It is almost mind-numbing to consider the changes in home entertainment happening today. Every day there are more and more options for streaming content available to consumers. Every day there are new deals between studios, content providers and digital distributors. The landscape ahead is wrought with confusion and uncertainty. No sooner have we settled on Blu-Ray than we are now confronted with the next technological chapter in home entertainment. Even Apple, it is rumored, will soon change the way we watch TV.
What does it mean for consumers? What does it mean for studios and content providers? And, is it really all that different when you get right down to it? What does the future hold?
In ten years will Netflix be more like an HBO of the new Hollywood Ecosystem? Or will it be more like Napster?
Many believe that distribution channels such as NetFlix, Hulu, Amazon and others are already beginning to become just that, distribution channels; a far cry from the disruptive market innovators of a few short years ago.
The crux of the problem may be in the licensing. The license model for NetFlix’s DVD business was very straight-forward- they purchased every DVD they rented and stuffed them in little red envelopes. Streaming is a different ball of wax entirely, and requires specific licensing for its use just as other ancillary markets such as PPV/ VOD and broadcast television require. This understanding is still in-process. The subscription-based nature of the business model was novel for the DVD business and remains so for the streaming business. The question is: what happens when there are 10 businesses all asking for $10 / month?
As for the studios, as long as packaged media sales of DVDs and Blu-Ray remain steady, they may consider licensing to streaming outlets as found-money. In the windowed release strategy of major studios, the packaged media window is generally where titles become profitable. Box office revenues for studios all but disappear with the cost of promoting a title and distributing prints to theatres. Recent studies show that adoption of streaming to be comparatively low to DVD and Blu-Ray, but on the rise. Fast-forward 5 years however, and it’s easy to imagine how those scales will shift. The same occurred when DVD replaced VHS years ago.
The early eighties started a home-entertainment revolution with the growing popularity of the VCR. The number of purchases has steadily increased year over year, while the composition of the formats slowly changes. VHS purchased dropped off as DVD sales increased, DVD sales are dropping as Blu-Ray are increasing and both will drop soon as digital streaming increases.
Today market experts like to speak in terms of technologies being disruptive. In the end it seems that content streaming will be more of a disruptive innovation for consumers than for anyone else. Studios and content providers seem to be holding all the cards. 10 years down the road, digital streaming will likely be just another column on studios income statement- another outlet by which they will license content for the public to consume. The only question that remains is: what will Wal-Mart do with all that extra space when the DVD goes the way of VHS?
