EST the Emperor's New Clothes?

7 Nov, 2014 By: Thomas K. Arnold

I may get strung up by my feet for suggesting this, but I am beginning to wonder whether electronic sellthrough, or Digital HD, is something akin to "The Emperor's New Clothes."

Every three months, DEG: The Digital Entertainment Group releases a new set of quarterly numbers, derived mostly from the studios, that show consumer spending on the various forms of home entertainment.

Each time, disc sales are down, EST sales are up and we hear lots of crowing about how consumers are finally grasping the concept of buying movies, TV shows and other filmed content as downloadable files instead of on physical discs, and what a great thing this.

Freed from the burdens of manufacturing and distributing physical discs, not to mention dealing with returns, the studios are crowing about how great the margins are, how lucrative this new business model is, and how consumers will no doubt soon be abandoning disc purchases altogether in favor of buying filmed content electronically.

But I question whether this brave new world will ever materialize, and whether all this happy talk about EST's remarkable gains is really just something we all want to believe so badly that we have somehow convinced ourselves that the more we talk about it, the more likely it is to become true.

The plain and simple fact is that while EST sales do keep inching up, they still account for a tiny fraction of overall home entertainment purchases — 18% to 82%, I believe the latest set of numbers indicate.

And while pushing EST through early release windows and digital lockers is certainly the smart thing to do, I believe a fair amount of caution is in order.

For starters, the disc business is still quite healthy. Sometimes I think those of us who live on the coast get too caught up in technological advances and trends — 3D, anyone? — to stop and think what mainstream America is doing. And the numbers suggest an overwhelming percentage of people still prefer to buy discs instead of downloads, in large part because of the old "if it ain't broke don't fix it" axiom but also because there's something about ownership that almost mandates a physical object. If we're going to buy something, we want something tangible, not ethereal.

Secondly, I think there's a misconception about the correlation between the rise of digital delivery and the decline in disc sales. Disc sales aren't going down because people are finally starting to realize they can buy movies as digital downloads without having to worry about cluttering up their homes with more "stuff"; they are going down because 1) younger people simply don't have the same desire for owning something that we older folks do (as seen in everything from music to cars and the rise of Uber and Lyft) and 2) the alternatives to ownership are so easy and cheap. Why spend hundreds of dollars on a boxed set of a hot TV show like "Breaking Bad" when I can access the same content at any time on Netflix?

If, as some pundits believe, eventually we will obtain all of our content electronically, then our home entertainment business will be in big, big trouble. If studio executives were stunned to discover people weren't rebuying their libraries in the transition from DVD to Blu-ray Disc, I believe they will be absolutely shocked to discover how few people are going to buy movies electronically that they already own on disc — particularly since so many of the films we have collected over the years are instantly accessible through Netflix.

That's why it behooves our industry to support, market, and promote discs as much as we can, as diligently as we can — lest this business wakes up one morning and finds itself stripped to its undershorts.

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About the Author: Thomas K. Arnold