Monday, February 09, 2009

Death by format: Movies move to enter the ether

Long ago and far away, we wondered aloud whether theaters and DVD's had much of a future. And now the future seems to be arriving quickly, riding the greased wheels of macroeconomic deflation and the cheap revolution.

DVD purveyors + the studios that count on physical media sales are suffering (here). Shipments of physical DVD media in 4Q08 were down 37%.

"Home-video sales and rentals, mostly reflecting DVDs, accounted for 68 percent of the $88.9 billion global filmed- entertainment market in 2008, according to estimates by New York-based PricewaterhouseCoopers LLP. The figures include $3.89 billion in online rental fees and digital streaming revenue."

It would be too easy to chalk it up as just another victim of recessionary pressures.  In fact, the streamers, as they will be henceforth known, are up...significantly. Netflix 4Q08 revenues were up 19%.

And Netflix is evolving. I've been using their streaming service--available through my existing Xbox and computer--free. Well, ok, I had to have the unlimited rental plan, but it doesn't cost any extra. And though the selection is limited to a subset of the total NetFlix rental catalog, it's still an impressive breadth.

So What? 
Netflix' integration with Xbox is impressive enough that a million XBox users have signed on to try it in the first three months. A nice example of distribution networks (NetFlix and Microsoft) collaborating to expand the use of their offerings without requiring additional purchases...classic share-gain strategy in a technology-enabled world!

I'll look forward to seeing what Blockbuster, Amazon and iTunes do next with their pay-to-rent download services...either way, the business of physically distributing media would seem to be evolving toward extinction. 

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