Home
August 05, 2011
With the advent of all-retail pricing on DVD, the percentage of total video units shipped to the US retail sector generated by feature films grew steadily from 65% in 1997 to a peak of 77% in 2003. At that point the exploding popularity of TV shows on disc caused the non-feature sector to begin increasing its share of the market. Feature shipments since then have hovered in the 74%-76% range, with the launch of Blu-ray Disc (BD) creating additional feature film sales while TV on disc sales began to plateau. Features represented 74.2% of video retail shipments in 2010 and are expected to end 2011 at 75.2%. IHS Screen Digest expects the feature film segment will continue to grow its share in 2012 with movies once again representing 77% of the market, continuing to increase year-over-year, reaching 80% of retail shipments by 2015.
There are a number of reasons why feature films on video are claiming a growing percentage of shipments, but the biggest one is not good news for studios: consumers have decided that there are few movies they absolutely have to buy at a premium price when they first come out. Instead, the growth in features' share of video retail is being largely driven by consumers holding off until new releases are re-priced and moved to the 'recent release' section of their local video department - whether they are choosing to buy BD or DVD. Once that happens, feature films move from the new release to the catalog segment of our Video by Genre model. Catalog features have grown from 33% of total retail shipments in 1997 to 48% in 2010 and are expected to pass 50% in 2014 to reach 55% by 2015.
This matters for studios because the average studio revenue per unit for new-release features on disc was $17.43 in 2010 while the average revenue per unit for a catalog feature was $6.52. These weighted averages include both DVD and BD shipments to retail.
Total studio revenue from feature films grew from $2.8bn in 1997 to a peak of $8.2bn in 2004 before falling to $5.6bn in 2010. Of that total, new release accounted for $1.8bn in 1997 while catalog features brought in less than a $1bn. At the peak of the new-release market in 2004, they generated $5.4bn of total features revenue, while catalog features peaked in 2005 at $2.9bn. But in 2010 when new-release features were worth $3.4bn to the studios, catalog features brought in $2.3bn - a 21% drop vs. a 38% loss for newer films.
The steady increase in the percent of shipments on higher-priced BD since its launch in 2006 was initially expected to grow the average revenue per disc for new-release features. The growth of the BD format has helped to prop up average retail pricing, but BD and DVD priding have been under downward pressure as volumes of sales have declined. During the same time period we have seen a shift in DVD sales from new-releases to cheaper catalog, and low-priced BD catalog is showing up in more locations and at ever-lower prices: Walmart has been featuring $9.99 and $14.99 catalog in mid-aisle displays and even supermarkets now have BD catalog shelves in sections that only sold low-priced DVD a year ago.
This increase in catalog feature sales over new releases has been one of the factors undermining studio revenue in recent years, and it intensified after the recession hit. The charts below show the growth in shipments of TV on disc and the shift in features from new release to catalog between 1997 and 2010. The demand for catalog features is expected to see continued growth to 2015, while sales of TV shows and other non-feature content are being undercut by their availability online and through cable and DBS free on-demand offerings. That great American babysittter, kidvid, is also battling online and on-demand options but is expected to hold on to a significant share of the disc market.
The shift in consumer demand to cheaper catalog from more expensive new-release features suggests that the desire for movies on disc is still there, but only if the price is right. With the dramatic increase in availability of free on-demand movies, TV shows and other content beginning with free streaming from Netflix in January 2007, the fact that US consumers bought 544m movies on disc in 2010 reflects a sizeable appetite for owning their favorite films on a durable medium. The additions of special features like making-of featurettes may be a factor supporting disc sales, but studios have started limiting extras on DVDs, saving them for the high-end BD release, so presumably consumers who opt for stripped down catalog versions are simply interested in owning the movie.
Tags:
