Packaged media to remain flat through 2012
Futuresource: Digital, mobile will lift home entertainment
By Susanne Ault -- Video Business, 1/30/2009
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The research concern believes packaged media—DVD and Blu-ray—will remain a flat business at least through 2012, with the home entertainment industry’s growth fueled solely by online and mobile distribution.
Futuresource agrees with studio estimates that Blu-ray will triple its revenue in 2009. But the format’s pace still will be just fast enough to counter standard DVD’s slide, creating a flat packaged media business between 2009 and 2012.
The industry won’t again reach its peak revenue—achieved in 2006—until 2012, when mobile and online digital revenue will account for 15% of total home entertainment spending, Futuresource predicts. At that time, home entertainment will encompass $20 billion in packaged media and $3.5 billion in digital revenue.
In a spot check of studios, Warner Home Video confirmed it believes that DVD and Blu-ray revenue will return home entertainment to growth by 2010. Other studios didn’t respond by deadline.
Analysts at Futuresource note that one obstacle keeping Blu-ray from an even steeper climb is the fact that it doesn’t represent as dramatic of an upgrade from DVD as DVD did from VHS.
“We are projecting strong Blu-ray growth, but it’s not enough to stem DVD,” said Mai Hoang, Futuresource senior market analyst. “In reality, not all consumers will be completely replacing all video titles with Blu-ray. The format transition is a harder sell than it was when going from VHS to DVD.”
Another factor curbing spending is software pricing, especially in catalog.
Catalog titles often carry a 200% to 400% price tag premium over their steeply discounted standard DVD counterparts. Relatively stronger Blu-ray new releases generally carry a 25% to 50% premium over standard DVD versions, according to Futuresource.
“We see new release pricing as fairly reasonable,” said Hoang. “But with 200% to 400% premium on catalog, these titles have been struggling to move significant volume.”
However, fast declining hardware prices are expected to significantly strengthen Blu-ray’s installation base by 2012. Futuresource reports that by then, 62 million Blu-ray stand-alone players will be in homes, as well as 25 million Blu-ray-capable PlayStation 3 consoles. Following $250 average Blu-ray set-top pricing in 2008, tags should be further shaved to $199 in 2009 and $77 in 2012.
Futuresource doesn’t expect the current recession to notably curb the format’s progress. And eventually, software pricing will likely fall to ramp up demand.
“We don’t see the economy having a significantly negative impact,” Hoang said. “There will be an element there, but it won’t be significant. Software prices are going to decline and that will aid in the format moving.”
Compared to Blu-ray, digital adoption will be a much more gradual process, according to Futuresource. Consumers will begin to embrace it more as known brands expand their digital offerings. For example, Netflix and Amazon have recently begun offering streams and downloads on top of their traditional online DVD mail-order businesses.
“Amazon.com and Netflix have an existing relationship with customers and can target them with value-added video service,” said Hoang. “LG and Samsung Blu-ray players [now offering Netflix service] will also drive online going forward.”
Additionally, studios such as Warner and 20th Century Fox Home Entertainment are bowing more titles for video-on-demand at the same time as the DVD releases, contributing further to consumer digital acceptance.
Quickening broadband speeds within the next several years also should boost consumer digital sales, according to Futuresource.
