Increasingly, the Name of the Game is VOD

Despite some promising disc sales numbers as we near the end of 2013, the VOD Sales Chart segment shows not sign of halting its growth or lessening its assumption of an increasing share of the home entertainment ecosystem. For studios and major distributors, this has a direct effect on the bottom line, with fewer discs being sold and/or rented as consumer behavior changes. And fewer discs means the loss of what had been a significant stream of corporate revenue. To compensate, studios are striving to find ways to replace declining disc-based home entertainment revenue with new sources, and Video-on-demand (VOD) licensing deals are proving to be a promising area. Bloomberg examined this trend in a recent article: “The post-theatrical release market has grown from selling movies for late-night showings on three TV networks to providing content to over 200 cable, satellite, and Net services. Wary of following the music industry, which failed to see the threat of Net piracy and the downside of relying only on Apple Inc. (AAPL)’s iTunes for a la carte sales, Hollywood is looking for ways to embrace new business models without being tied to a single distribution outlet…” Interestingly, as VOD battles with disc-based media for home entertainment supremacy, it may also be supplanting another, older disrupter of the home entertainment business, the venerable DVR.

“…media companies and ad buyers say they are preparing for a day in the not-too-distant future when TV viewers exchange their ability to skip ads for the convenience of getting their favorite programming on any device at any time.

Just as Facebook leapfrogged MySpace, the DVR is finding itself out-muscled by new developments in technology, namely video on demand. VOD is expected to gain favor as the consumer’s preferred way to watch TV and other video entertainment.”

While discs have a clear value proposition to consumers, namely an advantage in quality, appeal to collectors, and permanency, the DVR doesn’t enjoy these. That could be a problem. Why worry about managing a DVR queue, broadcast schedules and season passes or maintenance when an infinite queue of television and movies could be available via VOD? It’ll all come down to access and as broadband becomes ubiquitous and internet speeds improve, I’ll bet that more and more viewers may opt with television when they want it, how they want it and where they want it. VOD seems to have a bright future.   (An earlier version of this blog appeared in September, 2012.)