Panelists: Digital options lacking for future

IRMA: Lieberfarb says 'Internet not ready to distribute major video releases'

By Susanne Ault -- Video Business, 3/13/2007

MARCH 14 | INDIAN WELLS, CALIF.—Digital delivery is the future, according to presenters at the 2007 International Recording Media Assn. here this week, but its current shortcomings, including limited Internet capacity, ensure a longer life for packaged media in both standard- and high-definition.

Adams Media Research chief Tom Adams compared various entertainment sectors between 2006 and 2011, emphasizing that traditional video sell-through and rental will give some ground to rivals but remain popular among consumers. Also, new media (including pay-per-view, video-on-demand and Web downloads) will strengthen but stay small, jumping from 3% to 12%. Video sell-through will slip from 28% to 27%.

“In the short-term, I’m cautious about packaged growth, but we will ramp up when high-def gets to reasonable penetration levels,” said Adams, during a Tuesday panel discussion. “Over the next two years, there will be 15% to 20% penetration levels of high-def households, and we will get back to reasonable growth rates with packaged media.”

'Over the next two years, there will be 15% to 20% penetration levels of high-def households, and we will get back to reasonable growth rates with packaged media.'
Tom Adams, Adams Media Research

Panelist Danny Kaye, executive VP of global research and technology strategy at 20th Century Fox Home Entertainment, estimated that by 2011 new media formats would generate $4 billion in revenue -- up from $30 million in 2006 -- with traditional media revenue towering over that at $38.3 billion, up from $33.5 billion in 2006.

Kaye added that people are still buying standard-def DVDs but in slightly smaller amounts. Among early adopters, who were the first to build hefty DVD libraries, DVD purchases fell to 15 titles in 2006, from 22 titles in 2005.

Fox is promising to deliver some of the first Web-enabled Blu-ray Disc titles this year. Kaye demonstrated an X-Men: The Last Stand trivia game in which different Blu-ray households can compete against each other. He declined to specify when the bonus feature will be released and on which title.

Experimentation

“Electronic distribution isn’t a big business right now—it’s more about experimentation,” said Kaye. “20th Century Fox will continue to experiment and go where the consumer takes us.”

Even the service that has emerged as the most powerful distributor of digital media, Apple iTunes, still does not reach the masses, IRMA presenters said.

“This is not yet a hit,” said Bruce Leichtman, president of the Leichtman Research Group. “To date, 50 million TV shows and 1.3 million films have been downloaded on iTunes. [In contrast,] Comcast had 1.8 billion video-on-demand sessions in the past year.”

Recent surveys show that 70% of video iPod owners have never downloaded video, added Leichtman.

Revenue small, for now

Also telling, Walt Disney Co.’s projected $25 million in downloads this year is the equivalent of less than one day’s revenue at Disney’s theme parks, said IRMA keynoter Warren Lieberfarb.

During his speech, Lieberfarb illustrated current shortcomings with downloading, most notably the lack of suitable bandwith to deliver quality films to consumers.

Citing Shrek 2 sales of 11 million DVD copies during its first three days in stores in 2004, Lieberfarb noted that “it would require 33 times the data capacity of [today’s] Internet” to distribute the same number of copies digitally in the same period of time. “We need a larger pipeline that is capable of carrying 2 trillion bytes per second. The Internet is not ready to distribute major video releases.”

Up to 15% of downloads need to be retried because of corruption in the data transfer, added Andrew Parker, chief technology officer at peer-to-peer tech firm Cache Logic, during an IRMA session.

However, with bricks-and-mortar powerhouses such as Wal-Mart now offering movie downloads, the entertainment community needs to integrate the digital world into their traditional businesses. IRMA kicked off its conference with the announcement that it was morphing its name to the Content Delivery and Storage Assn. in order to embrace next-generation media members.

“Physical media will feed Hollywood for years,” said Charles Van Horn, IRMA president. “But it’s time for all of us to figure out how to capitalize on complementary online and mobile delivery.”

IRMA sessions were sprinkled with examples of how traditional and new media can co-exist.

“We get carried away in seeing this as competitive,” said Jim Bottoms, president of Understanding & Solutions. “There is some overlap, but there are lots of areas of synergy. A perfect complementary situation is if you miss a few broadcast TV episodes, you can download those that you missed, and if you miss [more like an entire] season, you can go and buy the DVD.”

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