The shift away from packaged media towards on-line offerings has been a gradual one for the movie studios. But last year might have been an inflection point for the industry, breaking into negative growth territory for the first time (-3.2% to $15.9B) after years of growth. These are certainly troubling times for the studios with their cash cows at risk of disappearing over the coming years. With consumers having more choices than ever before regarding how they consume media (Apple iTunes, illegal peer-to-peer filesharing, NetFlix and BlockBuster movies through the mail and on-demand, service provider on-demand VoD), the next major inflection point for the studios may be at hand – retailers like Wal-Mart shrinking the amount of space dedicated to DVDs could set off a death spiral for packaged media. In response, Time Warner is looking to invest millions to try to push back this perhaps inevitable development.
For the upcoming release of the Watchman movie in 2009, Warner will be producing exclusive content that will only be released on DVD. Previous to this, DVD exclusive material has tended to be throw-away extras that typically appealed only to super-fans of the movie. In this case however, the extra movie will be called “Tales of the Black Freighter” and presents content which will likely be of great interest even to casual fans – Warner anticipates that this release could lead to a separate release of the Tales movie just 5 days after the theatrical release as well as an ultimate version with Tales merged with the actual Watchman movie. Whether this will be enough to stem the tide with retailers is questionable to some degree, especially because Warner has been stepping on their toes by leading an initiative to simultaneously release movies on DVD and video-on-demand services.
This commitment from Warner is a sign that things are getting interesting in packaged media these days, and that the studios are looking at new ways to simultaneously preserve and replace legacy revenue streams – which seems like contradictory goals. Ultimately, this may prove to be a case of “too little too late”, as studios really can’t afford to withhold content from any distribution channel in an environment where customers are much more savvy in getting what they want, when they want. In other words, could packaged media “really fall off a cliff” should Wal-Mart decide to consider its commitments to DVD? This would definitely be something watch, and the ability to have access to a huge library of niche content through on-line services could mean that retailers may soon cut back and limit their DVD shelf spaces to just popular titles.
But for the studios, accelerating this shift could turn out to be best thing in the long run, as the experience of the music studios with respect to CDs taught us that movie to slow in the on-line realm really provided a window for someone else (in this case Apple) to be the middle man in this emerging market, while also providing the breeding ground for media piracy. Benefactors in an accelerating shift towards on-line distribution are the owners of the consumer portals, which include service providers like Comcast, Verizon, and the owner of the leading Internet media portal, Apple.
