June 09, 2014, 11:28 PM — The anecdotal stories of the demise of physical media are now being backed up by research, with the latest study saying that streaming video will surpass DVD rental by 2018 as on-demand takes off and DVD sales crater.
PwC, or PricewaterhouseCoopers, predicts that electronic home video, which includes subscription video-on-demand services and cable on-demand offerings, will overtake the box office by 2017 and bring in $17 billion by 2018, double the $8.5 billion now.
During that same period of 2014 to 2018, physical home entertainment revenue will fall more than 28% from $12.2 billion last year to $8.7 billion in 2018.
As I said, the anecdotal evidence is there; there's only one video store within five miles of my home. The rest of my rental options are Redbox vending machines in supermarkets, and even that is in trouble, with reports that Redbox will remove 500 kiosks from stores.
Redbox now makes up about half of the DVD rental market. It's not hard to see why this happened. Blockbuster was carrying huge debt when the Internet came along and could not adapt. Redbox is a subsidiary of Outerwall, formerly known as CoinStar. They have this business down.
And the fact is most if not all rentals are of new releases. So Redbox didn't suffer for carrying only the latest releases. How many people walk into a video rental store to get a Dolph Lundgren film from 1990 or the latest direct-to-video movies? So Blockbuster's huge space really wasn't needed. As for the mom and pop shops, they survived on adult video rentals, and the Internet sure took care of that problem. No more fear of being caught in the store by your neighbor when you are renting something naughty.
PwC points out that the amount of money that studios make per transaction may not be the same as a DVD rental but it is cheaper to distribute things digitally. And while DVDs have a lot of nifty extras, like deleted scenes, commentary tracks and alternate endings, most people don't care about those things.
There were two attempts to revitalize the DVD market, 3D and China. 3D has not done well at the box office and people aren't interested. The fact is, no one wants to wear those glasses. China is a massive market, but China has its own massive film market, and piracy there is pretty much the norm. So both tricks flatlined.
PwC did not get into what might be the savior of DVD, and that's 4k resolution, also known as Ultra High-Def, or UHD. Most people get their on-demand from cable rather than dish, and the cable wires cannot handle UHD. They can barely handle HD now. That's because most cable is copper, not fiber, and is limited in bandwidth.
Most HD comes over the wire in 720p rather than 1080i, and for multiple reasons, fiber is not going into homes. The cable companies aren't making the investments because, as Verizon and Google have learned, it's very expensive and very difficult to wire a city for fiber. Then there's all the Net Neutrality chicanery going on that threatens to slow everything down.
If UHD TVs come down in price – and they have already plunged from over $10,000 to about $3,000 in one year – then people will want content. There are some initial moves at 4k streaming, like Netflix's proposed 4k service, and the BBC is broadcasting the World Cup in UHD in England. They say users need speeds of around 20Mbps to watch 4K content without glitches. How many people have that?
So UHD might help revive Blu-ray DVD. And I don't believe DVD will ever fully go away. The advent of DVD has created a whole class of people who build libraries of movies so they can pull them out and watch when their whim hits. Netflix is often knocked for having a less-than-stellar selection of movies on-demand. If I want to watch some favorite old TV shows like "E.R." or "Star Trek: Deep Space Nine," my only option is DVD.
As for music media, there will likely be a return to CD or some kind of physical media, perhaps Blu-ray, which would be harder to rip. It's finally dawning on musicians that the promise of digital media and streaming audio is a load of bull. Nobody is making money right now, and the industry is going to react one way or another to make money.
I don't consider physical media doomed. The makers of it just need to lift a finger and make it special and thus worth the money. A lot of people are buying the Led Zeppelin album reissues because they come as a collection with a lot of content for the money. More and more DVDs come with the UltraViolet streaming option.
I know this much: when "Godzilla" comes to home video, I am not streaming that thing, I'm buying the Blu-ray.