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Digital Delivery: Salve or Salvation

7 Feb, 2014 By: Stephanie Prange

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The studios’ quarterly results reported this week offer a somewhat clearer picture of what studio executives are thinking about digital delivery’s contribution to the future of home entertainment.

Perhaps the most optimistic vision came from Time Warner CEO Jeff Bewkes. He noted the number of consumers who had used UltraViolet, the cloud-based service backed by most of the major studios, including Warner Bros.

“They love it,” he said. “We think more and more consumers will enjoy its benefits as retail support continues to increase.”

Bewkes said the improvement for UV contributed to a 50% increase in year-over-year electronic sellthrough throughout the industry, a number reported by DEG: The Digital Entertainment Group at the International Consumer Electronics Show in Las Vegas.

“That helped drive an increase in domestic consumer spending on home entertainment for the first time in eight years,” Bewkes said.

On the other hand, Walt Disney CEO Bob Iger was much more cautious. He said home entertainment’s scant 1% uptick in consumer spending in 2013, driven by increases in digital distribution, didn’t yet warrant a victory parade. He cautioned that packaged media’s 13% sales decline in 2013 wasn’t completely offset by digital sales.

“But, I think it’s still early in terms of just how significant that all could be,” Iger said.

Some noted higher revenue from television content deals with subscription video-on-demand services such as Netflix and Amazon Prime. Fox made a killer deal on the discontinued AMC show “The Killing,” while offering Amazon Prime exclusivity on the FX show “The Americans.” Sony caught a good break on its subscription video-on-demand revenue (as well as retail) for Golden Globe-lauded “Breaking Bad.”

In the midst of all this, Redbox, the kiosk company and leading physical rental outlet, appointed a new president, Mark Horak, a longtime Warner home entertainment executive. It’s a smart move for the biggest physical disc and outlet presence in the nation. With his studio background, Horak can help Redbox negotiate an uncertain digital future, while holding on to the rewards of physical media. It also helps that he is a smart and savvy executive who has seen many of the vicissitudes in the home entertainment industry, allowing him to negotiate future changes, including digital delivery.

Will digital be home entertainment’s salvation or just a salve as disc declines? The smartest and most experienced executives in the industry are on the case, both on the studio and retail fronts. But the answer to that question is still unclear.

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