Streaming/Digital = Bubble economy? (1 Viewer)

I brought up the point off the top in another thread, where it seemed off-topic, so thought I'd move it here where it had more appropriate room:

It was after I'd seen an article on China's AliBaba investment craze, which ended up reminding me of Facebook's IPO and the Dot-Com bust, which got me into a layman's conversation about how the mortgage meltdown and the 20's stock crash happened--
And all of a sudden it hit me: I didn't major in Economics at college, so I'm looking for anyone more qualified to fact-check me on this but...just looking at the UVVU craze, and the bloodthirsty rah-rah'ing for Digital to "replace the dying physical industry", unless I'm not reading my historical harbingers and omens right, this has all the economic/psychological makings of a Bubble, about to pop when the bills come in:

Judging from past cases, what a Bubble needs to happen is:
- The product being sold as a "new investment" by a company who--either through being an all-new industry, or having no regulatory laws--is accountable to no one, and playing up their opportunity in the press,
- Investors who don't really understand the more elaborate workings of the product or technology, but see how it hits some associated connection with the trendy zeitgeist of the public at the moment, so it must be ahead of its time and sure to catch on
- Press trend-articles pointing out, completely out of context, how one other similar company came out of nowhere and caught on like wildfire, so it's just a matter of catching the next tiger by the tail!
- New startup companies jumping onto the trend just to exploit the investments, without any of their own real clear understanding of the product or much sensible grasp of the business strategy,
- Reports of the company's "success" being largely "Phantom profits", cooked out of number figures of how much product was supplied before the actual money has come in yet (ie., how many UV users are actually buying their movies, and how many "subscribers" simply cashed in their free disk codes without paying anything?)
- Voice-in-the-wilderness experts warning that the entire industry is based on a shaky or non-existent foundation if there's no accountability for where the money is coming from...
- ...Promptly shouted down by investors' and biased economists' cheering over the "success" of the companies' dubious sales figures, and rubbing salt into wounds that anyone who can't see the new innovation is just clinging to old ways, and business doesn't stand still,
- Inflating investment prices causing companies to reconsider other alternatives and jump on the bandwagon,
- A sudden plunge in prices after that missing money suddenly didn't come in as expected, either from public apathy, less disposable economy from unexpected troubles in another dependent industry (eg. higher Internet rates), or the product's realistic inability to deliver on its promises and turn a profit in a real-world market.

Again, I've only got the average-joe's grasp on economic strategy, so I'm not sure if I'm getting this all correct--
I do, however, remember watching the Dot-Com boom in the 00's, and thinking, "No, really, can anyone explain how Excite is supposed to make its money?"

The surge of streaming/digital is backed up by numbers. According to the DEG, revenue from digital purchases (EST) are up 33% for the year. UV-related sales (mostly from VUDU, I presume), are a small but growing share of that. The growing acceptance of digital (helped by the growing awareness that UV has helped bring about) and the 2 week early window for digital is mostly responsible for the strong growth (which only became strong in the last 2 years). Therefore new release physical sales are being most affected by its growth.

Streaming is up 26% for the year. Mostly Netflix, but their share of that pie will be declining over time.

There is nothing in that about cooking up numbers, voodoo economics, dot.com bubbles, or phantom profits. It's just a simple fact that digital is growing quickly and is the only growth area in home video at all.

Disc sales have declined about 11% this year, which is a bit higher than normal (thanks to Blu-ray's sudden 14.4% decline since July). Discs will be around a long time, and who knows may have some kind of resurgence in sales. I do expect a bottom for physical and a peak for digital sales, and where that will be will be interesting to see.

bruceames said:

There is nothing in that about cooking up numbers, voodoo economics, dot.com bubbles, or phantom profits. It's just a simple fact that digital is growing quickly and is the only growth area in home video at all.

Disc sales have declined about 11% this year, which is a bit higher than normal (thanks to Blu-ray's sudden 14.4% decline since July). Discs will be around a long time, and who knows may have some kind of resurgence in sales. I do expect a bottom for physical and a peak for digital sales, and where that will be will be interesting to see.

Click to expand...

Yeah, was wondering about that, since the DEG figures simply said that physical rentals were down while digital sales were up, therefore physical sales must be "down".
(Instead of taking the most obvious interpretation that digital has taken over the mail-Netflix and Redbox rental market for reasons exclusive to renters, which we've known for a good while now, and simply settled into a sub-market.)

Which may not be "cooked", but that's a neatly selective bit of pro-industry press that needs to be looked at a little more carefully before the music and the cheering.

Ejanss said:

Yeah, was wondering about that, since the DEG figures simply said that physical rentals were down while digital sales were up, therefore physical sales must be "down".
(Instead of taking the most obvious interpretation that digital has taken over the mail-Netflix and Redbox rental market for reasons exclusive to renters, which we've known for a good while now, and simply settled into a sub-market.)

Which may not be "cooked", but that's a neatly selective bit of pro-industry press that needs to be looked at a little more carefully before the music and the cheering.

Click to expand...

Of course the DEG is a trade group and like all the others they have their own agenda. So I pretty much ignore their spin on the data and use them specifically for the raw data itself (ie, that spending chart I linked to).

I don't agree that streaming should be a full-fledged home video category, as it is inflating the digital numbers and overall HV spending. I believe streaming cannibalizes cable/sat more than physical media. In fact, physical media has been declining well before streaming became popular. Moreover, the rate of decline in physical media sales has held steady in spite of the growth of streaming, suggesting its impact on it is not as strong as some would believe (although it has affected physical rentals of catalog titles quite a bit).

A "bubble" is when the price of a good rises dramatically for some duration, and the predictions are that there are new market realities to justify this price increase, and call for continued price increases.I do not see the price of streaming rising dramatically: Netflix subscription fees have not gone from $8/mo to $80/mo.Have stock prices of steaming companies risen, to be bubble-like? I don't follow the stock market to say. If there is a sharp rise and decline in consumer popularity and purchasing of a good or service, that's a fad. Pet rocks. 3D movies.But digital content distribution is here to stay and will only increase. I suspect we're seeing the uneven rise of a new "paradigm"

DaveF said:

A "bubble" is when the price of a good rises dramatically or some duration, and the predictions are that their are new market realities to justify this price increas, and call for continued price increase.

I do not see the price of steaming rising dramatically: Netflix subscription fees have not gone from $8/mo to $80/mo.

Click to expand...

Subscription?...For movies? No, no, the market's long since moved off of Netflix, since VOD-library's where it's at:
On Vudu for ex., we have seen now unrestricted studios move their prices up from iTunes' regulated one-line "$4 rental, $9.99 catalog, $14.99-$19.99 purchase" model they were trying to get away from, up to the point where they now set their own prices, and have increased the options to buy new-release titles in Special Edition bundles for $29-$39, way over what would be charged on most retail shelves.
The "market realities" reasons given by the studios is that they assume digital purchase is now the way to go, that they're offering consumers "more opportunity" to preorder titles during the theatrical run and pay hefty short-term prices to make up for cineplex shortfall, and that audiences want the "extra" bonus package with featurettes, etc., while phasing the option of rental out of the digital market. (Also, they say, to "avoid competition with physical sales", even though their other PR has pretty much given up on it.)
As for "calls for the prices to increase", well, let's see what happens after studios want The Interview to happen again, and try to premiere/simulcast more opening-week movies online, at "reserved" prices, and what happens when studios start getting too used to that. (Wouldn't you want the opportunity to pay $50-75 for "exclusive" top-notch entertainment in your own home?--After all, theaters today are so overpriced! )

This, on the assumption that the digital audience will still keep coming because they simply want to, no matter what price level is set. That's when an industry starts neglecting to consider those little long-range pitfalls, and starts forgetting to plan for the "unexpected"...

I think you're making it too complicated: is the price of a consistent good (be it a house, a tulip, or a downloaded movie) rising in value seemingly without limit?

DaveF said:

I think you're making it too complicated: is the price of a consistent good (be it a house, a tulip, or a downloaded movie) rising in value seemingly without limit?

Click to expand...

Well, that was sort of my point: It IS.

(The first warning sign is in minor "tremors" before a major meltdown, like most of the catalog beginning to be dumped at increasing discount prices while the core-priced money-product isn't delivering the profits as promised.
Usually passed off by pro-biased economists warning that it's okay, the market is smart enough to know that it's resettling a bit and finding its niche, lot of worry over nothing, it'll sort itself out...)

I've re-read your comments and I don't see where you describe any bubble-like escalation of streaming service costs.You mention new, higher cost options -- with premium features -- coming out. That's not a bubble, that's market segmentation and market research. If those grow and then fizzle, I think it would be a fad, from changing consumer interests. I'm looking for eg the cost to buy "The Avengers" has risen from $20 to $40 to $60 over the last year. Maybe we're confused by semantics, and what you're perceiving is a fad in high-end streaming options.

DaveF said:

You mention new, higher cost options -- with premium features -- coming out. That's not a bubble, that's market segmentation and market research. If those grow and then fizzle, I think it would be a fad, from changing consumer interests.

I'm looking for eg the cost to buy "The Avengers" has risen from $20 to $40 to $60 over the last year.

Maybe we're confused by semantics, and what you're perceiving is a fad in high-end streaming options.

Click to expand...

It's possible, but by the same semantic confusion, think you're trivializing it by calling it a "fad":
The Twilight Series was a "fad", but we didn't have studios announcing, "Because of the demonstrated popularity of the series, our studio will only be making teen vampire romances from now on, which we feel will serve our public's interest over the years to come".
(Okay, maybe Summit, but where are they now? )

There always has to be a degree of throwing the baby out with the bathwater, in order to make the investment more of a small inter-competing "mini-monopoly" to drive up prices, and any other investment is seen as obsolete.
In digital, we've seen uniform prices go to studio-driven prices, and $4 rentals go to $20 purchases to $40 bundles, while we're persuaded that it will soon be the "only" home-theater option available as all other options die out, and grateful for the convenience. And, again, with no accountability or regulation to stabilize itself or keep the prices in check.

(I was trying to explain the mortgage craze to the younger generation, and the most layman's metaphor I could find was when you're playing Monopoly and become so thrilled that you got Boardwalk and Park Place, you sell and trade off every single last one of your other properties just to keep raising your houses up to a hotel, and see that $50 rent ultimately turn to $200 and then $2000...
And the fact that nobody ever lands on it doesn't stop you from raising the ante and building it up, until you suddenly find yourself without capital for the other player's $600 hotel on Connecticut Ave., and all you have left to sell off are those precious hotels, and watch your own assets and income spiral inevitably downwards. A little diversification might have helped.)

It's underpants gnomes all the way down.

Announce streaming services
?
Profit

We're talking past each other, I fear.
"Twilight", or such, was a fad, or fashion, or trend. Whatever one wants to call the varying market reponse to public tastes. Same for Zombie movies. These aren't a bubble

I did a spot check:
Watching a recent hit movie digitally from Amazon is $19.99. I don't see a rental option.
Captain America: The Winter Soldier by Anthony Russo & Joe Russo
https://itun.es/us/Z_jwY
http://www.amazon.com/Captain-America-Winter-Soldier-Blu-ray/dp/B0090SI3GQ/ref=pd_cp_mov_1

But older movies are rentable for $5.99
Pride & Prejudice (2005) by Jane Austen
https://itun.es/us/d1ITs

And a even newer movie can be rented for $5.99
Guardians of the Galaxy by James Gunn
https://itun.es/us/KoVM1

At a quick glance of a handful of titles, I don't see prices skyrocketing, or $40 super packs being the only option. Rentals are harder to find, but they're there.

Is online sales and distribution in flux as they're trying to figure what people will buy and for how much? Probably. Is there a bubble in streaming media? Not in any conventional meaning of the word "bubble".

Is there a scheme to eliminate all physical media and go to online-only distribution? That's beyond the scope of this thread

Ejanss said:

(I was trying to explain the mortgage craze to the younger generation,

Click to expand...

Have them listen to this:
http://thisamericanlife.org/radio-archives/episode/355/The-Giant-Pool-of-Money

DaveF said:

I did a spot check:
Watching a recent hit movie digitally from Amazon is $19.99. I don't see a rental option.
Captain America: The Winter Soldier by Anthony Russo & Joe Russo
https://itun.es/us/Z_jwY
http://www.amazon.com/Captain-America-Winter-Soldier-Blu-ray/dp/B0090SI3GQ/ref=pd_cp_mov_1

And a even newer movie can be rented for $5.99
Guardians of the Galaxy by James Gunn
https://itun.es/us/KoVM1

At a quick glance of a handful of titles, I don't see prices skyrocketing, or $40 super packs being the only option. Rentals are harder to find, but they're there.

Click to expand...

Especially in Captain America's case--It was available for $5.99 rental on Vudu for approx. 6-8 weeks, and, as noted...isn't now. Most Disney and Sony movies in particular revert to a purchase-only model, or in some cases are never available for rental at all.

Sony did this from the beginning to, quote, "protect their physical sales", but saying that with their left hand and saying with their right hand that they want to give up on physical sales, that brings up a few questions.

The most obvious being why studios want to move toward the "convenience" of the 300-400% markup of offering it for purchase only.


Check back in March and tell me whether you can still rent Guardians for $6 on A or V--I happen to know that's not the case with Gravity or Hobbit: Desolation, two movies I did watch on digital rental, back when that was still possible.

They're creating artificial scarcity. Which is a thing. An interesting and notable thing. But it's not a bubble.