April 08 2008
On-demand media sales to rocket
A new report has bad news for the DVD market, it looks like DVD cash-cow will be off to the slaughterhouse just like the CD market before it.
The DVD market is approaching the point that the CD market reached in the late ‘90s. The music business made huge profits from CDs during the ‘80s and ‘90s, but during that time of indulgence it also made a huge mistake, it took its eyes of the ball. While it was spending huge amounts on parties and cocaine for its artists its audience were investigating the internet and downloading, and despite the plentiful warnings it chose to ignore the problem and it wasn’t until CD sales started to fall that it took any notice. Then when it finally woke up to downloading, instead of embracing on-demand it put up the shutters and spent fruitless years arguing for levies on blank CDs, trying to ban MP3 players, and randomly taking downloaders to court.
The same thing is happening to DVDs. The current healthy profits from DVD sales are buffering retailers from the inevitable fall that will happen in a few years, the smart players – at the moment it’s the porn industry - are already doing on-demand media (ODM, sometimes referred to as ‘manufacturing-on-demand’) if you’re not at least investigating ODM then be prepared for a bumpy ride.
If you don’t believe us then take a look at Screen Digest’s (www.screendigest.com) latest report “On-demand media: Re-inventing the retail business model”, which examines the market for ODM.
The report is the first detailed study of ODM and forecasts its likely impact in Europe and the US to 2012.
According to the report the video business is approaching saturation point in many markets but the saviour will be ODM.
Screen Digest believes that ODM, if executed effectively, has the potential not only to revolutionise how consumers buy DVDs but also to generate incremental revenue at a time when overall growth in DVD spending has slowed. Screen Digest sees ODM services generating $33m in incremental spending this year in the US and the major European markets, and be worth $1.1bn in consumer spending by 2012. Crucially, two thirds or $665m of this amount will be new revenue, whilst the remainder will replace traditional DVD spending.
The report argues that the high street and even online retailers are struggling to accommodate an ever-expanding DVD catalogue while rights owners find that only the most popular titles can secure shelf space. ODM provides a way of tackling these problems by enabling retailers to offer a huge range of titles without the constraints associated with the traditional video supply chain. Rights holders will have the opportunity to exploit ‘long tail’ content – including video titles currently not considered viable for commercial DVD release - as well as the chance to explore alternative retail channels. Consumers will not only enjoy the benefits of a wider range of content and a greater choice of distribution outlets, but will also be able to pick and mix from a library of episodic content to create their own compilation DVDs.”
ODM distribution will initially grow more rapidly in the online environment as consumers will not need to adjust to new technology to the same extent as they will with shop-floor solutions. One major DVD retailer, Amazon, already offers an online ODM service in the US. However, Screen Digest believes that store-based ODM solutions will catch up quickly, and by 2012 spending will be more evenly split between in-store and online.
Whilst initially the ODM business will be focused on ‘long tail’ titles, including those not previously made available for sale, the market will also offer an avenue for content with a short shelf life such as highlights of sporting fixtures. As the market expands, ODM will be harnessed for ‘catch-up’ TV and, to a greater extent, catalogue feature film. Much of the content available through ODM services will be offered to viewers for the first time and therefore a significant proportion of the value generated by the market will be incremental.
Marie Bloomfield, Screen Digest Analyst and author of the research says “The industry has an opportunity to establish a viable ODM business, both in-store and online. Retailers, rights holders and consumers can all benefit from the on-demand retailing of a wide range of video content, and overall the industry has the potential to reap significant financial value from a well-executed ODM strategy. This is particularly crucial as the growth in the DVD business has plateaued and the new content made available to consumers will generate incremental revenue which will help sustain the market.”
