Understanding the physical video decline

Worldwide consumer spending on physical video has been in decline since the market peaked in 2004. Looking ahead to 2016, the outlook is further decline for physical video. Understandably, there is a lot of concern within the industry about the future, says TONY GUNNARSSON from IHS Screen Digest.

In launching hi-def video, many in the industry hoped that consumers would respond by upgrading TV sets to HD and buying new video players capable of hi-def video playback. This would then lead to consumers shifting from buying and renting DVDs to buying and renting premium priced hi-def video discs. In the event, the launch of hi-def video was anything but smooth: a format war between two rival hi-def video formats confused the all-important consumer message.

Blu-ray eventually came out the winner, but two years had passed and the time lost meant the format would face an uphill struggle in becoming the de facto successor to DVD. The global economic downturn then finally scuppered the high industry expectations for the format, with far fewer consumers willing spend more to upgrade.

The format has compensated for the decline in DVD in only a few markets worldwide, and even five years after launch only accounts for a relatively small portion of the physical video pie. This has led many industry observers to write BD off as a failure.

Viewed in isolation, BD has actually performed quite well. Five years on and hi-def video does generate around 10-15% of video spending in most developed markets. DVD was always going to be a tough act to follow; a hugely popular mass-market consumer product that brought with it a true revolution in home entertainment.

Having reached market maturity, and despite experiencing what will prove to be an ultimately terminal decline, the DVD format continues to be massively popular with consumers all around the world. In short, the format remains the lifeblood of the video industry and this will still be the case in the foreseeable future. One reason for this is simply that consumers like physical discs, even if they're no longer growing their collections at the rate they used to.

A decade ago DVD was the only contender but now there are many alternative channels though which consumers can access video content. BD, as already mentioned, remains a strong competitor. Walking into any TV retailer, modern consumers are no longer able to buy a TV set that is not HD-ready. For TVs, hi-def has become the standard. When it comes to video playback, tech-savvy early adopters have already made the jump from DVD to BD or digital (or a mixture of both). Indeed, BD players are now likely to become the standard replacement as households' main video disc player.

However, with all models being backwards-compatible with DVDs, consumers can not only continue to enjoy their DVD collections but even extend them.

Meanwhile, the BD format is still evolving. The format was designed to carry large volumes of data and is particularly suitable for 3D home video. Indeed, BD is the industry's designated 3D format, under the brand name BD3D. For different reasons, Ultraviolet (UV), while a standalone digital proposition, is also a suitable value-add for BD. UV is pointed towards higher end consumers, but even now few have learned to recognise digital value and collect digitally. Attaching this type of innovation to products bought by people who are already leaders in video consumption further legitimises both the BD price premium and 3D and UV as must have value-adds.

But today's video market is no longer just physical. Digital video channels and TV-based VoD all compete with DVD and BD for a share of consumers' spend and viewing time. But old habits die hard and the shift in consumption from physical to digital platforms is one that will take decades, not years. Indeed, our forecasts for physical video illustrate a slowing down in decline for physical video.

By 2016, 69% of world consumer spending on video will still be generated by physical formats, and 45% of that by DVD. In a declining market, the industry needs to look to conserve revenue generation and physical video will retain the lion share of consumer spending for the foreseeable future.

To lose sight of the importance of physical discs amid the buzz of excitement that accompanies 'alternative channels' could be the greatest danger for our industry.

Contact: www.screendigest.com...

Article Comments

comments powered by Disqus