Digital entertainment will be slow to grow
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Challenges include costs, download speeds
By Susanne Ault -- Video Business, 6/20/2007
JUNE 20 | LOS ANGELES—Digital entertainment will become a viable business, but only after a number of industry improvements are made, according to research groups Understanding and Solutions and Screen Digest at the Home Entertainment Summit: DVD and Beyond here this week.
At the moment, there is no reason for consumers to seek out digitally delivered films en masse because DVD makes a much better value proposition. Plus, not enough consumers are broadband-enabled for studios to generate profits from the medium.
“In Europe, the average movie download costs about 20% higher than the average DVD price,” said Alison Casey, principal consultant at Understanding and Solutions. “For consumers, that value is not great.”
Studios are still mostly testing their digital operations. They are selectively partnering with digital suppliers and selectively offering their content, leaving business models largely in flux.
Also tripping up consumers are today’s exclusivity windows, which curb the availability of online films. Depending on various video-on-demand TV deals, online rentals of the same film are allowed weeks following the same film’s listing for download-to-own.
“Windows do not translate for the consumer digitally,” said Casey.
As for the studios, they can currently reach at most 50% of homes in the U.S., U.K. and France that are broadband-enabled. That will grow to two-thirds penetration in these regions by 2011.
Even if consumers enjoy high-speed Internet, it still may seem easier to just drive to their local store for a movie, as current Web connections remain relatively slow.
The average U.S. downloading speed is 2MB per second, which equals roughly more than an hour needed to download an average-sized movie. By 2009, the average speed will increase to 8MB to 10MB per second.
“In the U.K., they’ll advertise 5.2MB per second, but in practice, it’s more like 2MB per second,” said Ben Keen, chief analyst and director at Screen Digest.
“If you hold back the number of deals, it’s like restricting the number of outlets allowed to sell DVD,” said Keen. “Right now, like trying to develop a mass market with Sam Goody [since folded into F.Y.E.] and not remembering Wal-Mart.”
Yet both Casey and Keen seem optimistic that digital entertainment will gain fans, as companies work out film pricing issues and as download times quicken.
“The new platforms will come,” said Casey. “But over the next four to five years, it will be a period of experimentation. But certainly beyond 2011, it will really take off and be significant.”
