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

With Arturo Castro (left), Aimee Carrero and Mark St. Cyr. Celebrate the Blu-ray release of Searchlight Pictures’ 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 simultaneous decline in transactional business. CD sales are a fraction of what they used to be. In 2006, consumers spent $24.1 billion on CD sales and rentals, more than at any time — or since. Last year, the total was less than $2.1 billion, according to estimates by DEG: The Digital Entertainment Group. Despite vigorous pushes from both studios and retailers, digital sales and rentals couldn’t make up for all of those lost sales — they brought in just $4.2 billion in 2022, according to DEG.

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

And that’s causing some of the brightest minds in the business, from Bob Iger to Bill Rouhana, to urge their brothers to stop for a moment and reconsider their window strategies. Historically, films have seldom made enough money at the box office to turn a profit. To turn the tide in their favor, they relied on home video, first VHS and then DVD/Blu-ray Disc, as well as pay-TV and foreign television rights.

But with the rush to streaming, those once-important revenue streams have all but dried up, and we’re left with a bevy of loss-making streaming services whose antidote to investors’ concerns is pouring more and more money into content and hurting their fingers and hope for the best. Trouble is, each new subscriber brings in just $15 or $20 (for Class-A streamers like Netflix) a month — about the same as a single new movie on Blu-ray Disc or digital.

A ripple effect is also at play here. Lost billions in consumer spending, studios are unable to produce as many films as they used to. There’s no point spending big bucks on a movie that ends up ending up on an all-you-can-watch streaming service, rather than enjoying a second profitable run of what we used to call home video. This not only affects Hollywood’s backcountry, but also its frontcountry: cinemas that need a steady supply of quality films to stay in business.

The bottom line is that investing in transactional business makes a lot of sense. I think studios realized this in the early days of the pandemic, when all entertainment was home entertainment. But the surge in streaming, which was already accelerating when the virus broke, created an even worse effect, and more recently studios have revived PVOD and, as we note in the cover story of our May 2023 issue, “Power Marketing 2023: Homeward Bound “ put more power in the marketing of traditional, transactional home entertainment solutions.

Universal Pictures sent influencers to Malta for home release of Jurassic World Dominion. Paramount sent journalists into the skies over 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 Blu-ray Disc release of The Menu.

Has Hollywood seen the light? One can only hope.

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