Tuesday, May 18, 2010

Film Distribution and Home Entertainment in 2015

There have been some very interesting articles recently predicting how consumers will be entertaining themselves five years from now.  The implications are significant.  Let me give you some highlights, and then make some quick comments.

Displaybank, a consumer electronics research group predicts that sales of 3D televisions will grow by 91% this year, making up 3% of the world televisions by the end of the year.  The study projects there will be 83 million 3D displays in homes by the end of 2014.  That represents 31% of the world market.  Those are really huge numbers.

GigaOM Pro is predicting that by 2015, 60% of the TV's sold will have a direct internet connection.  This year, 3.7 million applications designed to be run on televisions will be downloaded.  However, by 2015, that number will grow to almost 1 billion!  That is an enormous number!

The Los Angeles Times reports that Google is about ready to launch its Smart TV software that will allow consumers to navigate between TV, streaming content, home videos and any other number of media formats and sources.

- Last week, Hollywood studios won a ruling from the FCC that clears the way for streaming first run movies directly to consumers on the same day that they are opening in theaters.  (Businessweek's coverage of the implications of that ruling is pretty good.)

You can see the trend here.  Conventional wisdom in 2010 says that within 5 years consumers will be fully connected and entertained without leaving their favorite chair.  The implications for our collective physical fitness are frightening.  But aside from that, what does it mean for the entertainment business?

Are theaters wasting money installing digital 3D systems and amazing sound?  Are consumers just going to buy a giant 3D TV and 7.1 surround system and watch everything at home?  Click the Domino's app in the corner of their screens and have their favorite pizza show up in 30 minutes or less -- for a fraction of the cost of popcorn and Coke at the cineplex?

Despite these projections, I don't believe that the theater business is dead -- but it is definitely facing some challenges.  On the one hand, I believe consumers experience a palpable excitement when watching a film in a dark room with a few hundred strangers, on a giant screen with seat-shaking sound.  And I think people will always want to get out of their house and "do something" other than watch TV.  Going to a movie is the primary way they fill that need.  But I also think that theaters have to work hard to continue to deliver a high-quality experience at the right price.

The problem is that the distributors who already take the bulk of the ticket price from the theaters may soon become direct competitors.  If the distributors make more money piping the film directly to consumers' living rooms, then they have no incentive to help theater owners fill their seats.  That makes it very hard for theater owners to deliver a superior product at a reasonable price.

For the next few years. there will be a real wrestling match between theater owners and distributors and consumer electronics companies.  I think  Sony wins either way as it will continue to sell TV's and distribute films.  But Regal and AMC are facing a much bigger challenge that might even result in another round of downsizing for those major chains.

I welcome some comments and other points of view.

1 comment:

Cunningham said...

Roger -

Speaking as someone who has earned his living in the media marketing business for the past 10 years, I have to agree with you. Our media consumption is going to be more personal (Iphones, IPads and home ent. systems) and theatrical will have to position itself accordingly as more 'event-oriented' programming that is positioned at the tail end (or parallel stream ?)of a distribution cycle.

What I'm finding is that MANY distribution companies are not preparing their marketing accordingly. They are waiting for one dominant format (shades of Beta v. VHS, or HD v. Bluray) before redesigning their marketing materials to suit the new digital world.

As seen previously in movie history - they are going to have to play catch up. That's going to be expensive.