Digital video sales’ rise breathes new life into home entertainment

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Digital video sales’ rise breathes new life into home  entertainment

Annual digital sales of movies and TV shows surpassed $1 billion for the  first time in 2013, helping offset a plunge in DVD revenue.

International CES                                            U.S. consumers  spent nearly $1.2 billion last year to buy movies and TV shows in digital format  from online sellers such as Amazon.com. Above, a Samsung executive speaks at the  International CES trade show in Las Vegas.                                                (Justin Sullivan, Getty  Images / January 6,  2014)

 

LAS VEGAS — Joann Killeen had never before purchased a digital video, but she  took the plunge this holiday season. She forked over $3.28 each to watch the  children’s show “Yo Gabba Gabba” on her Apple iPad and dance along with a  friend’s grandchildren to the thump of another Nick Jr. show, “The Fresh Beat  Band.”

Killeen, 62, is not alone in busting a move. Digital sales have nearly  doubled in the last year, becoming the fastest-growing source of home  entertainment revenue for Hollywood studios.

“What we’re seeing is a dramatic shift in the digital ownership this year,”  said Ron Sanders, president of Warner Bros. Worldwide Home Entertainment.

Electronic sales of movies and TV shows have languished for years, as  consumers gravitated to low-cost DVD rentals and online streaming services to  deliver video to their television sets, computers and portable devices. Some  industry observers speculated about a permanent shift in consumer behavior, away  from purchasing.

A combination of factors, including access to high-definition-quality digital  video and new ways to download or stream content, has yielded double-digit  gains, which the industry plans to highlight Tuesday at International  CES, the giant consumer electronics show in Las Vegas.

Annual digital sales surpassed $1 billion for the first time in 2013, the  Digital Entertainment Group is expected to report. Consumers in the United  States spent nearly $1.2 billion last year to buy movies and TV shows from  online sellers such as Amazon.com Inc., Apple Inc.’s iTunes or Wal-Mart Stores  Inc.’s Vudu, an increase of 47% from 2012. Electronic sales of newly released  films and TV shows were up 60%.

Electronic sales represented a small fraction of the $18.2 billion that U.S.  consumers spent on home entertainment last year. But studio executives say the  growth in digital purchases, together with increased revenue from Internet  streaming services such as Netflix and rising Blu-ray disc sales, could help  offset slumping DVD sales.

“It’s clear in the last two years — and especially [in 2013] — that the  tremendous growth [in digital sales] has offset an awful lot of the physical  decline,” said Craig Kornblau, president of Universal Studios Home  Entertainment. “Given the trends, you don’t have to be too optimistic to feel  it’s going to all but offset the declines.”

To spur digital purchases, studios started to offer consumers early access to  the digital version of a filmmaking popular titles such as “Despicable Me 2”  and “The Hobbit: An Unexpected Journey” available weeks before the DVD  release.

Fox also dropped the wholesale price for its digital high-definition movies,  allowing retailers such as Amazon to sell the electronic version of “The  Wolverine” for $15 while the Blu-ray disc retailed for $20.

“Our belief is, there are about 40 million consumers that are digitally  active who have not started a collection,” said Mike Dunn, president of 20th  Century Fox Home Entertainment. “What are the benefits that will [entice] those  people and move into this model? It’s early access. It’s high definition. And  the pricing has to be competitive.”

Consumers found more ways to make digital purchases, even as the Hollywood  studios imposed a 28-day delay before making their latest titles available  through lower-cost services such as Netflix and Redbox.

The nation’s largest cable operator, Comcast Corp., began selling movies and  TV shows through its Xfinity TV store in November. Big retailer Target Corp.  also launched a digital download and streaming service last fall, Target  Ticket.

Studios also began promoting digital sales at theaters. Sony Pictures  Animation, for example, conducted a test with exhibitor Cineplex in Toronto,  offering a SuperTicket that paired a theater admission with early digital access  to last summer’s animated film “The Smurfs 2.”

“It’s a really encouraging first step in connecting the consumer who’s in the  theater to the home entertainment window,” said David Bishop, Sony Home  Entertainment’s outgoing president. “You can also send offerings to the  consumer, once you know that they purchased a ticket … and draw them into the  purchase model later.”

The proliferation of smartphones, tablets and new, inexpensive gadgets that  bring Internet-delivered video to TV sets are helping create momentum for  digital purchases. Many of them, such as a new Internet-connected smart TV from  Roku Inc., will be on display at CES.

These factors contributed to Chicago resident Doug McLennan’s decision to buy  his first digital movies this holiday season.

He acquired “Curious George: A Very Monkey Christmas” on the iPad to  entertain his “rambunctious” toddler during a flight to visit relatives in  Florida. For his wife, he bought the 2003 romantic comedy “Love Actually” using  one of his new Christmas presents, Google’s Chromecast, which delivers Internet  video to TV sets.

“I thought, ‘This thing is so teeny, I can bring it in my suitcase and set it  up on my mother-in-law’s television,'” McLennan said. “The quality was as good  as doing it on demand…. I was pretty impressed.”

dawn.chmielewski@latimes.com

Copyright © 2014, Los  Angeles Times

http://www.latimes.com/business/la-fi-ces-digital-sales-20140103,0,5970703.story#ixzz2qvYcW500

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