Even While VOD Expands, Discs Hang Tough

dvdsHome entertainment continues to undergo a tremendous realignment from physical media to digital, virtual forms. Yet for all the fanfare and attention which new streaming services like Netflix, Amazon, Hulu and others have received, discs continue to service a key market segment. They’re not going the way of the buggy whip yet (if ever).

“…DVDs are going to be around a long time, and a large percentage of the population will seek to rent at the lowest possible price…We believe that the vast majority of [price-conscience consumers] will prefer to see new movies for $1.20 a day rather than renting them for $4.99 to $5.99 through transactional video-on-demand…we think that the extraordinary studio profit contribution from DVD sales all but ensures that DVDs will be around for years to come.”

The fact is that DVD still plays a vital role in the home entertainment economy and remains a sizeable portion of our day-to-day business here at Giant Interactive. DVD players still enjoy a tremendous market penetration in American homes, exceeding 90% of households. This means the potential customer base for rental and sell-thru will continue to be large (and potentially lucrative) for many years to come. As noted in one of our earlier blog posts, DVD has a number of advantages which make it a technology which will definitely enjoy longevity, even in the face of ‘superior’ technologies or those which serve up additional convenience. From the advantageous economics to the ease of use, the certainty of quality to the ‘always on’ quality of a DVD-delivered show, discs are, indeed, here to stay. Even in the face of an onslaught of just such technologies, there are companies which have found a business niche exploiting the continued use of DVD and are creating a vibrant business addressing the need. Best example? Redbox has built a successful business renting discs, locating their kiosks where consumers are, particularly head-of-household decision-makers, simultaneously solving a problem for time-strapped parents and pricing their product below the threshold of ‘real money (just as Apple did when it wagered that music lovers would find the sub-dollar menu enticing). (There might be an interesting avenue of inquiry about how the pricing models of video stores, whether chains or independents, along with their resistance to automation and implementation of efficiencies, negatively impacted their longevity. White paper, anyone?) That particular pricing model has adjusted and expanded a bit from the early days, but with 119 million people without broadband and 19 million without even access to it, a stable, economical, reliable way of distributing content will continue to make sense. That’s the DVD. Discs may get simpler, less complex, and less expensive to produce and to rent/purchase, but they still make SENSE for consumers and CENTS (well, dollars, actually) for content owners. I admit it: I’ve got two DVDs from my Netflix queue waiting for me at home right now. (Big Red One, Redemption Blvd. if you must know.) Long live DVD.