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Digital Delivery Panel Says Packaged Media Still Registers

19 Jun, 2007 By: Chris Tribbey

Don't shut down the DVD, HD DVD and Blu-ray Disc replicators just yet: Packaged media isn't going anywhere anytime soon.

That was the consensus that came out of digital delivery discussions at the Sixth Annual Home Entertainment Summit: DVD & Beyond, which ended June 19.

“The physical product will always be in demand,” said The DVD Group President David Naylor. “People still want to own the DVD.”

But that doesn't mean studios can't nudge a buck or two out of the growing digital delivery business.

Ben Keen, chief analyst and director at Screen Digest, said digital retail has a very high margin of return for studios. And, as such, the studios should be less hesitant to enter the online market, he said.

“If you hold back on the number of deals done, it's like saying, ‘we're not going to sell DVDs through this chain of stores, but only this chain of stores,’ he said.

Digital media delivery is running into a lot of problems early on, Keen said. Price points are too high, digital rights management efforts are too prohibitive, and there's no easy routes made available from the Internet to the TV, where people want to watch their movies.

“Get the content to where people want to consume it,” Keen said. “It's not rocket science.”

“They want to consume the content on a big screen,” said Todd Rowan, SVP of marketing for 20th Century Fox Home Entertainment. “The Internet is another add-on … but it won't replace content on TV.”

“This year is about trying to get it to the TV,” agreed David Cook, COO for CinemaNow. “Getting to the TV is the No. 1 goal of everyone is this industry.”

The reasons Xbox and iTunes are dominating the online rental share is because they've addressed most of the problems, Keen added.

“Devices drive the market, not content,” he said.

Microsoft's digital content download service through the Xbox 360, Video Marketplace, has been extremely successful, according to Microsoft's Ross Honey, senior director of the Media, Content & Partner Strategy Group. He said HD downloads account for about half of the sales on the service.

“We were somewhat internally skeptical of high-definition downloads … but we were all, including our partners, blown away by how aggressively consumers adopted it.”

“Up until now, studios have been reluctant to offer HD content over the Internet,” said Movielink's Albert. But Pat Fitzgerald, EVP for worldwide sales, distribution and trade marketing for Buena Vista Home Video, linked that to hardware storage and potential poor quality issues currently present in the digital delivery business.

“If you underwhelm [the consumer] in an early state, it can be detrimental,” he said.

“HD players on computers is not a viable option,” said CinemaNow's Cook.

Plus, getting downloaded content quick is a major issue, many agreed.

“It's about what's going to happen with broadband speeds,” said Alison Casey, with the research firm Understanding & Solutions.

According to an Understanding & Solutions forecast, current broadband presentation in U.S. households is at about 57%, and will rise to 67% in 2011.

Consumers may also be slow to latch onto digital download services partly because it isn't as easy to find what you‘re looking for, Albert said.

“Convenience is a large part of it,” she said. “Are we there? Compared to what's out on DVD, no.”

Fitzgerald said the ability to move a movie off the computer to other devices cannot be underestimated. “Am I able to take it with me? We're all still working on convenient ways to get it to the consumer.”

“The consumers really want the property to burn,” Albert said. “They want control.”

Downloading to own isn't dominating over rental in the online market, but it is gaining ground, said Mary Coller Albert, chief marketing officer for Movielink.

Once consumers own movies, though, the fear of piracy persists. David Wertheimer, executive director of The Entertainment Technology Center at University of Southern California, said the home media industry needs to change the attitudes among young people.

“I don't think the world started to steal music because they wanted to steal it,” Wertheimer said. “They did it because it was convenient. Kids are shifting completely from physical product to digital.”

But that's a far cry from a death sentence for physical product.

When it comes to digital delivery, the next few years will see “periods of experimentation” but “packaged media will continue to dominate,” Understanding & Solutions' Casey said. “The value proposition [of a digital download] compared to DVD has a ways to go … [And] impulse purchase is important, and you don't get that in the online world.”

“[Owning a DVD] is like comfort food,” agreed Marvin Gleicher, BCI's senior VP of marketing and acquisitions.

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