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Is Packaged Entertainment Media Really on the Way Out?

By Peter Suciu
Sep 19, 2017 2:03 PM PT
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As home video viewing patterns continue to evolve, one common prediction is that packaged media is on its last legs. Streaming services have been gaining market share at a steady pace.

In fact, streaming media sales eclipsed sales of DVDs and Blu-ray discs for the first time in the last quarter of 2016 -- with discs accounting for US$5.4 billion in annual U.S. sales compared to the $6.2 billion haul for SVOD (streaming video on demand) providers such as Amazon Prime Video and Netflix.

However, to paraphrase Mark Twain, the death of packaged media has been greatly exaggerated.

Sales of DVDs and Blu-ray discs still accounted for $18 billion in 2016, according to Futuresource Consulting. Yes, that was down from $21.6 billion worldwide in 2015, and sales are forecast to drop to $9.1 billion by 2020 -- but that is still a lot of potential revenue for the content providers.

That $9.1 billion needs to be put into context too. It means packaged media will continue to sell, albeit at a reduced rate, and live alongside streaming media.

Streaming media actually arrived as Blu-ray began to replace DVDs, and one reason for Blu-ray's early success was that it was truly an HD format, which DVD was not, and it took advantage of the transition to larger TV sets with higher resolution.

Today streaming can provide nearly as good a picture and sound as Blu-ray -- but only if the bandwidth is available. At peak viewing times, and in areas where bandwidth is limited, streaming viewers have to settle for lower quality. However, as services now offer the ability to download for viewing at a later time, that is becoming less of an issue.

More Ways to Get Content

Packaged media's decline has coincided with the arrival of new ways to view content -- not only streaming, but also a growing lineup of on-demand offerings from pay-TV services.

Still, even though many cable/satellite subscribers add multiple premium channels like HBO and Showtime, the simple fact is that favorite movies are not always available.

In the early days of the home video era -- which came about almost as an afterthought, despite Hollywood's fierce anti-VCR resistance -- you had to go to a rental store if there wasn't something you wanted to see on TV.

The ability to purchase tapes, and later DVDs and Blu-ray discs, allowed consumers to build movie libraries.

Streaming has displaced video collections, but only to a point. Netflix, Amazon, Hulu and other services may add content each month -- both new and archived programming -- but they remove many films and TV series as well.

Disney's films, including its Marvel superhero franchise movies, soon will leave Netflix for Disney's own OTT (over-the-top) streaming service, scheduled to launch in 2019.

"Streaming has its limitations. It requires a connection, and the content library is typically limited," said Greg Ireland, research director for consumer digital transformation and multiscreen video at IDC.

"Movies drift in and out of these subscription services," noted Dan Cryan, senior director for digital media at IHS Markit.

"It is true that if you are going subscription-only you are going to miss some things, and all movies aren't available at all times," Cryan told TechNewsWorld. "Part of the reason is that there are windows, and this includes a set release strategy and viewers have to be patient."

Bungled Play

The pay-TV model is built around bundled packages, which for cable and satellite TV subscribers has meant numerous movie channels, but streaming services provide more.

However, the value of archived content could be lost as packaged media declines in sales.

"The industry has handled it badly -- they've bungled it, to be frank," said Colin Dixon, principal analyst at nScreenMedia.

"One of the problems is how online content has been handled," he told TechNewsWorld.

It seems as if someone hit repeat, and a format war broke out -- similar to the one that raged between Betamax and VHS, and later simmered between HD-DVD and Blu-ray.

In this case, the controversy can be pinned on the lack of an accepted format or protocol for watching content that has been purchased via streaming.

"UltraViolet was supposed to be the answer for buying a movie via digital download, but Disney never got behind it," noted Dixon.

"So you have islands now, and must question where you can play your films and on what devices," he said.

Amazon and Comcast offer competing standards, for example.

"It is hard to play those films you buy as a Comcast subscriber if you leave Comcast. The whole thing has been bungled," Dixon said.

Must-Own Films

One reason that packaged media may never go away completely is that there will be certain content that people will want to own in a physical format. Parents may want a library of children's content, for example, including packaged media that can be viewed in a car, on an airplane, or in other places where streaming services aren't available. Some consumers likely will want to own their own copies of modern epics and other "must see" films.

Anything with Star Wars in the title is likely to sell well. Many hardcore fans won't be satisfied with a mere digital copy.

Some viewers will always regard ownership of a physical object as important, said IHS Markit's Cryan.

There are lessons from the music industry's handling of streaming media vs. packaged releases too.

"We are seeing that the right title will sell," Cryan noted. "Taylor Swift sold a lot of copies of her album despite it being on Spotify."

If an offline platform can be managed, video content could follow the success of online music downloads.

"Many OTT streaming services -- both audio and video -- allow downloads for offline listening and viewing," IDC's Ireland told TechNewsWorld. "Cable already showed us the model with VOD services that have rentals as well as subscription content."

Studio Services

For movie studios, the streaming services could mean a decline in revenue, especially as many movie buffs once were happy to pay $20, on average, for a new DVD release.

Today, streaming services at $10 a month would offer much more value -- but consumers might not be amenable to paying for multiple services.

Even with multiple subscriptions, some favorite movies might not always be available through streaming.

Instead, "electronic sell through (EST) and digital rentals could be the answer," said Ireland.

"No single service offers a complete solution, just as cable TV doesn't solve for all of today's video needs," he pointed out, "so consumers will need a combination of streaming services and EST/rental services such as iTunes."

One possibility could be that studios utilize their vaults to launch their own respective services, and leverage their libraries the same way that they created a home video market in the first place.

That may seem like a workable idea, but "it isn't supportable because it adds up for the consumer," warned nScreen Media's Dixon.

"If the movie industry does this, people might subscribe for a month and cancel -- but another option might be a mega movie portal," he suggested.

Although that would be a better deal for the consumer, Dixon said, it would not bring in the same money as packaged media brought in for the studios.


Peter Suciu has been an ECT News Network reporter since 2012. His areas of focus include cybersecurity, mobile phones, displays, streaming media, pay TV and autonomous vehicles. He has written and edited for numerous publications and websites, including Newsweek, Wired and FoxNews.com. Email Peter.


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