Showdown: Digital Versus Traditional
Despite digital’s booming popularity, Hull says it represents “pennies compared to the dollars of traditional distribution.” However, services such as Netflix are catching up. “Roll up their 20-million-plus subscribers, and this is not the type of money that you generally see in traditional distribution … yet. It will totally get there; it will definitely get there,” says Hull.
In April, Bloomberg News reported that Providence Equity Partners, Inc. was looking to sell its stake in Hulu in order to invest in a new production company. The 10% share was reportedly valued at about $200 million, which represents a doubling of the firm’s money since 2007. Not too shabby.
Meanwhile, there has been a decline in overall DVD rentals. According to a March 26, 2012, piece on Deadline Hollywood, consumers spent $5.65 billion renting DVDs and Blu-ray Discs in 2011. That’s down 3.4% from 2010. In the last 3 months of the year, rentals were down 21.3% from the same period in 2010, as business at kiosks—including Redbox Automated Retail, LLC, which charges $1.20 a night—grew by 28%, notes Deadline.
Redbox, which generated $1.6 billion in revenue last year, also plans on launching a streaming service of its own, notes the Los Angeles Times. Redbox announced in February that it would be teaming up with Verizon to create a rental service that would offer digital delivery and compete directly with Netflix.
Blockbuster, LLC—which filed for Chapter 11 bankruptcy in 2010 and had been criticized for failing to embrace digital delivery—launched its own streaming video service last year. Last fall, Dish Network, LLC unveiled a Blockbuster-branded service to watch movies over the internet and rent DVDs through the mail.
So far the results are fuzzy, says Hull. “It’s unclear what’s going to happen with Blockbuster’s streaming service still. At first, everyone thought it’d be a Netflix competitor … or killer. Now, the feeling is that it’ll just be a value-add for DISH subscribers only,” explains Hull. “In the big picture, there’s still room for more competitors in the streaming marketplace, especially one as well capitalized as DISH. But Blockbuster needs to get off their tail and make some bold moves soon. Every day that goes by is one more day that Blockbuster’s name is forgotten.”
The Importance of Being Nimble
Moving forward, studios and content owners have to be very careful, adds Hull, because “they’re walking this very fine line where they’re kind of planning for the future and also not cannibalizing their existing revenue model.” Consequently, says Hull, studios are slow to change. “They’ve always been that way; they’re always going to be that way. That’s just kind of how they’re built; they always resist change for that reason.”
Hull points out that it’s a bit of a misconception that everyone in digital media is getting rich. “You can pick up The Wall Street Journal any day of the week and people are talking about digital media, digital media as if everyone’s getting rich in it—we’re not quite there yet, particularly on professionally produced content. … We are getting there but we aren’t there yet.”
Mulvey says he thinks Hollywood is ready to go fully digital, but he cautions that “it takes a long time to get people used to the way new business is going to be done.” His company GoDigital works with premium independent films to make them available to the widest possible audience on all the major platforms, including iTunes, Xbox, cable, and video on demand through Time Warner, Cox Communications, Inc., or Comcast, according to Mulvey.
“The independent side has been more progressive than the studios because we are more nimble and it’s easier for us to make changes and convince filmmakers to try what’s been considered alternative styles of marketing and distribution,” explains Mulvey. “But I do understand that it does take a while to make a transformation to a completely new way of marketing and consuming.”
Just as independent filmmakers often push artistic limits, it seems that now they may be the ones to push Hollywood to truly embrace alternative distribution. As shows such as Lilyhammer or Battleground enjoy internet success, distributors phase out their DVD business, and customers continue to demand more access, Hollywood is going to have no choice but to step up and take digital distribution seriously.
Los Angeles Times
New Amsterdam Media
The Wall Street Journal