Thomas K. Arnold is considered one of the leading home entertainment journalists in the country. He is publisher and editorial director of Home Media Magazine, the home entertainment industry’s weekly trade publication. He also is home entertainment editor for The Hollywood Reporter and frequently writes about home entertainment and theatrical for USA Today. He has talked about home entertainment issues on CNN’s “Showbiz Tonight,” “Entertainment Tonight,” Starz, The Hollywood Reporter and the G4 network’s “Attack of the Show,” where he has been a frequent guest. Arnold also is the executive producer of The Home Entertainment Summit, a key annual gathering of studio executives and other industry leaders, and has given speeches and presentations at a variety of other events, including Home Media Expo and the Entertainment Supply Chain Academy.
As we get ready to shift gears from 2017 into 2018, we’re keeping one eye on digital sales and the other on Ultra HD Blu-ray Disc sales, both growth industries with lots of potential.
Movies Anywhere — to which I am hopelessly addicted, by the way — could be just what the doctor ordered to finally boost digital sales beyond niche-business status.
Ultra HD Blu-ray Disc, meanwhile, should be an easy sell to the legions of new 4K TV owners. 4K TV sales are soaring, and yet there’s a conspicuous lack of available content, particularly on the ownership side. New data from Futuresource Consulting projects 35% of global TV sales in 2017 will be 4K UHD … [but a] lack of 4K-compatible broadcasts and network programming is limiting 4K content distribution to subscription streaming video services such as Netflix, Apple, Google and Amazon Prime Video.
Now, I don’t know about you, but I’m still having trouble streaming regular HD. Ultra HD? Forget about it.
Compounding this inability to get UHD content is the fact that digital UHD movie sales can be a challenge, as well, with iTunes, still the biggest online seller of music and movies (with Amazon and Comcast nipping at its heels), apparently riding this one out.
According to the MacRumors website, “Apple has updated its iTunes Store on iOS devices and the Apple TV with plenty of 4K movies ahead of the launch of the Apple TV 4K, but has made clear in a recent support document that 4K content from Apple can be streamed, but not downloaded directly on a device. According to Apple, customers can download a local copy of an HD movie … but 4K movies are not available for download and thus can't be watched without an Internet connection. … That means customers who have had their previously purchased iTunes movies upgraded from HD to 4K at no cost can stream those movies in 4K, but can only download HD versions. Newly purchased content is also restricted from download.”
An Ultra HD Blu-ray Disc player, and a stack of discs, seems the perfect solution to this dilemma.
And yet Ultra HD Blu-ray Disc sales face their own set of challenges. According to the Futuresource report, high dynamic range (HDR), the enhanced visual technology that is one of Ultra HD Blu-ray Disc’s key selling points, “remains largely lost on consumers.”
According to Futuresource, the HDR concept is more difficult to relay to consumers than the more straightforward resolution improvements offered by simple 4K, even as those familiar with the technologies peg HDR as the main advantage that 4K has in elevating image quality above conventional high-definition. Without a universally accepted standard, the industry risks devaluing the HDR brand, as there are many poor representations of HDR that fail to demonstrate its effectiveness by offering little to no discernible improvement in image quality.
So what’s the solution? Promote and market the hell out of Ultra HD Blu-ray Disc! Minimize the technical jargon and adopt something that’s easier and simpler for the average Joe to comprehend. Stop trying to explain HDR and instead play up how much closer Ultra HD Blu-ray Disc brings us to the theatrical experience: “You’ll think you’re at the movies, except there’s no annoying guy two rows back who’s constantly yelling at the screen.”
As consumers move more and more into the digital space, the physical disc will continue to serve as a bridge, which is why the combo pack concept works well — especially if you can give consumers a trilogy of value: an Ultra HD Blu-ray Disc, a regular Blu-ray Disc and a digital code.
But just as importantly, the disc remains the optimum viewing platform, with a far better picture than even the best streamed UHD movie — if your system can even handle it.
All we, as an industry, have to do now is figure out how to get this point across to the consumer.
I have a new morning ritual. While sipping my first cup of coffee (of two) and catching up on my email and the latest news, all on my iPhone, I now also invariably finish the movie I fell asleep watching the night before.
Yes, I am at that age where I begin to nod off well before the closing credits. And until just recently I would finish watching a movie the next night, before starting a new one. But thanks to my new ritual, I now start a movie every night, which by my estimation has increased the number of movies I watch by at least 30%.
What changed? The mid-October launch of Movies Anywhere, a remarkably simple and easy to use digital storage locker that lets me watch any film in my library with a couple of clicks on my iPhone button. All the major studios, except for Paramount, are participating, and the beauty of Movies Anywhere is that even for people like me who still buy Blu-ray Discs, entering the redemption code so I gain access to a digital copy takes just seconds — and then the movie is available on my iPhone, my TV, and anywhere else I have the app. (In fact, while writing this paragraph I just entered the code for Annabelle: Creation and watched it instantly appear on my iPhone. I will start watching it tonight — probably on disc, just out of habit — and then whatever I missed will be viewed in the early morning, with a Keurig cup of bold Sumatra, after the obligatory cleansing of emails and quick look at the news headlines.)
I have a confession to make. While I consider myself an early adopter, both because of my role in the industry and my natural curiosity and yen to be on the cutting edge of new and cool stuff, my digital movie experience has been limited to Netflix, Amazon and Hulu. I have never bought a movie online; I set up an UltraViolet account years ago but never used it, not even once. I keep writing that consumers value convenience, simplicity and ease of use, above all else, and I might as well have been writing about myself. I rarely make myself a salad, preferring the salad-in-a-bag approach. I vastly prefer Uber to taxis, and order most of my stuff online — even my Keurig coffee cups — because I hate waiting in line.
The problem was, prior to Movies Anywhere, watching digital copies of movies I acquired was too much of a hassle. There were too many sites to visit, too many passwords to enter, too many steps to take.
Movies Anywhere is as easy as watching Netflix. And that’s why I believe our studio friends have gotten it right this time. Sure, there are still hurdles to overcome — chiefly the other main driver of consumer behavior, the desire to get things for free or, at the very least, for as little as possible. It’s still going to be a challenge to convince consumers who are used to spending around $10 a month for unlimited Netflix content to fork over more than that for a single movie, regardless of how new that movie is, or how much hype it has generated.
Still, everything else is in place. The stage has been set for digital ownership to really take off, once consumers realize the value proposition of instant access — and immediate (or, in my case, morning-after) satisfaction.
When it comes to home entertainment sales, victories are not what they once were, but that shouldn’t diminish a win. That’s why it is so important that we temper our perceptions with perspective.
The sales business, both digital and physical, is competing with an almost unbeatable proposition, from a consumer standpoint: gobs of movies, TV shows and original content for about $10 a month. First-run movies may be conspicuously absent from Netflix’s all-you-can-eat entertainment buffet, but consumers don’t seem to mind, particularly now that Netflix has ramped up its game with compelling original content that is so addicting that “binge watching,” with apologies to baseball, appears to be America’s new greatest national pastime.
I’m saying this as an introduction of sorts to our annual report on Ultra HD Blu-ray Disc, which all the studios are now supporting. Walt Disney Studios made the circle complete with its July announcement that Guardians of the Galaxy Vol. 2 would be its first release in the better-than-high-def format. But for those who are wondering why sales of Ultra HD Blu-ray Discs, 18 months after the format officially launched, still represent a tiny fraction of overall disc sales — the first-week record for a theatrical new release is 14%, set by Fox’s Alien: Covenant in August — let’s put things in perspective.
We’re in a different world than we were 20 years ago, when DVD first hit the market. Even then, DVD didn’t really gather traction until two years after its launch — and we need to keep in mind that DVD was the first format to make movie and TV show ownership both feasible and affordable. The novelty of being able to buy a movie for less than $20 just three months after it bowed on the big screen was a revolutionary thing; by the time Blu-ray Disc came around in 2006 the novelty of movie ownership, and collecting, had worn off, and even then-Disney home entertainment chief Bob Chapek opined that Blu-ray was evolutionary rather than revolutionary.
Since then, we’ve seen the rise of streaming and the emergence of digital ownership. In their first few months, Ultra HD Blu-ray Disc sales may have exceeded Blu-ray Disc sales, in the comparable period, but that simply isn’t sustainable. There are too many other entertainment options, most of them tied to the Internet, for disc sales to ever approach the magnitude of what they were in DVD’s heyday. The decline in overall disc sales over the past decade is somewhat misleading — in most quarters, Blu-ray Disc sales have held steady or even gained — but the total amount of money consumers are allocating to buying physical home entertainment continues to decline, and that’s a trend that will not only continue, but also accelerate.
Similarly, digital sales are making impressive gains, percentage-wise, but it is unlikely they will ever surpass, or even come close, to the money consumers spend on streaming, chiefly through Netflix. Subscription streaming plays into those two hallowed temples of consumer wants: simple and cheap.
But that’s OK. As an industry, we need to temper our expectations and celebrate our victories, no matter how small. When digital sales go up 10% in a quarter, we should be happy — and not moan and groan because the actual dollars are a fraction of what consumers spend that quarter on Netflix. Similarly, when the DEG releases its quarterly sales estimates, we don’t have to sulk because disc sales went down another 12%. Break those numbers apart and you’ll most likely see Blu-ray Disc sales numbers holding steady and Ultra HD Blu-ray Disc numbers soaring, compared to prior quarters.
For those of us who grew up with VHS rentals and then DVD sales, there’s no question that we’re living in a strange world, a changed world. We just have to adapt, both with our business models and with our perceptions.
I couldn’t help but chuckle at the petition drive urging Walt Disney Co. not to pull its content from Netflix.
Petitioners, comprised primarily of cord-cutters who no doubt expected to reap huge savings from canceling their cable service, call the pullout “a huge blow to Netflix users and Disney lovers who don’t want to have to pay double to access the content we love,” the Care2 petition says. “Historically, we could buy a movie or TV show from any number of sources. But now, we’re being forced to buy subscriptions to multiple sources just to get the content we love.”
No sympathy here for any pity party. My dear consumers, you can still buy movies or TV shows “from any number of sources.” Buy a Blu-ray Disc or DVD at Walmart or Best Buy or Amazon; buy a digital copy from iTunes, Vudu, Xfinity or any of a growing number of other online sellers.
In fact, the selection of movies and TV shows you can buy is far greater than the selection you can access through Netflix.
And for a good reason: When you watch Netflix, you’re not buying a movie or TV show. You’re not even paying for streaming rights to a specific program. You’re spending about the same amount of money you’d normally spend on one new movie, either on disc or as a download, for an entire month of viewing — and that’s why you have no right to be so picky.
In fact, most studios don’t sell any of their movies to Netflix — at least, nothing newer than nine or 10 years old. Even Netflix’s big announcement in May 2016 that it would be the exclusive online home to Disney, Marvel, Pixar and Lucasfilm movies was a little grandiose: Only a handful of movies were made available every month, and only after they had exhausted their sales potential, with a similar window to that on HBO, Starz and other pay-TV networks.
The popularity of Netflix has never been based on movies. The growth driver has been binge-viewing of TV shows, first popular network shows and now original programming. The movie lineup at Netflix has always been, and likely will continue to be, anemic, with the good new stuff reserved for the purchase market.
Indeed, Gizmodo last October reported that Netflix’s content library is increasingly losing its best movies: “The Streaming Observer did some analysis, and found that only 31 movies from the IMDb Top 250 are currently available on Netflix. … Even worse than the paltry selection of movies, it’s noteworthy that this figure is actually down 12% from 2014, when a Reddit user documented the 49 available films from the IMDb Top 250 then available on Netflix. The IMDb Top 250 has changed over the last two years as well, but the decrease in titles is still significant.”
Will the loss of Disney movies hurt Netflix? I doubt it — not as long as the service keeps cranking out original content (last year, Netflix said its goal was 50% original content within the next few years).
But with Disney planning to launch its own streaming service in concert with the 2019 withdrawal from Netflix, it certainly needs what we in the business call a unique selling proposition — and creating its own streaming silo for Disney movies and TV shows certainly sounds like smart business sense to me.
The petitioners, while clearly ignorant of the economics of the movie/TV business, were right on one count: they’re going to have to buy subscriptions “to multiple sources just to get the content we love.”
And you know what? They’re going to wind up buying those extra subscriptions, regardless of how much they are protesting now.
The sixth annual Los Angeles Entertainment Summit underscored the importance of our home entertainment industry leaders getting together in person every once in a while for face-to-face meetings.
And what made LAES so special was its inclusiveness. Not since the demise of the annual Entertainment Merchants Association’s annual convention and trade show in Las Vegas nearly a decade ago has there been a single event that draws participants from the entire food chain, if you will — studios, distributors, technologists, marketers, retailers and, yes, members of the press.
Every one of those groups plays a key role in moving this business forward, and while we can do all right flying solo in our silos and occasionally attending carefully curated conferences, big industry-wide events certainly still have a compelling draw.
And my hat goes off to Mark Fisher, head of the Entertainment Merchants Association, and Mark Horak, the former Warner Home Video and Redbox executive who is now focused on the Cystic Fibrosis Foundation (two of his three daughters have the disease). Through their hard work, perseverance and tenacity, they have grown the event into a respectable and viable successor to the fabled old VSDA convention, with the good sense of always having it take place in Los Angeles, the epicenter of our business.
The exchange of ideas spilled out far beyond the curated meetings between home entertainment and video game content producers and retailers that most consider the heart of the two-day event.
Intense conversations permeated the opening night cocktail party at the Loews Hollywood Hotel and the following night’s “Classic Hollywood Soirée” at the NeueHouse Hollywood, located in the landmark CBS Radio Building where the first live “I Love Lucy” telecasts were filmed.
Executives bonded at the golf tournament and chatted informally about their kids, their latest home remodels, and their vacations in the lobby bar.
And the Knowledge Exchange and Digital EMA Forum provided valuable industry insights — much like, say, Digital Hollywood, but with a broader and yet much more targeted audience.
It was, once again, a good event — and, for many studio executives in attendance, a warm-up of sorts for Comic-Con International, held later the same week in San Diego.
I went to both events and saw many of the same faces. But at Comic-Con, the focus is on sizzle and glitz — bringing out the stars to dazzle consumers, constructing elaborate show-floor booths and, of course, throwing elaborate parties like the wonderful Omnia bash organized by our friends at Fandango, and featuring a stellar performance by singer Elle King, one of my personal favorites (yeah, I was the old guy hanging out in front of stage during the whole show, taking pictures).
At LAES, on the other hand, the focus was on us, and on our business — and what we can do to make it better.
Virtual reality may still be a Great Unknown in terms of how it ultimately will change filmmaking — and storytelling, for that matter.
But while VR is essentially still in its incubation period, Hollywood sure is having a lot of fun taking baby steps, using VR mostly as a way to drum up excitement about its core product, movies.
Most recently Sony Pictures announced a new VR experience for Columbia Pictures’ Spider-Man: Homecoming movie that lets people experience what it’s like to actually be Spider-Man – in a virtual sense, of course.
They can sling themselves in the air to do battle against The Vulture, and play around with the superhero’s new and improved web-shooters that feature prominently in the newest “Spider-Man” film, the second reboot of the franchise.
The VR experience becomes available for free June 30, a week before the film opens, across all prominent VR platforms, including, of course, PlayStation VR, from a sister Sony division, as well as Oculus Rift (owned by Facebook) and HTC Vive.
According to our friends at Variety, Spider-Man: Homecoming VR was produced by Sony Pictures Virtual Reality, the studio’s VR unit, which was launched last summer under the auspices of Jake Zim, the SVP of Virtual Reality for Sony Pictures Entertainment. It was developed by CreateVR, the same agency that turned Sony Pictures’ The Walk into a VR experience.
It’s good to see Hollywood having some fun again, and at the same time, pushing the innovation agenda. Invariably, fun and innovation go hand in hand, and the whole excitement about VR is a refreshing change of pace from the regular industry news, which this summer seems to be revolving around “franchise fatigue” (which I don’t happen to believe in — in my view, a good movie is a good movie, and a bad movie is a bad movie, regardless of whether it’s part of series) and the continuing debate over releasing movies on other platforms around the same time as they debut in theaters (something I see as inevitable).
On the home entertainment side of the business, we’re seeing quite a few triumphs, including the remarkable home video performance of Lionsgate’s “John Wick” properties and Walt Disney’s live-action Beauty and the Beast.
And on the innovation front, the home entertainment business is doing quite well itself, particularly at 20th Century Fox, whose Innovation Lab has its fingers in all sorts of technological wonders. Fox also smartly set up a new business unit, FoxNext, that’s home to the studio’s video gaming, location-based entertainment, virtual reality and augmented reality productions.
It’s shaping up to be a long, hot summer — and Hollywood, despite the usual turbulence, is sizzling.
Our annual salute to the nation’s top home entertainment retailers is still a month away. But in my regular perusals of quarterly earnings reports, and earnings call transcripts, I’ve noticed that perhaps the most overused term in retail circles is “omni-channel,” an attempt by brick-and-mortar retailers to remain relevant — and stay in business — in a world increasingly dominated by Amazon, iTunes and other Web-only sellers.
What I’ve noticed is that while retail executives liberally toss around the “omni-channel” term and pat themselves on the backs for their efforts to bring the physical and virtual worlds together, only a few are getting it right. Among them is U.K. fashion retailer Oasis, which arms its clerks with iPads so if an item isn’t in stock, the customer can either order it on the spot or be directed to a nearby store that does have the item in stock. Another is Carrefour, a Belgian supermarket chain that lets customers scan items they want into an online shopping list and, when done, submit the order for pickup or delivery. And I absolutely love Apple’s approach, to let customers make appointments online to the “Genius Bar” in Apple stores, for quick, one-on-one customer service.
One of the silliest trends I’ve seen is the “ship to store” option, in which customers can order something online, through the retailer’s website, and then pick it up at the store. That defeats the whole purpose of online ordering — the primary reason we buy something from Amazon is because we don’t have time to go to the store, and want the merchandise delivered to our home or office. Why would I order a PlayStation 4 or a batch of Blu-ray Discs from Best Buy and then schlep on down to the store to pick the stuff up? Yes, I know, the lure is free shipping, but guess what? Amazon already offers that, and in fact shipping charges are fast disappearing in the online world. I know why retailers like the “ship to store” option: It brings customers into their stores, where hopefully they will buy something else. But that’s not thinking like a customer, is it?
Retailers also need to realize that speed is critical — and thanks to Amazon Prime we’re used to getting pretty much everything we could ever want within 48 hours. Our youngest son, Hunter, came home from ninth grade the other day and said he needed a copy of a certain book and movie ASAP. My wife drove down to the nearest Barnes & Noble to see what they had; neither book nor Blu-ray Disc was in stock. A cheerful clerk offered to order both and smiling said they’d arrive at the store in about a week. As she was relating this story to me on the phone, I was already on my Amazon app and by the time we hung up had purchased both online, with free two-day shipping. “Bad customer service,” I told Diana when she got back home. “The clerk should have said it will be there in two days and, if necessary, done the same thing I did, order it off Amazon,” I noted. Instead, I’ve got a bad taste in my mouth — and for our next school-required book or movie purchase we’re not even going to give Barnes & Noble a chance.
It’s a brutal world out there, folks. Brick-and-mortar retailers need to sharpen their survival instincts and get aggressive. And the whole concept of “omni-channel” is not so much integrating the physical and virtual retail worlds as it is streamlining the shopping process and enhancing the customer experience.
At 73, Warren Lieberfarb is the proud father of a very famous young adult: DVD, the most successful consumer electronics product in history, which turns 20 this year. And if he seems remarkably calm and content — he’s even taking a twice-a-week history class — it’s because unlike most parents who have weathered a turbulent adolescence, his legacy is not mired in uncertainty and what ifs. It is both assured and crystal-clear.
With DVD, Lieberfarb didn't just make Hollywood a heck of a lot of money. The argument can be made that he also set into motion the sweeping digital revolution that has forever transformed the way we consume entertainment. Streaming, downloading, mobility, even Netflix — none of it, one could maintain, would have been possible without the foresight, vision and resolve of Warren N. Lieberfarb, the original Digital Driver.
That’s why we are singling out Warren Lieberfarb for a special salute in our annual Digital Drivers issue. DVD opened the door to digital as a home entertainment delivery mechanism, and the industry has never looked back. DVD and its successor, Blu-ray Disc, also have served as an entry point for the lucrative electronic sellthrough (EST) business, with the studios shrewdly including digital copies with physical discs in an effort to acquaint mainstream consumers with the concept of pure digital transmission.
Capturing the essence of Warren Lieberfarb — and just how right he’s been about this business, all along — in a space as short as this isn’t easy. So let me go back 10 years, to our April 2007 issue, when I related a few personal anecdotes: “I first met Warren Lieberfarb in mid-1995, when DVD was still a glimmer in everyone’s eye, two rival formats were planning to come to market, and studios were slugging it out over who had the highest prebook numbers for rental cassettes. As editor in chief of Video Store Magazine, I had written a column in which I advocated rental pricing for the new disc format. Rental, I wrote, was an ingrained consumer habit that would never go away.
“I received a phone call from a harried publicist at Warner Home Video informing me that Lieberfarb wanted to meet with me, for lunch, in the studio dining room. Since Warren had been notoriously press-shy, I accepted, although I had no idea why I had been summoned.
“So I drove to Burbank on the appointed hour, and met one of the most charming and gracious men I had ever encountered — until about 15 minutes into our lunch, when all of a sudden I felt I was in the middle of a sit-down with Marlon Brando in the first Godfather film. … Warren essentially informed me that I was an idiot, and he proceeded to lay out his vision of DVD as a sellthrough-only product that would add incremental revenue to studio and retail coffers. ‘It’s not a replacement technology,’ he argued.”
Boy, was he ever right. The rental model was dying — stabbed by late fees and return trips to the video store — and Warren was convinced packaged media needed to shift gears into a purchase model if it was to survive. There would always be a large chunk of consumers who didn’t want to buy, he said, but as technology advanced they would be driven to some form of advanced pay-per-view, the only electronic delivery system in existence at the time, particularly if it was easier and cheaper.
Fast forward two years. DVD was on the market, and Warren Lieberfarb was its chief cheerleader. Columbia TriStar Home Video (now Sony Pictures Home Entertainment) president Ben Feingold also emerged as a vocal supporter of DVD, “but with four of the six majors still on the sidelines, it was rough going,” I wrote 10 years ago. “Analysts began revising sales projections downward, and Warren’s tireless championing of DVD was beginning to tick off some people. I remember asking [former] 20th Century Fox studio chief Bill Mechanic when Fox was going to start releasing movies on DVD. ‘Ask Warren Lieberfarb’ was his response.
“Warren became a bit demoralized. ‘I don't know. T.K., maybe I should just give up the whole thing,’ he mused during a private conversation we had during the July 1997 Video Software Dealers Association convention in Las Vegas. (He was walking with a cane at the time, and had followed me into the restroom, which made the whole scene even sadder.) ‘I'm trying to do something that can be very good for our entire industry, but some people just don't seem to get it.’ The trade press got it, however, and so did some of the major retailers. By the late summer of 1997, Universal Studios and Disney had announced their intent to join the DVD team, and Warner went national.
“But just as it appeared DVD was beginning to gain some momentum, another fly appeared in the ointment: Divx, a payper-play variant championed by the chief of Circuit City, one of the country's major consumer electronics retailers. Several studios immediately lined up behind it, including Fox, which had yet to come to the DVD table.
“Warren went to war. He criticized Divx as a half-baked blend of packaged media and pay-per-view that was doomed to failure, but still could wreak havoc on the fledgling DVD format by confusing consumers. I agreed with him, and unabashedly railed against Divx in my columns. And when Divx died, chiefly because the consumer electronics manufacturers failed to support it, I rejoiced with him. I also laughed my ass off when I first heard the following story, which I have never been able to verify as fact or urban legend. A reporter asked the head of a leading Japanese consumer electronics manufacturer why his company, and most other companies, would not support Divx, even though it was being championed by one of their leading retail customers. ‘We were told the most powerful man in Hollywood was against it,’ came the response. ‘Who is the most powerful man in Hollywood?’ the reporter asked. ‘Why, Warren Lieberfarb,’ the executive responded. ‘Who told you that?’ the reporter demanded. ‘Mr. Lieberfarb did,’ was the response.”
I’m going to relate one other anecdote that indicates another side of Warren Lieberfarb — a kind, generous man, a mensch, if you will.
It took place at the Consumer Electronics Show in January 1999. DVD by then was a huge hit; I had a breakfast meeting with Warren at Caesar’s and woke up with the flu, complete with high fever. Stymied by CES traffic, I opted to walk the mile and a half from the Monte Carlo. Warren knew right away I was not well, and at the conclusion of our meal, when I told him I had to hurry back because my flight left in an hour, he insisted his car and his driver take me back to my hotel room and then to the airport. “Thanks, but what will you do?” I asked him, knowing he was at the Bellagio, also a good mile away. “I’ll walk,” he said.
Are the disruptors being disrupted? That’s a good question to ask ourselves as we at Home Media Magazine present our seventh annual Digital Drivers feature, which we launched 2011 as a way to spotlight the executives behind the transition from physical media to digital distribution.
Back then, there were two views of digital distribution. One, held by the studios, was a transactional model in which consumers would buy digital copies of movies, TV shows and other filmed content over the Internet, effectively transitioning their purchase habit from physical media and providing studios with much better margins, with no manufacturing costs, minimal distribution expenses, and, best of all, no returns.
Rental, too, would migrate to the web, in the form of transactional streaming, or pay-per-view.
What studios hoped would be a smooth transition was already then being disrupted by Netflix, which had a whole other view of digital distribution: subscription streaming. Three years earlier, in 2008, Netflix jump-started its then-nascent subscription streaming service by leveraging a sub-contract with Starz that gave it access to Disney and other studio movies. That, in turn, led to the studios dealing directly with Netflix in licensing their back-catalog films and TV shows.
It was a decision Hollywood would soon come to regret, but, as they say, you can’t put the genie back into the bottle. And so it is today that the digital distribution world is dominated by streaming, and streaming is dominated by Netflix, the biggest disruptor this industry has seen since DVD 20 years ago shifted home video from a rental model to a purchase model.
And yet while Netflix and the whole over-the-top (OTT) concept certainly dominate digital distribution, Netflix and the other streamers aren’t immune to disruption, either.
New research from Parks Associates reveals that 39% of U.S. broadband households visit a video sharing site like YouTube at least once a week — and 59% of broadband households visit an online video site on a regular basis. These findings sparked a session at the NAB show in Las Vegas called "OTT Video Services: Fighting to Capture and Retain Users," with Parks Associate senior analyst Glenn Hower, in a press release, maintaining that the growing popularity of user-generated content, particularly among young people, poses a growing treat to professionally produced content. "Consumers 18-24 go to a video sharing site 13 days per month on average,” he said. “They also use a video chat app like Snapchat an average of nearly 11 days in one month. The TV is still the most-used device for watching video content, but increased usage of secondary devices and video apps is making a significant impact on how users, especially younger viewers, consume and perceive content.”
Parks Associates research also shows 26% of households participate in live-streaming activities, such as streaming video from their own device or watching video over a live-streaming platform. "Emerging content platforms are changing the way content creators tell visual stories," Hower said. "Services like YouTube have given rise to video bloggers and sketch performers, who can interact with their audiences in a way that traditional media like film and television cannot allow. In addition, live streaming on platforms like Twitter's Periscope or Facebook Live is raw and impromptu, which can come across as more 'authentic' compared to a recorded video that has been edited and perfected."
The savviest digital drivers are those who realize that disruption is no longer something that happens from time to time, but, rather, is an ongoing thing.
It’s not enough to be platform agnostic. We now have to be content agnostic, as well.
The digital revolution is not over.
The DVD, the most successful consumer electronics product launch in history, turns 20 this spring.
It was the last week in March 1997 when I received that first black box of DVDs from Warner Home Video, whose president at the time, Warren Lieberfarb, is widely considered the “father” of the format. It was Lieberfarb’s vision that saw the potential of the consumer purchase (rather than rental) model; it was Lieberfarb who got the Japanese CE guys on board and who convinced his studio counterparts to come along, with support from Sony Pictures’ Ben Feingold.
We all knew at the time our industry was on to something big, but no one at the time could have predicted how big: A sweeping transition from renting videocassettes to buying discs led to double-digit gains in consumer spending for a good eight years, and at long last gave home entertainment executives a say in greenlighting movies after that fateful moment (I believe it was in 2001) when spending on discs outpaced spending on movie tickets.
Money breeds respect, and our little industry minted tons of both.
DVD’s legacy is just as impressive. Technological advancements in the five-inch disc led to the Blu-ray Disc and, most recently, the Ultra HD Blu-ray Disc. Today, most discs are packaged in “combo packs” that transcend physical media by also including a “digital copy” consumers can watch from their hard drives or the cloud. And with Netflix eating Hollywood’s lunch, the disc’s viability — both as a standalone product and as a means to promote the concept of digital ownership — is something to be both lauded and perpetuated.
It’s funny — back in mid-1996, when I heard DVDs were finally going to come on the market, all I remember thinking was, “What took them so long?” It was, after all, 15 years after another shiny little five-inch disc, the CD, revolutionized the music industry. I was big into music at the time. Audio purists swore by the LP, but for me — and hundreds of millions of other consumers the world over — convenience trumped any audio superiority analog might have over digital. And besides, records wore down with use and, invariably, developed snaps, crackles and pops. I was more than willing to sacrifice a little audio quality if I could listen to Springsteen’s “The River” without a nasty skip right when he was reminiscing about Mary’s body “tanned and wet down by the reservoir.”
The clunky videocassette, in my view, was just as flawed, and I still recall in the early days of CD looking with disdain at my VHS library and wishing I could get movies on disc, as well.
In the early 1990s, there was briefly a product called CD-I, mostly for interactive video discs. A few movies came out on CD-I, and I was ecstatic. No matter that you had to change discs at least once, and that the color black just didn’t look right — CD-I was it. When the format crashed and burned, I mourned — but then came my first meeting with Warren Lieberfarb and I was giddy with anticipation.
I still have that first box of DVDs from Warner — and damn if those DVDs don’t still look good, even on the pricey new Ultra HD TV with HDR in our bedroom.
Long live disc!