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Digital Drivers Cruising Into the Future

25 Apr, 2016 By: Erik Gruenwedel, Stephanie Prange



Digital delivery has been running on all cylinders in the past year, cruising into the future.

Subscription streaming of movies and TV shows generated consumer spending of more than $5 billion in 2015, a 25% gain from 2014, according to data compiled by DEG: The Digital Entertainment Group. Meanwhile, electronic sellthrough generated $1.9 billion in consumer spending in 2015, up 18.1% from the $1.6 billion the DEG estimates it generated in 2014. Total consumer spending on digital — streaming, sales and video-on-demand — came in at an estimated $8.9 billion, a 16.4% increase from 2014, the DEG reported.

As digital delivery gained ground, studios continued to push the sale of digital downloads due to their high margins, making most new titles available digitally two or three weeks before the disc release.

“In 2015, the home entertainment business domestically generated close to $4 billion dollars through electronic sellthrough and video-on-demand,” said Ron Sanders, president of Warner Bros. Worldwide Home Entertainment Distribution. “We are continually seeing increasing numbers of retailers offering digital content, and consumers love the ease, convenience and accessibility of digital entertainment. We are very optimistic going forward. The consumer experience continues to improve, and the margins remain very lucrative.”

“Overall, the digital business continues to experience lucrative double-digit growth year-over-year, with EST revenue alone having multiplied five times what it was five years ago,” added Michael Bonner, EVP of digital distribution for Universal Pictures Home Entertainment.

Digital ownership is making important inroads, according to Bob Buchi, president of worldwide home media distribution for Paramount Home Media Distribution.

“While the penetration of OTT continues to grab headlines, we’re seeing simultaneous growth in our transactional businesses, especially with catalog content,” he said. “Catalog was the engine that helped fuel our category for nearly a decade, so it’s a trend we’re thrilled to see repeating itself digitally.

"We’re excited about the prospect of cable, satellite and telco providers around the world expanding their services to offer EST and optimistic about the potential for continued significant digital growth in the near term. As content providers, however, our success in that time frame will require flexibility and experimentation — as Paramount demonstrated with its digital revenue-sharing initiative with theatrical exhibitors last year.”

Paramount in 2015 pioneered a new business model, offering Paranormal Activity: The Ghost Dimension and Scouts Guide to the Zombie Apocalypse on digital 17 days after each film dipped below 300 domestic theaters, but also offering theatrical exhibitors a cut of the digital revenue. That experiment is still a work in progress, but other studios are expanding the scope of digital delivery in other ways.

“At SPHE, we are supporting the continued growth of electronic sellthrough by innovating with new products like digital extras, virtual reality mobile apps, and the studio’s new streaming video service, ULTRA, which takes advantage of the latest display technologies, including 4K resolution and high dynamic range,” said Man Jit Singh, president of Sony Pictures Home Entertainment.

At Fox, the mantra is to foster new forms of and better quality entertainment through such new formats as virtual reality and 4K Ultra HD with HDR.

“Our industry is in a constant state of disruption, and that gives us the freedom and opportunity to define the future through leadership and innovation,” said Mike Dunn, president, worldwide, 20th Century Fox Home Entertainment.

Lionsgate meanwhile is pushing vigorously into subscription VOD, in addition to EST.

“We’re proud to be first movers at the cutting edge of change in the SVOD and OTT space,” said Jim Packer, president of worldwide TV and digital distribution. “We’re always looking for new ways to connect our content directly with consumers who place a premium on accessibility, availability, curation and discovery. We’re continuing to grow our own portfolio of branded platforms even as we explore innovative new strategies for licensing our content to other SVOD and OTT services.”

Lionsgate’s SVOD platforms and partnerships include Tribeca Shortlist; Comic-con HQ, a partnership with Comic-Con International; and Kevin Hart’s Laugh Out Loud.


High-Level Strategists

Sony Pictures

Universal

20th Century Fox

Warner Bros.

Paramount Pictures

Disney/ABC Home Entertainment and Television Distribution

Lionsgate

Independents

Retail/Technology/Other


About the Author: Erik Gruenwedel


About the Author: Stephanie Prange


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