NPD: Disc, Not Digital, Drives Home Entertainment Revenue (1 Viewer)

[Jason_V]

Originally Posted by Persianimmortal
A lot of people are saying this, and I still contend that this is completely incorrect. Physical media will disappear over time, and probably sooner than we think, because at some point they'll just stop releasing the highest quality stuff on physical media. Sure, CDs and DVDs will probably live on for a while yet, but BD and 4K material is just prime for digital.

Downloading has a long, long way to go when a 42 minute episode The Suze Orman Show (not even in HD) takes me at least an hour to download. Digital copy of The Hunger Games through iTunes took hours. If you want to take all night to download something, feel free. I don't want that and I think there's plenty of people who are either unwilling or unable to do so.
Again, if 60% of home video revenue comes through packaged media, the studios are not going to give that up and force everyone to using the cloud or downloading. Just not going to happen. And as long as packaged media sells, that percentage will remain high.

 

[Persianimmortal]

I think you and many others are engaging in short-term logic and wishful thinking. Completely understandable in many ways, as just like anyone else here, I'm hardly eager to rebuy most of the movies I've purchased on Blu-ray on a new format or in digital form, so it would be comforting for me to think that the Blu-ray physical format is going to be the be-all and end-all for quite some time to come. I'm also not keen to move from physical ownership to cloud-based "rental" or streaming model either, so again, I can understand the lack of belief in that model. But the reality of the data that spurred this thread is that digital sales are growing, and disc sales are down from 64% in 2011 to 60% in 2012. Of those disc sales, the majority are DVDs, something like 70-75% of disc sales being DVDs in mid-2012 (e.g. according to this article). There are also some other interesting facts to consider. Jason, you state that:

If you want to take all night to download something, feel free. I don't want that and I think there's plenty of people who are either unwilling or unable to do so.

And yet this conveniently ignores the fact that for many years now, a very large number of people have been doing exactly that, through piracy. So not only the capability, but the will, is there for many people to download sometimes very large files for hours or even days. The last time I looked at detailed piracy data for an article I was writing in 2008, this article indicated that "P2P [Peer-to-Peer] data currently represents 44.0% of all consumer traffic over the Internet and 33.6% in North America.". That was 5 years ago, I haven't found a more recent article, but I'd suggest that if 5 years ago almost half of all Internet data was mainly piracy-related downloads, it hasn't gone down given the increase in broadband speeds, connectivity, data caps and pirated material. So as a studio owner, what can you deduce from this? Firstly, disc sales are not the future. They're going down, not up. No business in its right mind would continue to invest in a falling source of revenue. Secondly, quality is hardly the driving factor in home entertainment. If 60% of your sales are disc-based, but almost three quarters of that is lower quality DVD, then replacing it with equal or better quality streaming HD is both commercially viable and likely to be well-received over time. Thirdly, if people are willing to download pirated movies, TV shows, games and music en masse, then they will be quite familiar with handling and storing digital files as opposed to discs, and willing to wait the time it takes to download the material - as long as it is relatively cheap and convenient. That last part has been the current stumbling block. Fourthly, purely from a business perspective, it is much easier to precisely match supply with demand via digital, rather than printing large volumes of discs to cover estimated demand, and storing them in warehouses, on store shelves, etc. So the business case for moving to digital is pretty much cut-and-dried. I have no doubt Blu-ray and DVD will stick around for a while yet, but Blu-ray is already a niche, and will become even moreso. Newer high resolution movie formats like 4K will likely skip Blu-ray and move to digital download/drive-based storage. And for most people, streaming or compressed digital download will come to be the norm, because as current data indicates, the majority of the market is not overly concerned with quality.

 

[Jason_V]

Originally Posted by Persianimmortal
Firstly, disc sales are not the future. They're going down, not up. No business in its right mind would continue to invest in a falling source of revenue.

So instead of finding a way to innovate and find a way to make the medium relevant again, you abandon it?

Originally Posted by Persianimmortal
Secondly, quality is hardly the driving factor in home entertainment. If 60% of your sales are disc-based, but almost three quarters of that is lower quality DVD, then replacing it with equal or better quality streaming HD is both commercially viable and likely to be well-received over time.

I think I said almost the same thing previously. Streaming quality HAS to get better for this to work. Right now, it's not there. For casual fans, they might not care. But for the hardcore cinephiles, it will matter. A lot. Here's the thing: BD and DVD are coexisting. Downloads and physical can coexist. Why? Studios will not cut off a part of their audience because of the distribution method. Even if we have to go to a specialty store for physical, or right to the studio, it will be there. Everything is cyclical. This will be as well.

Originally Posted by Persianimmortal
Thirdly, if people are willing to download pirated movies, TV shows, games and music en masse, then they will be quite familiar with handling and storing digital files as opposed to discs, and willing to wait the time it takes to download the material - as long as it is relatively cheap and convenient. That last part has been the current stumbling block.

Cheap and available. But wait for the first time something major happens with the technology...like all internet companies impose caps on usage or a network goes down or a lot of people lose all their movies. There will be a clamor for physical media once again.

Originally Posted by Persianimmortal
Fourthly, purely from a business perspective, it is much easier to precisely match supply with demand via digital, rather than printing large volumes of discs to cover estimated demand, and storing them in warehouses, on store shelves, etc.

Easier, perhaps. So maybe we go to a strictly MOD version of physical media like the WAC and Fox and several others are doing now. Print what is needed on an "as ordered basis."
Getting rid of physical completely feels like throwing out the baby with the bathwater.

 

[Persianimmortal]

Again, this is not long-term thinking. Why "innovate" by holding onto a medium that is locked in to 50GB (BD) or 8.7GB (DVD) of storage maximum, at 1080p or 480p respectively, and requires physical manufacturing and distribution? It seems odd to me that you're ignoring the business, environmental and technological points which all indicate that a move to digital is inevitable. An entire generation of young people are now completely accustomed to digital-only media. Piracy has seen to that. HDTVs already have multiple input ports and accommodate a variety of file formats for just this very reason. The market is already there, all that's needed is the right delivery mechanism, and I can't understand why you and others seem to think this won't occur in the next few years, given the potentially huge profits for something like a "Steam for movies" model that actually works. If you had told me back in 2005, while I was standing in the checkout line at my local hi-fi store with an armful of DVDs, that those discs would be superseded by a new format shortly, and that I would be rebuying many of those same DVD movies a scant 5 years later on BD, I would have either laughed in disbelief or cried in despair, but here we are and it has happened. Technology is moving quicker than ever. You keep stating that BD and DVD will live on, and I've already said that I agree. But these formats will be superseded and eventually phased out of the mainstream. You can still buy brand new 3.5" 1.44MB floppy disks and Blank VHS Tapes, but who wants them? They're not dead, they're irrelevant. When we move to 4K, which I assure you could be mainstream as quickly as in 5 years' time, where do you fit the larger file - cram in on a 50GB BD? How is it innovation to increase compression and potentially reduce quality just to hold onto a particular physical format? Doesn't it make more sense to store 4K material on a drive of some sort, preferably distributed primarily via digital means? When you can have on-demand high bitrate 4K material in 5-10 years' time, who would even want Blu-ray discs? The enthusiasts for whom quality is the primary concern will be forced to adopt the newer, higher quality standard, while the average person for whom quality is not a major issue will be just as happy with streaming or low-quality smaller digital downloads. P.S. - I'm not rejoicing in any of this, or saying that I want it to happen this way. I'm just stating what I think is the reality of where media is heading.

 

[Jason_V]

One reason why it won't happen and I'll leave it at that: The studios and tech companies aren't agreeing on digital anything. There's UV and then digital downloads and Disney file whatever. And then Netflix streaming has rights to certain titles, but they won't be on Amazon Instant. And CBS does not allow Hulu to stream any of their shows. And on and on and on. We may get a new format (smaller, more space), but I really, honestly 100% believe physical media will always have a place at the table. Way too many problems for it to go away permanently.

 

[Persianimmortal]

I'll also leave you with this thought: the PC gaming market went through exactly the same thing many years ago. Different game publishers didn't agree on anything, and wanted their own proprietary formats and various DRM solutions and so forth. It was the introduction of the Steam digital distribution/DRM platform that shook up the industry, and despite heavy initial resistance and outright hatred from both publishers and consumers alike (including me), eventually came to dominate the market. Similar to what iTunes did for digital music sales, or Netflix for movie rentals. All it takes is the right platform, and you will get rapid adoption. I just can't see how the next phase in selling movies is to go to yet another physical medium. The data tends to indicate that with DVD, physical media reached saturation point, arriving at the cost/quality compromise that most consumers seem happy with. For that reason, BD has faltered, and I don't think any sane movie studio or CE manufacturer would then decide that the solution is to come up with yet another, even more niche, physical format as its successor. Maybe we'll get 4K movies sold on 128GB USB thumb drives. Who knows?

 

[Chuck Anstey]

If you think about it, the resources that go into creating individual discs in cases, all packaged up and sitting on a shelf taking up lots of space, some of which are never purchased, is grossly inefficient both economically and environmentally. It makes far more sense to find a better way to deliver the ultimate product - which is after all just a movie in digital form - in a manner where supply always equals demand precisely, at the lowest cost to the manufacturer and consumer. Streaming is one option that will always be there, but I personally think digital downloads will be more common, similar to the Steam model. You will purchase and hold your library of movies via some sort of digital locker or online account. Of these, you can then download as many as you want to a local drive of some kind, whether on your PC, portable device, or a standalone player, or even a built-in storage module in your TV. Say it can hold 2-3TB of movies at one time, which at 50GB per film would be 40-60 whole discs of movies stored locally. You can purchase new movies at any time and download them straight away, or just keep them in your digital locker for later download when required.

Do you know how much energy it takes to run a server farm? All the energy to transmit those bits from the server to a home? And that has to run 24/7/365. My 350 BD discs used no energy today. One year from now they will have consumed 0 additional energy. What is the fastest and most efficient way to transmit data in bulk? An 18-wheeler full of BD or other high density storage. Faster would be a 747 cargo carrier for longer distance and potentially more efficient would be a boxcar. Streaming is neither efficient nor environmentally friendly until the bulk of energy can be created with far less environmental impact. Streaming is far more convenient for the consumer when one wants access to virtually every title out there. That's when you can run into problems with economies of scale creating physical discs in bulk for the majority of titles, which are far less popular than the few big movies each year. However to provide access to such titles requires a continuous expenditure of energy 24/7 so even that may end up consuming more energy than they generate in revenue. Disc on Demand for lesser titles, shipped to your house would probably be more efficient in total cost in energy and impact to the environment. In that case you have a set of machines that run 24/7 creating DoD, always 100% busy. Movies and TV shows stored on other physical media that only uses energy when being copied and no energy when idle. Streaming does have one other significant advantage; the ability to change standards. My BD is permanent as far as quality and standard goes and requires specific hardware. Changing to 4K, 12-bit, bigger color space, HFR, or a new device would require a new disc or new media. Streaming would just change without being locked into any given spec and we have that now with Ultraviolent and such. Pay once and watch the movie on "any" device. Of course if you thought bandwidth was essentially zero cost, try watching a few movies on your smart phone and see how much your wireless provider thinks bandwidth costs.

 

[Persianimmortal]

I'd be interested if you have any data that actually shows exactly what a data center costs to run, per unit of data, as opposed to manufacturing each individual disc out of plastic, a case out of plastic, and shrink wrapping it in plastic, printing insert artwork on glossy paper, then transporting it to points of sale across the world, then in turn to each person's home. Electricity is not the only cost involved, as plastic is mainly derived from petrochemicals which are non-renewable and toxic. I'm no environmentalist, but I'd suggest to you that if it were more expensive in terms of energy and resources, then companies would never be looking at moving to streaming in the first place. Clearly there are efficiencies involved. Also, you may be aware that I've repeatedly mentioned a model which is not streaming as such, but allows you to download the movie to local storage (hence my comparisons to Steam). Download once, use as many times as you like. The key aspect is that it cuts out the resource-intensive and wasteful physical production and distribution process. All we're really after is a digital movie file anyway, whether stored on a 50GB BD disc, or as a file on a local drive, it's exactly the same.

 

[RobHam]

I'd be interested if you have any data that actually shows exactly what a data center costs to run, per unit of data, as opposed to manufacturing each individual disc out of plastic, a case out of plastic, and shrink wrapping it in plastic, printing insert artwork on glossy paper, then transporting it to points of sale across the world, then in turn to each person's home. Electricity is not the only cost involved, as plastic is mainly derived from petrochemicals which are non-renewable and toxic. I'm no environmentalist, but I'd suggest to you that if it were more expensive in terms of energy and resources, then companies would never be looking at moving to streaming in the first place. Clearly there are efficiencies involved. Also, you may be aware that I've repeatedly mentioned a model which is not streaming as such, but allows you to download the movie to local storage (hence my comparisons to Steam). Download once, use as many times as you like. The key aspect is that it cuts out the resource-intensive and wasteful physical production and distribution process. All we're really after is a digital movie file anyway, whether stored on a 50GB BD disc, or as a file on a local drive, it's exactly the same.

Persuasive and insightful arguments presented in your sextet of posts within this thread - I agree with most of it. The knock-on effect of Blu-Ray heading into niche territory is that prices will inevitably go up for physical media, and conversely come down for cloud based downloading with mass-market adoption. At some stage (within the next 3 - 5 years), I think my current DVD & BD collection will end up on a local storage drive - either a huge capacity drive or a series of smaller drives. Transferring them will be a bugger of a job though, and what to do with all that spare shelf space (maybe books will make a comeback).

 

[Chuck Anstey]

I'd be interested if you have any data that actually shows exactly what a data center costs to run, per unit of data, as opposed to manufacturing each individual disc out of plastic, a case out of plastic, and shrink wrapping it in plastic, printing insert artwork on glossy paper, then transporting it to points of sale across the world, then in turn to each person's home. Electricity is not the only cost involved, as plastic is mainly derived from petrochemicals which are non-renewable and toxic.

Since streaming only delivers the data and nothing else, there are plenty of options available to greatly reduce the environmental impacts of the plastics and glossy paper at the retail level such as simply having one display box but people buy a disc in a cardboard sleeve.

I'm no environmentalist, but I'd suggest to you that if it were more expensive in terms of energy and resources, then companies would never be looking at moving to streaming in the first place. Clearly there are efficiencies involved.

You mean companies always choose the less expensive and less environmental impact choice? See my first response to show that isn't true. Secondly I am quite sure that streaming is currently artificially subsidized by many parties. First would be the companies themselves trying to break into a new model. We have seen this many times before when companies bring out a new product and sell the hardware and/or software at a loss to get a foothold. Recent apropos examples would be HD-DVD, PS3, and Blu-ray. Another area of subsidy is from all the users of the internet. Just like the phone and wireless lines, the total bandwidth does not allow but a small percentage of the people to be on at once. Most ISPs are looking at data caps because they cannot allow everyone full bandwidth 24/7. Streaming, just like the original phone modems, would overwhelm the infrastructure once a critical mass of people want full bandwidth 24/7 because it wasn't built for that kind of use.

Also, you may be aware that I've repeatedly mentioned a model which is not streaming as such, but allows you to download the movie to local storage (hence my comparisons to Steam). Download once, use as many times as you like. The key aspect is that it cuts out the resource-intensive and wasteful physical production and distribution process. All we're really after is a digital movie file anyway, whether stored on a 50GB BD disc, or as a file on a local drive, it's exactly the same.

I have bought at least 10 times more movies than I have ever owned in games in my entire life, and that is across 6 systems and untold numbers of PCs. Even from your personal example you own far more movies than games and movies occupy far more space than a game. You could probably fit all your games in less space than a single movie. Storing even what is considered an extremely large amount of games locally is nothing compared to storing a rather small (by collector's standards) number of movies. There is one more consideration why PC games are not a good example of how downloading can work. PC games get obsolete or completely incompatible and are no longer desired after 5 to 6 years typically. So Steam only has to keep the latest games, not every game made in history. With movies the opposite is true. Once a movie is available, it would be available for all time. Oh, and old movies does not occupy less space than current movies, at least not until HFR becomes the norm. On the other hand, games even a few years old tend to be only a fraction of today's games' sizes, which are still small compared to a Hi-Def movie. I like the concept of streaming and I have used it to watch some shows that I could not or would not buy on disc because the cost would be too high. However I am quite sure that I am being subsidized to keep my cost low or free and that eventually the system will go to the true cost of streaming and then it will no longer look nearly as attractive. Wireless data has already started to have this happen.

 

[Persianimmortal]

Chuck, you make some good points, but almost all of it is based on current or recently passed technology, not future developments. Streaming and digital delivery are almost undeniably the future for multimedia. It just makes sense in so many ways in the long run. It is simply a case of having a viable business proposition and the right infrastructure come along to make it happen. And that could be much sooner than you think. Here in Australia for example, the government is in the process of rolling out a National Broadband Network (NBN), a nation-wide mostly fibre optic network with a maximum speed of up to 1 Gigabit per second (~128 MB/s). So in 5 or 10 years' time, as we have witnessed over the past few years, internet speeds will go up and bandwidth will become cheaper due to technological and infrastructure-based improvements. This article for example shows that the forecast is for exponential increases in bandwidth, and exponential decreases in cost over time, so it's going to occur quite rapidly.

At some stage (within the next 3 - 5 years), I think my current DVD & BD collection will end up on a local storage drive - either a huge capacity drive or a series of smaller drives. Transferring them will be a bugger of a job though, and what to do with all that spare shelf space (maybe books will make a comeback).

Imagine being able to have all of your movies on a single huge capacity SSD. At around half the size of a Blu-ray case, these drives have millisecond access latencies, and sustained throughput of hundreds of megabytes per second, and are completely silent, cool and resilient. Browse your library of movies on your TV, select the relevant movie, and have it load up within seconds, rather than the current process of getting a disc out of its case, inserting it in the player and going through somewhat lengthy loading/validation times. So much more efficient, and the same end result.