June 6, 2019
The home entertainment landscape has never been more fragmented — and polarized.
Fragmented, because there’s no longer one standard “product” that consumers can buy or rent. They can acquire movies and TV shows in three different physical formats — DVD, Blu-ray Disc and 4K Ultra HD — as well as digitally, with options for standard-definition, high-definition and, in some cases, ultra high-def.
Polarized, because the split between transactional and subscription has never been greater. The home entertainment divisions of the major studios are scrambling to keep transactional alive, because that’s the very essence of their business model: consumers pay to watch, or own, a specific movie or TV show.
Meanwhile, subscription streaming continues to post significant growth, with its share of consumer home entertainment spending likely to increase further with the launch of high-profile new SVOD services by Disney, Apple, NBCUniversal and WarnerMedia, as well as countless smaller players. Here, consumers aren’t paying for a specific movie or TV show — they are paying for access to as much content as they can watch, for a low monthly fee.
The big question is one of sustainability: Can Hollywood continue to produce blockbusters if they’re going straight to subscription services that allow consumers to watch all the content they want for a mere $12 a month? Of course not. That’s why studios continue to reserve their top-shelf product for the TVOD business, while the streamers are busy pumping out more and more of their own original content.
Disney+ is an interesting experiment. The Walt Disney Co.’s new streaming service, set to launch in November, will offer first-run movies — from Disney — to promote the new service. But we’ll see how long that lasts, and what kind of impact that will have on the TVOD performance of those same movies.
Regardless: those with a vested interest in transactional are holding their breath to see what happens when all these new services launch, silently hoping for subscription fatigue — that consumers will balk at signing up for so many different services and take a step back, maintaining one or maybe two core services and rediscovering the joys of the transactional business, paying only for the content they really want.
The studios have never been in the transactional business alone. With the exception of Disney, none of the studios is a brand unto itself — hence, the need for third-party content distributors, or retailers. And while direct-to-consumer is the buzzword du jour, studios are doubling down on their retail partnerships, as evidenced by the recent “Ultimate Movie Weekend” promotion in which five studios teamed with more than a dozen “retailers” of various shapes and sizes to offer digital movie rentals for as little as 99 cents.
The survival of the transactional business depends as much on the studios’ resolve to keep it alive as it does on the retail sector’s resolve to continue supporting it. It’s good to see the two sides working together.