With the failure of several major European bricks and mortar video retailers in the first month of 2013, the future of physical video in Western Europe appears bleaker than ever. However, TANIA LOEFFLER, Research Analyst with IHS Screen Digest, cautions against reaching hasty conclusions.
First Virgin Megastores in France declared insolvency, as fellow French retailer FNAC said it will be selling off its eight stores in Italy. HMV, the UK's largest video specialist retailer, fell into administration, followed by Blockbuster UK a few days later.
A common thread in press coverage regarding the closing of retail outlets specialising in physical video is that 'no one buys physical video any more.' It is no secret that, yes, the number of transactions for physical disc purchases is in decline across Western Europe. However, the scenario which is presented over and over again is far too simplistic to explain the decline in physical retail transactions or the difficulties facing physical video retailers.
So, what is driving declines for DVD and Blu-ray purchases? Is it because everything transitioning to digital? Yes and no. While there is no doubt that there is some cannibalism of physical purchase by digital consumption, the trade is by no means one-for-one. To date, very few digital or online movie services have made the purchase movies and TV content into enough of a compelling consumer proposition to drive the kind of consumption that will account for losses on the physical side. Indeed, when consumers make the digital switch, they are more likely to turn the digital rental not retail.
Data suggest that consumers moving to the digital space, are choosing not to consume content on a transactional basis at all, but in a subscription environment, such a Netflix or Lovefilm. The same dynamic can be said to exist for the increasing number of people making good use of the PVR included with their TV set-top box. Why spend money on the DVD box set of your favourite television programme when you can just record and store it on your PVR from the TV subscription you already pay for anyway?
The transition from physical to digital is not necessarily a straight line, with digital still lacking often the ease, quality and selection of premium content still offered by DVDs and Blu-ray Discs. But why then is the physical purchase market struggling to generate the levels of consumer spending it once did?
Key to the decline of physical retail is the commoditisation of DVD and Blu-ray discs. The result is shrinking shelf space and promotional dollars dedicated to physical video from the retailers which carry it as part of their product mix. The competition on price has been the result of grocery chains using DVDs and Blu-ray Discs as footfall generators, offering new release titles at loss leading prices.
By marketing and treating physical video as a product category equal to that of a loaf of bread, much of its intangible value is stripped away. This has also forced specialists like HMV and Virgin to continuously lower their prices in order to compete. Unlike a grocery chain, HMV does not have the luxury of spreading its margins around hundreds of other product categories.
Even if all bricks-and mortar specialist selling physical discs closed, consumers would still have the option of purchasing DVDs and Blu-ray Discs from online retailers such as Amazon. A consistent one-third of physical video purchases are already made online. Online lacks much of the promotional power of a bricks-and-mortar presence. With each closure of an outlet that either specialised in physical media closing, or another type of outlet ceasing to sell it (or reduce shelf-space or promotion), consumers lose both awareness and opportunities to purchase - driving further declines in transactions.
There is no doubt that some consumers are moving away from purchasing movies on physical discs. However, the message that 'no-one buys DVDs any more' is largely untrue; it is one that should be challenged, lest it become a self-fulfilling prophecy.
Predicting the future, let alone the future of packaged media, is a perilous exercise, and possibly counter-productive, as the exercise closes doors rather than keep them open, argues JEAN-LUC RENAUD, DVD Intelligence publisher. Consider that: Apple was left nearly for dead 15 years ago. Today, it became the world's most valuable technology company, topping Microsoft.
Le cinéma est une invention sans avenir (the cinema is an invention without any future) famously claimed the Lumière Brothers some 120 years ago. Well. The cinématographe grew into a big business, even bigger in times of economic crisis when people have little money to spend on any other business.
The advent of radio, then television, was to kill the cinema. With a plethora of digital TV channels, a huge DVD market, a wealth of online delivery options, a massive counterfeit underworld and illegal downloading on a large scale, cinema box office last year broke records!
The telephone was said to have no future when it came about. Today, 5 billion handsets are in use worldwide. People prioritize mobile phones over drinking water in many Third World countries.
No-one predicted the arrival of the iPod only one year before it broke loose in an unsuspecting market. Even fewer predicted it was going to revolutionise the economics of music distribution. Likewise, no-one saw the iPhone coming and even fewer forecast the birth of the developers' industry it ignited. And it changed the concept of mobile phone.
Make no mistake, the iPad will have a profound impact on the publishing world. It will bring new players, and smaller, perhaps more creative content creators.
And who predicted the revival of vinyl?
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