DVD has helped expand the home video market even further, not only making insane profits for movie studios because of their small overhead, but also making it possible to release whole TV series in an economical fashion. Still, the down economy has made sales sag as much as 30 percent and that’s forced some movie studios to rethink their strategies.
“Inspired by the dismal economy and the drop in DVD revenue, studios are rethinking how they make talent deals — eliminating first-dollar gross, limiting writers to one guaranteed draft and generally doing what they should have been doing years ago when DVD revenue was at its peak: trying to run their business like a business instead of a lottery,” writes Jeffrey Korchek. “Because it’s the movie business, there always needs to be the dream of a windfall in the future, and this year’s entrant in the everything old is new again category, 3D, is the next best hope. But the decline in the DVD business has broader implications that are not answered by converting every movie to 3D, and in the same way that the introduction of DVD changed the face of the business, the migration away from the format is changing it again.”
“3D appears capable of attracting audiences out to the theater, and certain movies might work well to be upgraded for 3D, but movie studios have another problem: Netflix and Redbox. These two have taken the place of most of what video stores used to do, but their profitability for studios isn’t great… making video-on-demand more appealing to them.”
“VOD may be the better alternative for consumer and studio alike,” adds Korchek. “For consumers, the below-$5 price point is affordable, and how many movies are worth owning anyway For studios, a VOD transaction is a license, affording them more control like theatrical distribution. But there are alternatives: Sony and Microsoft are talking about putting your movies in a cloud, just like Jell-O did with pudding, so that consumers can watch their movies on any of their multiple platforms. That pits them against Apple and its proprietary system, which manages 75 percent of the VOD market and 95 percent of download-to-own transactions. But there’s a catch: Although there is some lack of clarity among studios, VOD generally is treated as television distribution in profit definitions and for guild residual purposes, meaning that 100 percent, not 20 percent, of studio revenue is included in gross revenue for those purposes. As consumers migrate to in-home transactions like VOD, the financial implications are more complex than merely replacing one purchase transaction with another.”
“The issues facing the motion picture business and the economic system surrounding it are enormous and complex because nothing about the pictures is ever small. Unfortunately, planning for the future often is orphaned when the next big hit or new technology comes along. Without a comprehensive plan, though, the business is in danger of its dreams of a brilliant future being already behind it, and as Nick Carraway would note, studio executives — so slavishly devoted to the green light — will be thinking they are moving forward as they are borne back ceaselessly into the past, he concludes.”
Source: The Hollywood Reporter
