Studios Find Their Best Hope for Offsetting a DVD Decline
When Walt Disney Pictures releases “Iron Man 3” on homevideo Sept. 24, it won’t be the first post-theatrical glimpse fans will get of the film after its theatrical run. The movie will be available for high-definition download three weeks earlier on a range of digital platforms from iTunes to Amazon, instead of the typical simultaneous rollout with disc purchase and digital rental/VOD formats.
What was once an exception to traditional windowing for movies is steadily becoming the rule. One year after Fox announced plans to offer all of its films two to four weeks early under the “Digital HD” banner, more and more blockbuster titles are getting the same distribution treatment. Warner Bros.’ “The Great Gatsby” was available on select digital platforms weeks before its Aug. 27 street date, while Paramount’s “Star Trek Into Darkness” did the same Aug. 20 — though disc buyers will have to wait until Sept. 10.
And after a few years of scattered trials with what the industry calls “early electronic sellthrough,” or EST, it’s not just the timing and duration of the window that’s being tweaked. Both where and when films are offered is being tested outside the home in retail stores and movie theaters.
Enabling this increasing experimentation is the changing operational structure at studios, most of which have combined their digital and disc divisions. Sony, Fox and Paramount have made such moves over the past several years, followed more recently by Warner Bros. and Universal.
With disc sales struggling to maintain the value they’ve long enjoyed on conglomerate balance sheets, EST growth is critical to studios, which must transition the whole notion of ownership to digital, a format far more conducive to the much lower margins being earned by rentals.
“We’re looking to encourage ownership in a digital world, and what EST does is separate the ownership piece out, brings it directly to the consumers, and creates impulse sales like we never had before,” said David Bishop, worldwide president of Sony Pictures Home Entertainment, who said Sony was the first to offer EST, through an exclusive iTunes sell-through for 2011 documentary “It Might Get Loud.” It soon followed with the studio’s fi rst major title in the window, “Bad Teacher.”
Even in decline the disc business is the most valuable window after theatrical. In January, Nomura Securities estimated that home entertainment was responsible for 14% of total revenues at News Corp., 12% at Time Warner and 5% for Disney. Homevideo generated $18 billion in sales in 2012, according to the Digital Entertainment Group, slightly up over the previous year.
Whether an earlier electronic sell-through window is working is difficult to quantify, considering detailed statistics aren’t easy to come by in home entertainment, which is seeing a combination of Blu-ray sales and digital compensating for DVD losses. How much EST has to do with that isn’t clear: The early sales aren’t parsed out by the Digital Entertainment Group, which did fi nd, however, that EST overall soared by more than 50% in the first half of the year over the same period in 2012. That amounted to $490 million of the $8.6 billion spent on home entertainment in the first half of 2013, putting the category on track to reach $1 billion this year.