Home Entertainment: Why 2013 Was the Year of Digital HD

/// Home Entertainment: Why 2013 Was the Year of Digital HD

December 31, 2013  |  Blog

The announcements came toward the end of the year, virtually at the same time: all remaining Blockbuster Video stores would be closed by January 2014, and Comcast, the cable giant, would expand from renting movies from major studios to also selling them.

Both announcements were symbolic of what 2013 had in store for the home entertainment business. It wasn’t a year of evolution, transformation or even change so much as it was a year of shifting, from the old model of home entertainment to the new.

The old model, of course, was renting or buying a movie or TV show as a physical, packaged, consumer product from a brick-and-mortar store and bringing it home to watch.

That model still exists, and it likely will continue to exist for some time.

But the big lesson from 2013 is that the entire business is shifting – not just in bits and pieces, as in years past, but in a unified, holistic way.

The wellspring of options, both in distribution and in consumption habits, has sprung wide open, much as the TV industry did back when cable first burst on the scene and people were no longer limited to the same three networks they had grown up with.

Streaming had already taken root some years back, but as the Comcast deal indicates the other side of digital distribution – electronic sellthrough, or EST – came to fruition in 2013 as a viable and infinitely more lucrative business, buoyed by a collective effort by the studios to allow consumers to buy movies electronically, over the Internet, in a new early window that comes several weeks before the film is released on DVD or Blu-ray Disc.

A growing number of movies are getting this “early EST” release, and the digital product even got an official name in 2013: Digital HD.

“There’s no question that the digital business is making significant inroads,” said Craig Kornblau, president of Universal Studios Home Entertainment. “We are seeing extraordinary double-digit growth quarter over quarter as consumer confidence in digital ownership continues to gain momentum. We have our foot on the gas but must rally more industry partners like Comcast, whose recent entré into digital has proven to be a game changer, if we are to realize the platform’s full potential as a mainstream business.”

Indeed, the addition of a big player like Comcast gives a big boost to studio efforts to educate consumers about the value of digital ownership.

Ron Sanders, president of Warner Bros. Worldwide Home Entertainment Distribution, said EST should be up 50% this year and surpass $1 billion on consumer spending. “Warner Bros. now offers early EST on virtually all of our theatrical new release titles,” he said.

Janice Marinelli, president of Disney Studio Global In-Home and Digital Distribution and Disney-ABC North America Content Distribution, said the results of this strategy are tangible. “For the right collectable movie title, we are seeing that early windows provide a definite boost,” she said.

Studios also are stepping up their marketing efforts for early EST, from offering additional premium content to Digital HD buyers to bundling Digital HD downloads with movie tickets.

“This year, we partnered with Regal on an innovative new early EST offering in the United States called Regal Super Ticket, which resulted in increased EST sales,” Sanders said. “SuperTicket allows moviegoers to buy a theater ticket bundled with an HD download of the movie. The digital download becomes available to Super Ticket buyers before the Blu-ray, DVD and digital versions are officially released. As an added incentive to those who buy a SuperTicket, we’ll also be offering additional digital content to the consumer, which they can access right away. This is a creative way for us to open up a new and mutually advantageous business relationship with exhibitors, as it gives us an opportunity to drive awareness of the theatrical window and promote home entertainment product at the same time.”

Sanders notes that it’s not just studios that are driving this growth in EST.

“The number of retailers, both online and brick-and-mortar, offering digital products and services has helped create greater consumer awareness and adoption of digital,” he said.

Bill Clark, president of Anchor Bay Entertainment, said Target Stores’ rollout of Target Ticket “means all major national retailers [now] have a physical, digital and online presence, which allows the industry to offer a seamless consumption experience across all three platforms.”

Another factor is the proliferation of portable and mobile devices, from tablets to smartphones.

“We are in a renaissance of connectivity, fueled by technology, and this is driving consumer appetites for high-quality digital content,” said Mike Dunn, president of 20th Century Fox Home Entertainment.

Dunn predicts the newly launched Xbox One and PlayStation 4 “will help rejuvenate the market connected to the TV” even more.

Disney’s Marinelli agrees the connected consumer is a key driver in the shift toward EST.

“There was strong electronic home video growth in 2013 as more and more Internet-connected devices allowed consumers to access our movies anytime and anywhere, thus narrowing the gap between physical and digital,” she said. “Our overarching goal is to give consumers the best opportunities to collect the movies they love digitally.

“As the digital business expands, it is essential that we get our content onto multiple devices in order to suit the needs of the consumer. Whether it’s a TV set or a tablet for example, we’re working to make digital consumption as easy as possible.”

Dennis Maguire, president of Paramount Media Distribution, said 2013 “was the most exciting year in the last 10 years in the business because we are starting to see the promise of the future in media distribution and consumption. It’s like a perfect storm. First, we have consumers enamored with technology buying bigger and better screens for the home as well as smaller and better gadgets for on the go – all to enjoy more content. Second, we have more partners working with us to offer our content to more people in an aggressive and convenient way. I have not seen new partners entering the market to sell our product since my early days at Disney when retail chains like Toys R Us, Walgreens, Target and Wal-Mart entered the booming VHS business. Third, the creative community is creating more and more content for broadcast, Internet distribution and streaming – all to satisfy the burgeoning demand these new gadgets and platforms.”

The year also saw a shifting mindset from one technology replacing another to constructing bridges. In 1997, DVDs came on the market with the promise that they would replace the VHS videocassette; a decade later, Blu-ray Disc was marketed as the next step forward in packaged media.

With digital, studios and consumer electronics manufacturers are taking a completely different approach. UltraViolet was launched as an enhancement to the physical disc, a way of transforming purchased content into something that can be accessed anytime, anywhere, on any device – and thus get consumers comfortable with the concept of digital ownership.

“UltraViolet continues to gain momentum with consumers; in fact, there were more than 1 million UV redemptions over the course of Black Friday weekend alone,” said Warner Bros.’ Sanders. “There are more retailers joining the effort with new products and services, and there are now more than 14 million UltraViolet accounts – and the number continues to grow.”

And no one should discount the fact that the new generation of Blu-ray Disc players all have wireless Internet connections and allow consumers to connect their TVs to the web. They can be used not just to watch Blu-ray Discs, but to stream movies through Netflix, for example.

“There’s no question that effectively bridging physical and digital is key to fueling the long-term growth of our business,” Kornblau said. “Flexibility, utility and affordability of both physical and digital products bundled into one high-quality Blu-ray Combo Pack creates an unparalleled value proposition for the avid movie consumer and provides them the ultimate choice in how and when they want to watch their favorite films. Based on Universal’s successes and others across the industry, it is clear that digital and Blu-ray now are not only co-existing but growing in lockstep with evolving consumer behaviors.”

Helping consumers navigate through the increasingly complex web of platforms, products and delivery mechanisms is one of the key challenges the home entertainment industry’s leaders faced in 2013. A big step came when the industry banded together “to adopt consistent terminology with regard to digital products,” Sanders maintains. “All of the major studios have all agreed to refer to digital versions of filmed entertainment and television content across all consumer communication as Digital HD. This new positioning brings consistency to the way digital products are packaged and marketed to consumers, thereby reducing a lot of the confusion in the marketplace and helping speed consumer adoption.”

The year also saw lots of shifting on the studio landscape. Warners put its longtime home video president, Ron Sanders, in charge of Warner Bros. Worldwide Home Entertainment Distribution and expanded his portfolio to include video on demand and EST. Walt Disney Studios put home entertainment under TV distribution; Universal Studios put digital under home entertainment.

The moves were preceded by a fall 2011 reorganization at Paramount in which the studios created a single unit combining home entertainment, digital licensing and television licensing – and headed by Maguire, previously in charge of home entertainment.

Studios in 2013 also continued their quest for greater efficiencies. Paramount, which in the fall of 2012 cut a deal with Warner Home Video to market and distribute a hefty chunk of its library, in the fall of 2013 negotiated a pick, pack and ship deal with Universal Studios – a move that will allow its executives to focus more on digital and other channels.

And with the recent announcement that longtime president David Bishop is leaving Sony Pictures Home Entertainment in March 2014, observers expect this shifting to continue well into the new year.

The business, noted one observer, “is being pushed together and the lines are blurring. And the truth is, folks like Amazon and Netflix saw this convergence even before the studios did and began offering DVD, Blu-ray, VOD and streaming, all at once. They saw the future before others, but now, in a sense, the future is here, and everyone’s recognizing and acting on that.”

Disney’s Marinelli believes digital consumption “is going to continue to evolve in 2014 and beyond, especially as consumers become more comfortable with it and view it as a safe and easy way to enjoy content and build a digital library. We’re also confident that as the system continues to be refined, it will become even more user friendly. There are also going to be more choices for consumers and that’s why we are aggressively working to get our Disney brands and franchises into more digital stores. Our movie and television electronic home video businesses are growing, so we expect 2014 to deliver outstanding results.”

Link:  Home Entertainment: Why 2013 Was the Year of Digital HD

The Hollywood Reporter – Thomas K. Arnold


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