×

Digital Home Entertainment to Exceed Physical by 2016, Study Finds

Box office and digital revenue will climb steadily over the next five years, but rentals and sales of DVDs and other discs will fall sharply, according to a report released Wednesday by PwC.

In a sign that the future will be streamed and downloaded, the study projects that electronic home video revenue will exceed that of physical home video in 2016. Meanwhile DVDs are looking increasingly imperiled, with PwC estimating that physical home entertainment revenue will fall more than 28% from $12.2 billion last year to $8.7 billion in 2018.

By 2018, electronic home video, which includes subscription video-on-demand services and cable on-demand offerings, will be the main contributor to total filmed entertainment revenue, overtaking the box office by 2017, the study finds. In five years, revenues for the sector will double from $8.5 billion in 2014 to $17 billion by 2018.

Though the movie business is clearly an industry in flux, there are bright signs for one of its oldest distribution avenues, the theatrical exhibition industry. Ticket sales are projected to climb over the next five years, with domestic box office revenue climbing 15.9% from $10.8 billion to $12.5 billion. Meanwhile ticket prices will increase by less than a dollar from an average of $8.89 to $9.81 by 2018.

“The sector has been quite resilient,” said Cindy McKenzie, managing director of PwC’s entertainment, media and communications practice. “People still want to go to the movies, especially the big tentpole films.”

Even though DVD’s date with the dustbin is fast approaching, McKenzie said that the rise of Netflix, Hulu and other Internet video services are creating new revenue opportunities for movie companies. Further, the growth of electronic sales of movies, which topped $1 billion in revenue for the first time last year, also show some promise and signal consumers are willing to keep buying films as well as renting them.

The flush years of home entertainment may be gone, as revenues get carved up between studios and digital upstarts, but there are cost-savings opportunities.

“The amount of money that you’re making per transaction may not be the same, but it is cheaper to distribute things digitally,” McKenzie said.

The study’s methodology is opaque, with PwC reporting that it relied on historical data and proprietary data to come up with its models and forecasts.

PwC touches on two other silver bullets of interest — 3D and China — both of which were intended to restore the industry to health following DVD’s decline. China remains a tantalizing opportunity for studios looking to pump up international revenues. With a burgeoning population of moviegoers and extensive investment in theater construction, China is growing at a breakneck clip, with the box office climbing 15% last year to $3.13 billion. However, protectionist policies, rampant piracy and the growth of China’s own film industry could pose challenges for U.S. studios in their attempts to tap into the market, PwC concludes.

In the case of 3D, studios’ enthusiasm for the tinted specs appears to have diminished. Though total spending on 3D movies, video and video-on-demand hit $2.2 billion last year, studios scaled back the number of 3D films they released by 20% in 2012.

More Biz

  • Alan Horn Disney

    Variety Keynote Speaker Alan Horn Sees Opportunities in Expanded Portfolio

    As Walt Disney Studios co-chairman and chief creative officer, Hollywood veteran Alan Horn oversees the most enviable content portfolio in show business. In step with his co-chairman, Alan Bergman, Horn has command of monolithic brands like Marvel Studios, Lucasfilm and Pixar — to say nothing of the 21st Century Fox film assets the men added [...]

  • Edward Cheng, Tencent Pictures CEO

    Tencent Results Show Rising Cost of Compliance, Impact of China's Slowing Economy

    Tencent, the Chinese tech giant that commands dominant positions across games, music, streaming and social media, Wednesday revealed third quarter results weighed down by slowing ad sales, slowing PC games and rising costs. Revenues in the July-to-September period showed a 21% year-on-year increase to RMB97.2 billion ($13.8 billion). Net profits dropped 13% to RMB20.4 billion [...]

  • Lilly Burns Tony Hernandez

    Variety to Honor Jax Media Chiefs Tony Hernandez, Lilly Burns at New Leaders Event

    Emmy Award-winning producer Tony Hernandez and Emmy-nominated producer Lilly Burns will receive the Creative Leadership Award on behalf of Jax Media at the Variety New Leaders event presented by City National Bank, taking place Nov. 14 in New York City. As founders of Jax Media, Hernandez and Burns have produced shows and specials such as [...]

  • Andrea Bocelli

    Andrea Bocelli Calls Plácido Domingo Cancellations Due to Sexual Harassment Claims ‘Absurd’

    Italian singer Andrea Bocelli is defending embattled opera star Plácido Domingo, saying it is “absurd” that concerts have been canceled in the wake of multiple sexual-harassment allegations. “I am still appalled at what happened to this incredible artist,” Bocelli said, according to the Associated Press. “I don’t understand this. Tomorrow a lady can just come up [...]

  • Rudy Lopez Negrete Returns to CAA     

    Rudy Lopez Negrete Returns to CAA

    Rudy Lopez Negrete has rejoined CAA as an agent in the Music Touring department, specifically focused on leading brand partnerships for CAA’s Latin music clients. He will be based in the company’s Los Angeles office, where he will work with Latin artists including Enrique Iglesias, Ricky Martin, Jennifer Lopez, Becky G, Isabela Merced, Luis Fonsi, Mon [...]

  • Richard Plepler HBO

    Former HBO Chief Richard Plepler Close to Signing Apple TV Plus Production Pact

    Former HBO chief Richard Plepler is close to signing an exclusive production pact with Apple TV Plus. Apple declined to comment and Plepler could not immediately be reached for comment. It’s understood that Plepler plans to launch a boutique production company designed to focus on a handful of high-profile projects. Among his advisors in pulling [...]

  • Byron AllenVariety Inclusion Summit, Inside, Los

    Byron Allen, Comcast to Square Off in Supreme Court on Racial Discrimination Case

    Byron Allen’s racial discrimination case against Comcast Corp. on Wednesday heads to the Supreme Court, where justices will consider Comcast’s argument that the case should hinge on two words: “but for.” Allen filed a $20 billion lawsuit against Comcast in February 2015, arguing that the nation’s largest cable operator was discriminating against his company, Entertainment [...]

More From Our Brands

Access exclusive content