As DVD's Die, How Will The Film Business Fare?

Here is a pretty good article that discusses the shifting trends in the in-home distribution of films.  Obviously, the trend is away from DVD's and moving towards direct delivery.  In fact, the shrinkage in the DVD numbers is pretty dramatic.  The DVD is going the way of the CD.

Blu-ray is making up some of those losses, but Blu-ray will eventually follow the same path.  Right now Blu-ray discs are popular because there is no real alternative for super-HD resolution.  But when a Blu-ray quality file can be easily and quickly downloaded right to your big screen TV, there will simply be no reason to mess around with a disc.

Discs are dead.  However, the download and video-on-demand markets are expanding pretty quickly.  None of this is news, but what does it really mean?

For disc manufacturers, it means they should already have shifted their focus to other businesses.

For distributors, the ability to warehouse and handle large amounts of physical product will not be useful much longer.  The distribution of content is still a very good business, but moving digital files is very different than moving discs. The good news for distributors is that the profit margins should increase dramatically as all of the costs of moving physical inventory evaporate.

Producers still need to produce great content.  Consumers will always want good stories that are told well.  However, production is both cheaper and trickier.  As more people use iPads, smartphones and similar devices to watch films, the productions will need to translate from very large screens with huge speakers (like IMAX) to the small screens of a smartphone with headphones.  That's challenging.

The real issue for those of us on the business side is whether the revenue from new sources such as download, streaming and mobile will replace the dwindling DVD market.  I believe the answer is "Yes" if you look at the profits.  The revenue might go down, but so will the costs of delivery.  That means that even if volume is lower,  the profits will be higher and hopefully make up the difference.

Direct delivery of content is a more efficient system than any physical media.  The benefit of those efficiencies should be apportioned in some manner among all of the stakeholders, from consumers up the chain to producers.  I think natural market forces will cause that to occur, and at the end of the day, the film business will be healthier than ever.  Higher profits means it's a better business model.