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Panel Debates DVD in Digital Age

1 May, 2008 By: Erik Gruenwedel

Studios grappling with expanding content distribution beyond DVD to include electronic video-on-demand distribution and pay-per-view channels continue to walk a fine line between incremental revenue and cannibalization, said a panel of entertainment executives last week.

Faced with the statistic that digital sales represented less than 7% of entertainment revenue in 2007, panelists at the Milken Institute Global Conference in Beverly Hills, Calif., said technological advancements in content distribution are moving too quickly to ignore.

“It's what I spend the most of my time on,” said Peter Chernin, president and COO of News Corp., which owns 20th Century Fox, Dow Jones & Co., MySpace and recently launched content site Hulu.com, among other properties.

Chernin downplayed concerns expansion of entertainment via streaming, downloads and video-on-demand would negatively impact the existing DVD business model.

“We are in the business of creating content and distributing it as ubiquitously as possible,” he said.

Chernin said Fox's digital and DVD divisions are run by the same home entertainment company, which he said required a neutral corporate stance about whether consumers should buy, download or stream content.

The executive said recent discussions between studios and Apple regarding margins on movie sales and rental necessitated moving forward.

His comments came less than 24 hours before Apple announced it would offer major studio movies for sellthrough on iTunes.

“What we are primarily concerned with is how we can maintain margins,” Charnin said.

The COO said the costs associated with releasing a movie for download and on DVD were virtually identical. The fiscal returns for DVD rentals, however, paled in comparison.

“What we do want is pay-per-view to replace video rentals,” he said. “Ultimately, that is more profitable for us.”

Mark Thompson, director-general with the British Broadcasting Co., said online availability of Planet Earth hadn't stymied DVD sales of the popular series, which he said totaled more than 3 million units to date.

“A stream of Planet Earth might well actually have increased DVD sales,” he said.

The BBC recently launched its iPlayer, a free download that allows users to access BBC content, including music, on a PC. A compatible iPlayer for cable and mobile is in the works as well.

Chernin said the transition from DVD to VOD is inevitable, despite continued demand for packaged media.

“The easier it is to acquire a movie, whether it is in Wal-Mart, electronic or VOD, ultimately there will be market growth,” he said. “It's not going to be a tripling effect but you will see is that these things are moderately additive.”

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