to own a product, instead of just renting, and, according to Spivak, an early EST release extends the promotional awareness for any single release. The drawback? “We need to be careful not to dilute our marketing activity around a given title,” he said.

Sony is strategic with its early release plans. It starts with a determination of the best date for a physical disc release, and works backwards from there for early EST.  Above all, Spivak said, the studio keeps the purpose behind early EST in mind with every decision: improve the consumer value proposition of digital ownership.

“Beyond price and availability, improving the actual digital product is also fundamental to its success,” Spivak said, pointing to expanded digital rights and the studio’s backing of cloud-based services, such as UltraViolet. “We are just beginning to tap into the consumer potential of digital ownership. However, we believe that there is still significant work to be done in this area.”

■ 20th Century Fox Home Entertainment

What started as an experiment is now gospel for 20th Century Fox Home Entertainment.

In September 2012 the studio announced it would offer Prometheus via electronic sellthrough weeks ahead of the film’s Oct. 11 disc release, kicking off the studio’s Digital HD campaign.

Today, the industry has adopted that “Digital HD” moniker, marking Fox’s term as the accepted definition of all digital versions of filmed entertainment and TV content, across all consumer communication and packaging. Try finding a Blu-ray Disc combo pack without the words “Digital HD” today.

Not every studio equates Digital HD with early EST. Fox does, with its commitment to offering every new theatrical release title for digital sellthrough, across digital platforms, before those titles can be had on disc.

“We think early access is an important pillar in our strategy of delivering premium entertainment experiences,” Fox’s Marcais said. “Our view is that the Digital HD business is complementary to the physical disc business. Everything we do centers on the consumer, so it all depends on their preferences. Fox offers a complete suite of entertainment offerings.”

Following that first early Digital HD release of Prometheus, News Corp. president Chase Carey predicted “new opportunities in the home entertainment” industry for years to come. So far — for both Fox and the industry — he was right.

After several more early Digital HD releases — leading to a 400% jump in digital ownership of the studio’s titles — Fox threw all its weight behind the early EST idea last May, announcing it would offer early digital ownership options and UltraViolet access for every new title going forward, across almost every digital platform (Vudu, Google Play, Xbox Video, Amazon, CinemaNow).

“All of our retailers, including those in the digital space and those that offer both digital and physical products, are extremely supportive,” Marcais said. “They’ve identified early Digital HD as the single most important factor of their EST growth.”

“Ownership is rapidly changing because of technology,” Marcais said. “We all remember the friend who had bookshelves of DVDs proudly displayed in their living room. But a new trend of digital ownership is emerging because of the early window, cost and flexibility of Digital HD. We believe the amazing year one for Digital HD indicates that consumers are recognizing the value of digital ownership.”

Marcais said that The Wolverine (released via Digital HD Nov. 19, two weeks before its Dec. 3 street date) has been Fox’s most successful Digital HD title to date, producing double the early EST sales of A Good Day to Die Hard (May 14 for digital, three weeks before its June 4 disc release).

But it’s not just action films. Franchise, family and filmmaker-driven films are all contributing to Digital HD, Marcais said, driving major increases in digital sellthrough, compared with a year ago.

“We are seeing that genre is not a major factor,” Marcais said. “Consumers across the board want early access to new releases, affordable pricing, and the flexibility to store and view across multiple connected devices. Last year we saw great Digital HD results on fanboy titles such as The Wolverine, on female comedies such as The Heat, and on family animation such as DreamWorks Animation’s Turbo, which became Fox’s strongest-performing Digital HD animated title.”

■ Warner

In examining Warner’s approach to Digital HD — at least as far as early release — it is useful to look at how the studio approached digital for four of its top titles: Argo, We’re the Millers, The Hobbit: An Unexpected Journey and Man of Steel.

Argo? Available on digital two weeks before disc. We’re The Millers? Digital day-and-date with disc. The Hobbit: An Unexpected Journey? Out via digital a week before disc. Man of Steel? Digital day-and-date with disc.

It’s a case-by-case strategy Time Warner CEO Jeff Bewkes first alluded to in late 2012 in the early days of pre-disc EST. By that point the studio had already offered an early EST option for a handful of new-release titles, all at least two weeks before disc in the United States.

Keeping a “case-by-case” attitude for each title was (and remains) an important tactic for the studio, Bewkes said then, stressing that both rental and sellthrough need to be catered to for Warner home entertainment product.

“What we’re trying to do with UltraViolet and some of our other plans is to try and make the choice between rental and sales [to consumers] viable on both,” he said at the time. “We’re trying to make the experience easier and better for both. And we think pricing will follow the convenience and demand.”

Just as when early EST first became widespread, Warner today isn’t taking a blanket approach to new releases and early EST. On Feb. 18 the studio announced an April 8 release for the second “Hobbit” film (The Hobbit: The Desolation of Smaug; $860 million worldwide at the box office). Unlike the first “Hobbit” film, that’s for both disc and digital, with no early digital offering.

Warner isn’t adverse to offering premium, new-release, digital content to consumers. Quite the contrary. In an industry first last spring, the studio worked with Walmart to offer preorders of the Blu-ray Disc combo pack or an HD Digital download of Man of Steel, paired with an early theatrical screening of the Zack Snyder-directed film. In July, Warner partnered with Canadian theater operator Cineplex Entertainment to give movie fans early access (before disc) to an UltraViolet copy of Pacific Rim, alongside the purchase of a theatrical ticket.

In November Warner expanded that theatrical-to-home idea with the launch of the Regal Super Ticket, an option for Regal theatergoers to buy a Digital HD version of The Hobbit: The Desolation of Smaug (weeks before disc) when they bought a ticket for a theatrical stub.

“This is a creative way for us to open up a new and mutually advantageous business relationship with exhibitors, as it gives us an opportunity to drive awareness of the theatrical window and promote home entertainment product at the same time,” Ron Sanders, president of Warner Bros. Worldwide Home Entertainment Distribution, said during the Super Ticket announcement.

■ The Walt Disney Co.

The Walt Disney Co. has been slower to join the early EST party, but has so far seen great success.

The studio first debuted an early digital release Feb. 12, 2013, when it bowed Wreck-It Ralph on high-definition digital and digital 3D before the March 5 disc release.

According to Janice Marinelli, president of Disney Studio Global In-Home and Digital Distribution and Disney-ABC North America Content Distribution, the title performed very well digitally.

“Our overarching goal is to give consumers the best opportunities to collect the movies and television shows they love digitally,” Marinelli said. “For the right collectible movie title, we are seeing that early windows provide a definite boost.”

One title that received such a boost was Marvel Studios’ Iron Man 3, which Disney released Sept. 3, 2013, as a high-definition download on such digital platforms as iTunes and Amazon three weeks before its packaged-media release. The early digital release didn’t seem to hurt packaged-media sales. The mega blockbuster debuted at No. 1 its first week in stores on both the Nielsen VideoScan First Alert chart, which tracks combined DVD and Blu-ray Disc sales, and Nielsen’s dedicated Blu-ray Disc chart. Meanwhile, digital sales didn’t slow down once the disc became available. Iron Man 3 became the top digital title in Disney history, Marinelli said.

“One of our top priorities right now is early digital [EST], and we have high expectations for its continued success,” said Dan Cohen, EVP of pay television and digital for The Walt Disney Co. “We have done early digital releases where it makes sense to do so on a case-by-case basis. It is not an automatic initiative for every title. To date, we have maintained pricing for early digital at the same level as other new digital releases while improving the window. Although we are constantly re-evaluating our pricing and windows, our strategy has proven to be successful thus far.”

Marinelli concurred and added that another positive digital development for the studio is that Disney has made all its bonus material available to digital retailers.

“Our digital customers now have access to the same bonus content as our physical customers,” she said.

Disney’s most recent early digital release is Marvel Studios’ Thor: The Dark World. Disney bowed the movie digitally in 3D and HD Feb. 4, and set a Feb. 25 disc release date. The film grossed more than $205 million at the domestic box office and $639 million worldwide.

“Digital consumption is going to continue to evolve in 2014 and beyond, especially as consumers become more comfortable with it and view it as a safe and easy way to enjoy content and build a digital library,” Marinelli said.

■ Paramount Home Media Distribution

During 2013, Paramount expanded its early digital distribution strategy. In August, the studio offered Pain & Gain digitally two weeks before its Aug. 27 disc release, while Star Trek Into Darkness was available Aug. 20 as a digital release three weeks prior to its disc debut.

The following month, Paramount closed the theatrical-to-digital window when it released Adore on video-on-demand the same day the film came out in theaters on Sept. 6, 2013. The studio again employed the same strategy with Ghost Team One, offering digital access on Oct. 11, 2013 — the same day the independent horror comedy debuted in theaters.

“Early digital exclusives are something we’re watching closely at Paramount, and so far the results have been very positive,” said Amy Reinhard, EVP and GM of domestic home media distribution for Paramount Pictures. “We’re seeing strong gains on EST, which is our most profitable channel on a per-transaction basis, and no signs of material cannibalization on our other platforms.”

Paramount began implementing the early digital sellthrough strategy as early as the beginning of 2012, and it seems to be catching on with consumers.

The studio’s Paranormal Activity 3 debuted early as a digital download prior to its Jan. 24, 2012, disc release. The tactic was again used the following year with Paranormal Activity 4, which saw a two-week early digital release in January 2013. Paramount sold 12 times the EST copies sold on Paranormal 3, according to Variety.

Most recently, Paramount offered a different kind of early digital campaign for the home entertainment launch of Jackass Presents: Bad Grandpa, starring Johnny Knoxville. Prior to releasing the movie on disc Jan. 28, the studio streamed an unrated cut of the comedy to registered digital consumers on Jan. 3. Consumers who bought the digital edition from CinemaNow, iTunes, Sony Entertainment Network, Target Ticket, Vudu and Xbox Video, among other platforms, were able to watch the movie along with Knoxville and enter for a chance to win prizes during a Jan. 3 live Twitter viewing party.

■ Universal Studios Home Entertainment

Universal Studios Home Entertainment (USHE) April 1 will release comedy Ride Along, starring Ice Cube and Kevin Hart, on Digital HD two weeks ahead of packaged media. The studio is also releasing comedy The Nut Job, starring Will Arnett, on Digital HD April 8 — one week ahead of the title’s packaged-media launch.

The early access underscores Universal’s increased drive to expand digital sales — an evolving strategy that was validated over the Thanksgiving weekend with the availability of Despicable Me 2 on Comcast’s nascent Xfinity On Demand store.

Comcast, which owns NBC Universal (and Universal Studios Home Entertainment) later confirmed that DM2 became the top-selling digital movie of all time.

Craig Kornblau, president of USHE, said 2013 was a breakthrough year in the evolution of the digital home entertainment business. He said Digital HD access on new services such as Target Ticket and Xfinity On Demand helped convey to consumers the value of digital ownership.

“The results are in, and it’s clear that early EST windows have firmly taken root with consumers — in fact, they have become a critical motivator behind digital purchases, helping to fuel overall engagement in the format and providing a substantial lift in sales quarter over quarter,” Kornblau said.

The executive said that while meaningful strides in building digital into a mainstream business have occurred, the industry is still far from finishing the transformation. Kornblau said the industry should rally more partners such as Comcast to succeed in realizing digital sellthrough’s “full potential.”

“The path to the digital future is exceptionally bright,” he said.

■ Lionsgate

Lionsgate was one of the first studios to offer access to its expansive home entertainment library on Comcast’s Xfinity On Demand digital store. It’s a strategy the mini-major would like to replicate with other multichannel video program distributors.

Co-COO Steve Beeks said Lionsgate will continue altering digital strategies (including release dates) and pricing based on the content and market conditions.

The studio released both Ender’s Game and Escape Plan early on digital the week of Feb. 2.

Beeks said electronic retailers such as Target Ticket would buttress digital sellthrough by making movies available with UltraViolet functionality.

“That’s going to accelerate growth in the EST marketplace even further,” he said, adding that early releases are done on “an opportunistic” basis by title. “We look at every single film differently and make a judgment call on what kind of film is going to benefit from [early release].”

Indeed, Feltheimer said Ender’s Game and Escape Plan over-performed expectations. Target sold the Escape Plan DVD with UltraViolet access for $10 on its Feb. 4 street date.

“This reinforces our belief that packaged media remains resilient and digital growth is largely incremental,” he said.

■ Independents

Independent suppliers also are experimenting with early digital release.

Anchor Bay Entertainment, in a joint distribution with 20th Century Fox Home Entertainment, is bowing actioner In the Blood, starring former MMA fighter Gina Carano, simultaneously in theaters, on demand and on iTunes April 4.

Anchor Bay last month became the first distributor to launch in-store, pre-buy programs for electronic sellthrough with the Jan. 14 release of Lee Daniels’ The Butler.

Mara Winokur, SVP of digital at Starz Digital Media (parent of Anchor Bay), said Digital HD is proving to be a valuable business model, particularly for studios and the consumer. She said Digital HD typically works for bigger box office titles and movies with strong fan bases. Smaller indie films tend not to benefit from Digital HD, with other distribution models serving them better, she said.

“Early EST is not right for all titles,” Winokur said. “We look at our releases on a case-by-case basis to determine which ones will benefit the most and benefit the most consumers the most.”

Indie distributor Cinedigm Entertainment Group is using Digital HD as a means of securing prominent placement in the growing digital sellthrough landscape.

Cinedigm released early on digital platforms the Jane Lynch comedy Afternoon Delight, British/American documentary The Imposter, and the Indonesian doc The Act of Killing, with Imposter gaining the most traction, according to Michael Pears, VP of digital sales at Cinedigm.

“Probably our best-performing digital title of all time is The Imposter, which was early EST, and Afternoon Delight (released the weekend before its Feb. 18 street date on iTunes) ranked a Top 10 movie overall on iTunes,” Pears said.

He said that with Digital HD commonplace among the majors for virtually every theatrical release, securing premium placement on digital platforms for indie content isn’t as easy it used to be. Pears said the margins of digital sellthrough continue to attract.

“Early EST is a great way to encourage ownership vs. rental, and the addition of HD at a competitive price point incentivizes consumers to ‘buy now’ as opposed to waiting to rent day-and-date,” he said.

■ TV Suppliers

One interesting addendum to the early EST story is the way TV suppliers, such as BBC and PBS, have approached windows after broadcast.
BBC has seen a “catch-up TV” phenomenon on EST, with day-after purchases (usually with a 24-hour window after broadcast).

“They are buying it,” noted Soumya Sriraman, EVP of home entertainment and licensing for BBC Worldwide.

PBS Distribution, too, has employed an early window for TV series.

“We have seen strong purchases as we make the Digital HD available the day following the PBS broadcast,” said Andrea Downing, co-president of PBS Distribution. “Depending on when the title is available for the DVD release, the digital window can be exclusive for a few days up to several weeks. “
PBS has the much–coveted “Downton Abbey” series.

“We have made the past few seasons of the ‘Downton Abbey’ series available on Digital HD day-and-date with the DVD and Blu-ray release, which is a few weeks prior to the broadcast finale,” Downing noted. “We have seen tremendous success with early releases for the ‘Downton’ series. We’ve even seen sales increases for previous seasons as we release the current season early.”

It’s all about satisfying enthusiast consumer demand for PBS.

“We see early releases as serving our customer as quickly as possible as they are anxious to own this content digitally,” Downing said. “Generally, our titles are also available to stream for free on PBS.org following the broadcast for a limited time as well, so giving consumers who’d like to own the content digitally at this time makes a lot of sense. We see little risk of DVD cannibalization with early digital releases as our DVD consumer is very different from our digital consumer.”

■ Retail Platforms

In 2010, iTunes represented about 75% of all EST movie sales, with Walmart’s Vudu.com, Microsoft’s Zune and Amazon Instant Video among other contributors, according to IHS. That percentage dipped to 65% in 2011, and has been falling with the entry of many other services, including Best Buy’s CinemaNow, Google Play, and, more recently, Target Ticket and Comcast’s Xfinity On Demand store, among other players.

Comcast generated quite a bit of buzz this past November after adding digital ownership to its broadband Xfinity On Demand store and becoming the first cabler to offer digital sellthrough. The platform topped all digital services over the Thanksgiving weekend with its early release of Universal Studios Home Entertainment’s Despicable Me 2 — helping Xfinity On Demand generate 15% market share in the digital sellthrough space.

“What we’re hearing is that the Comcast store is doing pretty well, and not just from the DM2 data,” he said.

IHS analyst Cryan said feedback from digital sellthrough platforms regarding early release has been unanimously positive. Indeed, he said pricing, high definition and windowing combined are driving digital ownership.

“Every one of those platforms we’ve spoken to has said [early release] has been a great way to boost sales,” Cryan said. “It is responsible for increased consumer adoption of [movie] purchases. It’s very likely we’ll see more early EST in 2014. It provides a differentiated product. It adds value.”



An early release window, a major driver for Digital HD sales, shows promise as a strategy to drive consumers to purchase content digitally. While physical sellthrough, on both DVD and Blu-ray Disc, remains the dominant home entertainment revenue stream, Digital HD made strides in 2013 that show the consumer will buy titles digitally given certain incentives, especially early release.

As the home entertainment industry navigates the digital future, Digital HD is becoming an integral part of each supplier’s release, marketing and branding strategy.

“We are hopeful that 2014 will continue as 2013 ended with consumers gravitating to more ways for collecting and owning content,” said Amy Jo Smith, president of DEG, the industry trade group. “While Blu-ray maintains its prominence as the best way to own filmed entertainment, Digital HD is fast becoming one of the easiest and most flexible means for owning content in the digital world. It’s exciting to see consumers changing their behaviors, trying new forms of buying content and looking to Digital HD as their preferred choice for collecting content digitally and in the cloud.”

Thus, Digital HD is the top visionary product for 2014 — and it looks to propel ownership into the digital future.

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