The New Face of Home Entertainment

18 Dec, 2015 By: Thomas K. Arnold

Home entertainment is dead. Long live home entertainment!

In the nearly 30 years that I have been in this business, the one constant has been change. Cassette to disc, rental to purchase, physical to digital.
And yet our definition of home entertainment is as crystal clear to me as it’s ever been: the act of bringing a movie, TV show or other filmed content into our home for personal consumption where and when we want it — with the ability to stop watching and resume watching at our discretion, without relying on a commercial break.

Subscription streaming has thrown something of a wrench into the traditional home entertainment business model, which has always been transactional — the consumer pays to watch a specific movie or other program.

\Subscription streaming is effectively a twist on the cable model of bundling: You pay one price and get access to a wide assortment of programming.
But the similarities end there. With cable, you get access to channels, which is why cable is concerned part of the television world.

With subscription streaming, be it Netflix or Amazon Prime, consumers select specific shows to watch — just as they did in the old days when they walked into a video store and grabbed cassettes from the shelves.

It’s clearly home entertainment — a matter of choice.

So, on the “rental” end of the business, Netflix is the new Blockbuster (and let’s not forget: Netflix began as a DVD-by-mail rental service, and that’s how it effectively killed what was once referred to by industry insiders as “Big Blue”).

On the “sellthrough” side, consumers also have broken through the digital divide and taken to buying movies electronically, over the Internet — but if the sale of digital downloads hasn’t been anywhere near as big a success as subscription streaming, keep in mind that Blu-ray Disc and DVD sellthrough is still a big, big business. To be sure, it’s not as big as it was a decade ago, or even five years ago, but if you take a holistic view of home entertainment you’ll see that the total amount of dollars spent has remained remarkably constant over the years, despite a proliferation of new technologies, online services and gadgets — from Facebook to YouTube and “Words With Friends” — that are now competing for consumer eyeballs.

Numbers provided every quarter by DEG: The Digital Entertainment Group attest to this — and they don’t factor in Amazon Prime, with the rationalization that we don’t really know how much money subscribers are spending to stream content because many people subscribe just to get free two-day shipping.
One other constant in home entertainment, aside from consumer choice, is the quest by the studios, who own the content, to get the biggest bang for the buck. Nearly 40 years ago, when the business began, they fought retailers who wanted to rent their movies and pocket the spoils; the studios lost that battle but ultimately got a piece of the action through revenue-sharing. They also successfully shifted the business toward sellthrough with the advent of DVD, the ultimate model from a studio revenue standpoint.

Now, there’s a very similar battle being fought. The studios want to sell movies electronically, or at least be able to get a piece of each “streaming” transaction – something that’s impossible to do under the subscription model. And yet they’re not protesting as loudly as one might presume because of the big-dollar front loads – the amount of money Netflix and Amazon are paying for ‘B’ movies.

But they realize this isn’t going to last forever, as subscription streamers move more and more into original content – which is why we are going to see a renewed push into “sellthrough,” both physical (with the arrival of Ultra HD Blu-ray Discs) and digital (with enabling technologies like Vidity, which allow buyers to actually possess the movie files they buy).

Yes, it’s a topsy-turvy world out there, an increasingly challenging environment for studio executives who simply want to maximize the amount of money they can generate from their content. But with every challenge, it seems, we’re also seeing a new opportunity.

And as long as there are TV screens, recliners and comfy slippers, that’s not going to change. Home entertainment will survive, and even thrive, regardless of the environment. We just have to figure out how to make it worth our while.

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About the Author: Thomas K. Arnold