Digital Push Pays Off

30 Oct, 2013 By: Thomas K. Arnold

It’s good to see the studios are becoming increasingly aggressive in pushing the digital sale, rather than streaming, of movies.

Several of the majors are giving big movies an early digital release in the hopes of spurring sales, which for years were stagnant and dominated by iTunes sales. That’s because there was no real incentive for people to buy a digital movie, and my hunch is they were put off by the relatively steep price, compared to streaming.

Consumers took to buying music over the Internet because they could easily purchase their favorite songs at 99 cents a pop. Studios came into the game with a decided disadvantage: While music is sold by the song rather than by the album, with movies you have to buy the whole thing, not a scene or two. And finding the right price for a download — which lacks a physical, touch-and-feel presence — has been quite difficult, with the electronic sellthrough, or EST, needle remaining stuck in the “anemic” range even when the price of a new movie dropped to about $10.

An early window for a digital release just might be the game changer everyone’s been hoping for. Studios, after all, cling to the physical disc simply because it’s tried-and-true and we haven’t seen a precipitous sales falloff as we did with the CD (a fact that, again, can be explained through consumer purchase habits: music by the song, movies by the whole movie).

But given their druthers, every studio executive worth his or her marketing degree would like to replace that disc-based revenue stream with a digital model, with nothing to manufacture, nothing to package, nothing to ship and nothing for retailers to return.

The problem is, getting people to fork over even $10 for a download has been incredibly challenging, because the concept of ownership, at least at this point, still mandates something physical. It’s more about the product than it is about the experience.

But making a hot new movie available only as a download two, three or four weeks before its release on disc is a whole other story. The consumer who doesn’t see value in buying a download for $15 when he can buy a beautifully packaged DVD or Blu-ray Disc for roughly the same amount now has a whole new reason to do so: He’s not paying for the ownership so much as he is paying for the privilege of having something before anyone else does. Call it pride, call it vanity — it’s human nature, and clearly it’s working.

As reported in our magazine, DreamWorks Animation’s Ann Daly on a conference call Oct. 29 said the early Digital HD (now the standard name for all digital versions of a movie) release last month of The Croods generated 15% more sellthrough revenue than any other DreamWorks film.

Daly applauds 20th Century Fox, which distributes DreamWorks Animation titles into the home entertainment channel, for being “aggressive in promoting and developing the electronic sellthrough portion of their business,” and maintains, “It is having a positive effect on our overall business.”

Keep it up, guys. Clearly, it’s working.

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About the Author: Thomas K. Arnold