It seems that 2011 was a strange year for home entertainment. Netflix made the poor decision to significantly raise their prices over the summer, causing frustrated customers and plummeting stock prices. That move by Netflix appears to have driven some customers to alternate streaming media solutions or even back to (or staying with) disc based media.
The home entertainment industry saw some improvement in 2011, posting it's first positive quarter since the economic nightmare started in 2008. The third quarter of 2011 saw consumer spending up when compared to the same period last year. Driving that positive quarter was packaged media making a serious comeback.
What's most interesting about the packaged media sales in 2011 is how things were split between DVD and Blu-ray. Many films saw at least half of their sales from Blu-ray, even family movies, which traditionally haven't been big sellers on the format. Movies like Harry Potter and X-Men First Class beat studio expectations of sales, sometimes by as much as 20%. Fox claims X-Men alone is on track to sell 8 million units.
Craig Kornblau, president of Universal Studios Home Entertainment, talked about how Blu-ray faired in 2011 saying,
“Blu-ray had a remarkable year, with the format showing significant growth and bolstering overall home entertainment consumer spending for the first time in three years. New releases benefited tremendously, with female-targeted comedies like Bridesmaids hitting the masses and surpassing industry expectations. Catalog also saw impressive gains, as evidenced with the stellar Blu-ray debuts of such huge fan favorites as Scarface, Star Wars and The Big Lebowski. With the number of Blu-ray homes exceeding 30 million and growing—and with more than half of first-week sales of physical products now credited to Blu-ray—the consumer appetite for high-def movies has never been more palpable.”
Hollywood isn't just counting on physical media sales to post profits. The industry is starting to get more realistic about digital video and the direction that consumer consumption of media is going over the next few years. To that end a consortium of studios and companies got together in 2011 to create UltraViolet, a digital storage locker allowing consumers to stream purchased media to a collection of different devices. That move was a positive step by Hollywood in identifying the ways in which consumer media consumption is changing.
UltraViolet still has some issues. Apple doesn't support it and Walt Disney has decided to develop their own system instead, dubbing their solution Keychest. This kind of segmentation always causes problems with consumer adoption.
Despite those concerns, Ron Sanders, president of Warner Home Video, had very positive expectations for the future of UltraViolet and its connection to Blu-ray sales.
“UltraViolet has had a good start, given the limited amount of titles in the system so far. The conversion rates for UV digital copies are very good on Blu-ray, which we think is also driving sales of new releases. Consumers are excited about the prospects for streaming and mobile device use with UV, and we think as the ecosystem continues to develop it only drives more consumers to own more content.”
So, what does 2012 hold for the home entertainment industry? If industry executives are asked, it seems they feel nothing but good vibes about where things are going in the future. Almost all executives seem to be very positive about increased sales of Blu-ray Discs and higher consumer adoption of UltraViolet or competing digital locker style systems.
I personally believe digital is where this industry is going, but with the higher adoption rate of HDTVs, Blu-ray could see decent sales in 2012 with DVD sales finally falling behind. I'm hoping these studios can get together and decide on one major digital locker format and push platform holders, like Apple, to support the format. That would make it far easier for consumers to commit to going digital even if Netflix continues to bury itself with poor decisions.
