It wasn’t the glitz that lured Sony Pictures Entertainment topper Michael Lynton back to studio land. It was the economic stability DVD brings to an otherwise volatile business.
Already a windfall for the movie biz, the shiny little discs have created a surprisingly brisk back-end business for the TV industry, which has only increased the format’s standing in the boardroom.
The rising revenue stream from TV on disc is easing the pain of a diminished syndication market and a malaise in network television. Dusty libraries of old TV shows suddenly aren’t looking so irrelevant.
News Corp. prexy-COO Peter Chernin and Time Warner chair-CEO Richard Parson virtually gushed over TV DVDs during recent earnings calls.
Once a sleepy homevid sector, TV DVDs have grown by leaps and bounds, reaching sales north of $3 billion in 2004. That’s a 50% increase from 2003 and triple the take in 2002. As recently as 2000, TV DVDs racked up a mere $130 million in sales, according to Variety sister pub DVD Exclusive.
Wall Street is taking note.
Merrill Lynch analyst Jessica Reif Cohen predicts that spending will grow 30% a year to $3.9 billion in 2008. She says TV DVDs have been “a huge surprise,” shifting economic power back to the moribund TV studios.
“In our view, TV shows on DVD will be a significant contributor to studio growth domestically for at least the next three years,” Cohen wrote in a recent report.
“TV DVD is a new high-growth category that does not cannibalize other operating segments, the all-important syndication cycle in particular,” Cohen says.
Wall Streeters say the international markets will be a growth driver for another five years.
And like anything else in Hollywood, it’s a hit-driven biz. In the first half of 2004, only 18 of the 500 TV DVD released sold more than 100,000 copies.
So far, there’s no evidence that DVDs take away from a show’s syndie ratings. “Seinfeld” and “Friends” remain powerhouses in both forms.
“People like to collect things. Whether they actually go back and watch is an entirely different story,” one network exec points out.
A popular DVD release can, however, get a cancelled show back on the air — as seen with Fox’s animated skein “The Family Guy.”
DVD sales are even stacking up nicely against syndie deals.
Last year alone, HBO’s “Sex and the City” racked up $77 million in DVD sales. Also in 2004, HBO cut a joint syndie deal with TBS and local stations that brought in license fees of $100 million.
The entertainment congloms don’t break out homevid revenues, although both News Corp. and TW each happily predict that TV DVD revenues will exceed $1 billion this year.
Meanwhile, Viacom will unleash more than 200 TV releases on DVD this year alone. Among the title wave: “The Brady Brunch,” “The Beverly Hillbillies,” “MacGyver” and newer nighttime soaps “Beverly Hills 90210” and “Melrose Place.”
Not that every TV show will rake in big bucks on DVD.
“You need to think about big events or hitting passionate groups,” Chernin said at a recent Bear Stearns gathering. “We produce ‘Judging Amy’ for CBS. We couldn’t sell it on DVD if we paid people to take it because it appeals to a broader group.”