Still Room 'At the Table' for Physical Media, SDS Head Tells DEG Expo
Despite more than a 30%-plus jump in video streaming in 2020, as consumers ratcheted up their viewing time during stay-at-home orders, there’s still a large revenue opportunity in transactional video, Eddie Cunningham, Universal Pictures & Warner Media president-Studio Distribution Services (S.D.S), told a virtual Digital Entertainment Group Expo Wednesday.
“Of course there’s room for physical still at the table,” said Cunningham, acknowledging the segment won't drive the growth for the entertainment industry over the next 10 years. Studios will follow the consumer, and “get content out in front of eyeballs in terms of how consumers want to consume that,” he said. Attention to electronic sell-though, subscription VOD, ad-based VOD and premium VOD is understandable, given the growth in streaming, but physical is a “huge, important part of the mix," he said.
Despite the pandemic, pressure from retail closures outside the U.S. last year and few theatrical releases, physical video disc sales were a $7 billion global retail market, Cunningham said. “It’s still going to be important to the industry for a long time to come.”
“None of us have gone there to switch the lights off on the physical business,” said Cunningham of S.D.S., a 10-year joint venture announced last year to distribute DVDs, Blu-rays and 4K Ultra HD Blu-rays for new releases, library titles and TV shows, along with marketing initiatives, in the U.S. and Canada. The venture, which launches early next month, “should demonstrate a huge commitment on behalf of both studios to the future of this business," he said, citing costs and challenges in “setting it up from scratch.”
S.D.S. hopes to make the retail end of the business more efficient over time because of its complexities, including shipping stock to stores and handling returns, Cunningham said. “We need to keep right-sizing our business," as the market continues to decline, he said. A goal is to take the sum of the parts of both studios and “create something bigger from that.” Studios have to make it easier for retailers to stay in the physical disc category, said Cunningham. The coming together of Universal and Warner, with third-party distribution partners, will enable the studios to “share boxes coming out of Technicolor," the replicator, he said. That "in turn then saves a lot of in-store labor and support costs,” he said. The team hopes to secure front-of-store displays “if we can get them enough content” and change the content often enough.
Cunningham referenced “amazing things” coming out of S.D.S. over the next 12-18 months from DC Comics titles, King Kong and Godzilla -- “things we can bring together in a way that we wouldn’t have gotten around to before that are great for the consumer, great for the retailer and good for both studios.” S.D.S. breaks out video consumers into three categories: (1) a double-digit percentage of digital-only consumers who will “never buy physical probably again in their lives"; (2) hybrid consumers who buy some physical media and view digitally; and (3) the 40% of transactional consumers who have never streamed, “a huge target for us.”
Streaming and transactional consumers aren’t mutually exclusive, Cunningham said. By the end of the month, four of the biggest sellers in S.D.S.’s catalog will be in the Harry Potter, Game of Thrones, The Office and Curious George franchises, even though the latter gets “billions of streams” each year. “If content is available on subscription services, you can still sell a lot of content physically on those same franchises," he said.