Thomas K. Arnold: Investing in transactional home entertainment is a smart business decision

Starring Arturo Castro (left), Aimee Carrero and Mark St. Cyr. celebrate Searchlight Pictures’ Blu-ray release of feature film The Menu (photo by Dan Steinberg).

Thomas K. Arnold

The rise of streaming has been well documented in the media, as has the concurrent decline in transactional activity. Record sales are a fraction of what they once were. In 2006, consumers spent more on record sales and rentals, $24.1 billion, than ever before – or since. Last year, according to estimates by DEG: The Digital Entertainment Group, the total tally was less than $2.1 billion. Digital sales and rentals, despite a valiant push from studios and retailers, have failed to make up for all of these revenue losses — in 2022, they brought in just $4.2 billion, according to DEG.

But with the red ink flowing from streamers, it’s becoming clear that SVOD’s business model is unsustainable, given the high cost of content and the low price of all-you-can-eat monthly subscriptions.

And it’s prompting some of the smartest minds in the industry, from Bob Iger to Bill Rouhana, to urge their brethren to step back for a moment and reconsider their window strategies. Historically, movies have rarely made enough money at the box office to turn a profit. They relied on home video, first VHS and then DVD/Blu-ray Disc, as well as pay TV and foreign TV rights, to turn the tide in their favour.

But with the streaming rush, these once-crucial revenue streams have all but dried up, and we’re left with a money-losing framework of streaming services whose antidote to investor alarm is to pour more more money in content, cross their fingers and hope for the best. The problem is that each new subscriber only brings in $15 or $20 (for Class A streamers like Netflix) per month, which is about the same as a single new movie on Blu-ray or digital disc.

There is also a ripple effect at play here. With billions of dollars in consumer spending evaporating, studios are no longer able to produce as many movies as they once did. There’s no point spending big bucks on a movie that will eventually end up on an all-you-can-eat streaming service instead of enjoying a profitable second run on what we used to call home video. This affects not only the back end of Hollywood, but also its front end: movie theaters, which need a steady diet of quality films to stay in business.

The upshot is that investing in transactional commerce makes a lot of sense. I think studios started realizing that at the start of the pandemic, when all entertainment was home entertainment. But the wave of streaming that was already building when the virus arrived created a more blinding effect, and it wasn’t until recently that studios resurrected PVOD and, as we note in the cover story of our issue from May 2023, “Power Marketing 2023: Homeward Bound,” putting more muscle into traditional and transactional home entertainment marketing.

Universal Pictures has sent influencers to Malta for the home release of Jurassic World Dominion. Paramount sent journalists to the skies above San Diego, in stunt planes, to promote Top Gun: Maverick. And Disney threw a big party at a retro Blockbuster pop-up in Los Angeles to celebrate The Menu’s Blu-ray Disc release.

Has Hollywood seen the light? We can only hope.

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