Stars Arturo Castro (left), Aimee Carrero, and Mark St. Cyr. celebrate Searchlight Pictures Blu-ray release of the feature film The Menu (photo by Dan Steinberg).
May 26, 2023
The rise of streaming has been well-documented in the media, as has the concurrent decline of the transactional business. Disc sales are a fraction of what they once were. In 2006, consumers spent more on disc sales and rentals, $24.1 billion, than ever before – or since. Last year, according to estimates from DEG: The Digital Entertainment Group, the total tally was less than $2.1 billion. Digital sales and rentals, despite a valiant push from both studios and retailers, have failed to make up for all this lost revenue – in 2022, they brought in just $4.2 billion, according to DEG.
But with the red ink flowing from streamers, it’s becoming clear that the SVOD business model is unsustainable, given the high cost of content and the low price for monthly all-you-can-watch subscriptions.
And that’s prompting some of the industry’s smartest minds, from Bob Iger to Bill Rouhana, to urge their brethren to step back for a moment and reconsider their window strategies. Historically, movies have rarely made enough money at the box office to turn a profit. They relied on home video, first VHS and then DVD/Blu-ray Disc, as well as pay TV and foreign TV rights, to turn the balance sheet in their favor.
But with the rush toward streaming, those once-crucial revenue streams have all but dried up, and we’re left with a cadre of money-losing streaming services whose antidote to investor alarm is to pour more and more money into content, cross their fingers and hope for the best. The problem is, each new subscriber only brings in $15 or $20 (for Class A streamers such as Netflix) a month – about the same as a single new movie on Blu-ray Disc or digital.
There’s also a ripple effect at play here. With the evaporation of billions of dollars in consumer spending, studios are no longer in a position to produce as many films as they once did. There’s no point in spending big money on a movie that will ultimately end up on an all-you-can-watch streaming service instead of enjoying a second profitable run on what we used to call home video. That not only hits Hollywood’s back end, but also its front end: movie theaters, which need a steady diet of quality films to remain in business.
The upshot is that investing in the transactional business makes a lot of sense. I think studios first began to realize this back in the early days of the pandemic, when all entertainment was home entertainment. But the streaming surge that was already building when the virus came created a blinder effect, and only recently have studios been resurrecting PVOD and, as we note in the cover story in our May 2023 issue, “Power Marketing 2023: Homeward Bound,” putting more muscle into marketing traditional, transactional home entertainment.
Universal Pictures sent influencers to Malta for the home release of Jurassic World Dominion. Paramount dispatched journalists into the skies above San Diego, in stunt planes, to promote Top Gun: Maverick. And Disney threw a big party at a retro Blockbuster popup in Los Angeles to celebrate the Blu-ray Disc release of The Menu.
Has Hollywood seen the light? One can only hope.