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Disc May Be Down, But It’s Far From Out

5 Jun, 2014 By: Thomas K. Arnold

The home entertainment business is becoming increasingly polarized in its thought leadership. We have those executives who believe there’s still plenty of life left in physical media, particularly in the country’s less-tech-savvy heartland, and then we have the disc-is-dead folks who believe Netflix and subscription VOD have destroyed sellthrough, paving the way for the disc’s imminent extinction.

The former group seems to be throwing their lot in with the 4K crowd, believing there’s a growing market for even higher-quality viewing experiences than high-definition and that the industry needs to start offering consumers a 4K option with both physical discs and set-top players.

The latter crowd, meanwhile, dismisses quality as a secondary factor — citing the disaster that was DVD-Audio and Super CD — and maintains any investment in building a better disc, so to speak, is futile, since we’re all going to move over to electronic delivery before too long.

This contrast really struck me the other day when I had conversations with the presidents of two major-studio home entertainment divisions in the space of about an hour and a half. One president said he sees Netflix eating into broadcast TV, not disc sales, and maintained the disc market remains much healthier than many might think; the other president said disc sales are plummeting “because everyone’s gone over to Netflix.”

Black and white, folks — when, in truth, as with so many things, the real answer lies in the gray area in between.

Here’s my take: Yes, let’s forge ahead and keep improving the physical disc — all the while promoting it as the premier viewing experience when it comes to quality – but let’s manage our expectations. As we’ve seen with Blu-ray Disc, people are not going to rush out and rebuy their entire movie libraries again — it’s the law of diminishing returns, compounded by growing acceptance of the cloud, which presents us with a unique way of “owning” something without cluttering up the house.

The disc market, then, will be smaller, quite possibly a lot smaller. But it’s not going to disappear, either — simply because there will always be people who want the best possible viewing experience and for the foreseeable future, at least, the disc remains the best way to deliver on that front.

And yet at the same time, electronic delivery will continue to grow — although I’m not convinced EST will ever be as big as many in our industry hope. Even if building a movie library is cheap and easy and you can store it in the cloud instead of the hallway closet, the need to own is tenuous. Part of the success that DVD enjoyed came not from people wanting to own a bunch of movies, but from the collectability it inspired. And now that we’ve been there and done that (sorry for the cliché) it’s time to move on.

The fact is, subscription DVD, a la Netflix, is about as simple, easy and cheap as the average all-American couch potato could hope for. So I’m not surprised in the least by the new PricewaterhouseCoopers study that predicts electronic home video revenue will be the main moneymaker in all of filmed entertainment by 2018, driven by subscription VOD services, which generated $7.34 billion in 2013, but in PcW’s view will more than double to $17 billion by 2018.

That’s where the viewing future of on-demand home entertainment lies — I think we can all agree on that. But it’s not going to be an all-or-nothing proposition, and I have a hunch the physical disc, though down, won’t be out for a very long time.


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