Still reeling from a declining DVD market, a panel of major-studio home entertainment presidents concluded that green shoots are finally beginning to appear on a sector that's been in steady decline for the last five years.
With the Blu-ray Disc format finally beginning to gain traction with consumers, and with 28-day release delays to Netflix starting to show the desired effect on margins, the group of top studio executives convening at the Blu-con 2010 at the Beverly Hilton Tuesday said growth is coming … someday … soon.
But the picture isn't entirely rosy. For now, Warner Home Video president Ron Sanders conceded, the business continues to experience tough post-recessionary sledding, with sales of standard-def DVD — still the lion's share of the business — down 14 percent through the first three quarters of the year.
And overall, the home-entertainment business — rentals, sales, discs, downloads … everything — is down about 4 percent for the year.
For one thing, revenue from Blu-ray is expected to reach $2 billion this year, especially with the studios marketing Blu-ray combo packs that include more widely playable DVD versions.
Fox Home Entertainment president Mike Dunn said this year's fourth-quarter shopping season could present a tipping point. "We're finally going to see (Blu-ray) go into the minivan," he said. "It's now a good value for mom and the whole family."
Blu-ray sales increased 80 percent through the first three quarters of the year, according to studio-sponsored research firm the Digital Entertainment Group. And mainstream adoption, Universal Studios Home Entertainment president Craig Kornblau said, would enable studios to begin mining their vaults for the Blu-ray release of legacy titles — a major driver of DVD sales a decade ago.
"It feels like we're on the cusp of an opportunity on the catalog front," Kornblau said.
"We're getting double- and triple-digit growth in Blu-ray catalog sales," added David Bishop, president, Sony Pictures Worldwide Home Entertainment. "I think we're finally at a point where we're going to see that market shift.
With cash-strapped consumers opting en masse to rent rather than purchase DVDs in recent years, Sanders said the migration away from brick-and-mortar shops like Blockbuster to kiosk services like Redbox and online renters like Netflix has acutely affected margins, with these newer outlets offering rentals at a much lower price point.
Over the last year, most of the major studios have negotiated windows with Netflix and Redbox, keeping new titles out of their hands during their first 28 days of release. There was a consensus among the panel participants that the windows were bumping sales of Blu-ray and DVD titles by an average of 10-15 percent.
"Over time, more and more people are going to understand that there's a window, and if they want to see (a movie) on the day it comes out (on DVD and Blu-ray), they're going to have to buy it," Kornblau said.
Added Sanders: "To be honest, 28 days is a little shorter than what we really need, but there will be a chance for this to get looked at again later."
Meanwhile, the panel said help also was on the way from the emerging VOD market, with cable and satellite service providers beginning to make their rental offerings more technologically workable and consumer-friendly.
Emerging competition for VOD services from new devices, like Apple's iPad, is forcing companies like Comcast and DirecTV to improve their offerings, Sanders said. "The Apple and Android devices are raising the bar on these cable-system interfaces," he explained.
"On 'Robin Hood,' we did one and a half times what we have done historically (on VOD), so that market is developing," added Kornblau, who also mentioned the emerging premium VOD window being developed by most of the major studios that would make recently released theatrical titles available for around $30.
The panel also touted its joint work on the Digital Entertainment Content Ecosystem, a broad coalition of companies looking to establish a digital sell-through market for movies and TV shows.
Currently, digital sales amount to a tiny faction of the market — well below $1 billion annually — but Lionsgate president Steve Beeks envisioned a day when consumers are as comfortable buying digital copies of movies and TV shows as they are songs.
"Consumers have already bridged that chasm with music," he said. "They've shown that they'll make that connection if we can enhance the experience."
With Fox's Dunn noting that total home entertainment transactions should end up at an all-time high of 3.6 billion this year, the group concluded that ongoing experimentation with windows and the burgeoning number of release platforms was their ticket back to growth.
But in a market that's way more complicated than it was a decade ago — when all there was to worry about was selling DVDs — the group conceded that managing all of the new the complexity is a bit daunting.
"If you slice the pie in to many places, no one is going to be satisfied," said Dunn. "And if we have too many windows that are too small, that's going to be a problem."