×
You will be redirected back to your article in seconds

Why 2015 Home Entertainment Figures Should Worry Studios

What looks like a 1% increase is more like a 6% downturn

The preliminary numbers are in for consumer spending in the U.S. home entertainment business for 2015, and all is not what it may seem.

What the DEG: Digital Entertainment Group refers to as “total U.S. home entertainment spending” is up almost 1% to just over $18 billion last year, reversing a 1.8% decline registered in 2014. The industry’s trade org collects the numbers from studios and retailers on a quarterly basis.

But dig deeper into the numbers, and what looks up is actually down–and in more ways than one.

The $18 billion figure is an amalgam of several key revenue streams including sales and rentals of DVDs and Blurays; digital distribution options like VOD and electronic-sell-through options including iTunes, and subscription VOD options including Netflix.

That third category is where the problem lies: SVOD is truly a very different business than the other two. While all are essentially viewing options in the home that occur after the first theatrical window, lumping Netflix together with iTunes and disc revenues is a head-scratcher for several reasons.

The primary problem is the secular decline of the disc revenues that is the studios’ most important revenue stream is precisely because the easy, lower-margin distribution in subscription streaming is what is hurting that core business.

Even odder is the logic of including SVOD revenues but excluding from the total another aftermarket window for movies: premium channels like HBO, Showtime and Starz. Then there’s the fact that Netflix has evolved into a more TV-centric business while home video is primarily driven by movies.

In 2015, subscription streaming delivered over $5 billion to the bottom line for the studios; pull out that number and what was a 1% increase is actually just over a 6% decrease for the year, to just under $13 billion. The 2014 total sans subscription streaming is $13.8 billion, down from $15 billion in 2013.

The studios’ primary home entertainment revenue stream continues to be the sale of discs, which dropped from $6.9 billion in 2014 to $6.1 billion in 2015. The rate of decline accelerated from 10.9% in 2014 to 12% last year.

Considering subscription streaming increased by a whopping 25% year over year for two consecutive years, 2016 might be the year that disc sales actually become the second biggest revenue driver in home entertainment given the current trajectory of both categories.

Disc rentals also continue to decrease, now just over $3 billion. Rate of decline isn’t as steep as disc sales, which is somewhat surprising given the troubles its biggest driver–Redbox–experienced as of late in the kiosk business.

On the digital side of the home entertainment business, both VOD and EST are contributing nearly $2 billion each to the bottom line. Propelled by the push of the early window known as Digital HD, EST registered healthy 18% growth but the rate of growth is actually down from the 30% rate from 2014.

Another digital indicator showing moderating growth for home entertainment: the number of Ultraviolet accounts grew by nearly 20%, to over 25 million. But that growth was over 30% in 2014.

The home entertainment sector is hoping that the first deployment of Ultra HD discs with HDR later this year will put new fuel in the tank of the  flagging disc business’, noting that penetration of 4K TVs now stands at 5 million in the U.S.

If anything, the surging subscription streaming category is actually significantly lower than its true total considering DEG doesn’t count Amazon Prime in its numbers, which is probably second only among SVOD players like Hulu to Netflix in that category.

A potential silver lining in the 2015 data that bodes well for next year: “Star Wars: The Force Awakens” drove a big 17% fourth-quarter year-over-year surge at the box office after many consecutive quarters of decline, which could soon boost disc sales. DEG doesn’t break out the revenue totals of specific titles but noted that “Star Wars Collection,” “Big Hero 6” and “Jurassic World” were among the top performing movies on home video for the year.

Popular on Variety

More Digital

  • Gabrielle Carteris

    SAG-AFTRA Urges Gavin Newsom to Sign Law Punishing 'Deep Fake' Videos

    SAG-AFTRA National Executive Director David White is urging Gov. Gavin Newsom to sign legislation that institutes penalties for nonconsensual digital sexually explicit videos, also known as “deep fakes.” The legislation, Assembly Bill 602, targets companies and individuals who create and distribute the videos in California without the consent of the individual being depicted. “We urge Gov. [...]

  • Facebook Portal logo

    Facebook Is Launching a Portal TV Device: Here’s What We Know

    Facebook is getting ready to launch a TV streaming device in time for the holiday season, Variety has been able to confirm with multiple sources familiar with the company’s plans. The new streaming hardware will be part of the company’s Portal family of devices, featuring a camera, and combining video chatting with TV viewing and [...]

  • MoviePass card

    MoviePass Shuts Down, With Parent Company Citing Failure to Raise Funds

    MoviePass, the long-struggling theater subscription service, finally appears to be down for the count. On Friday, MoviePass notified remaining subscribers that it would be shutting down the service effective Sept. 14, 2019, because “its efforts to recapitalize MoviePass have not been successful to date,” parent company Helios and Matheson Analytics announced. “The company is continuing [...]

  • Disney Plus - Full Lineup

    How to Browse the Disney Plus Catalog the Company Is Testing in the Netherlands

    Disney began testing its Disney Plus streaming service in the Netherlands this week. Consumers in the U.S. will have to wait until November 12 to get access to the service, but European streaming aggregator JustWatch already makes it possible to browse the catalog available during this beta test. JustWatch is one of a number of [...]

  • JoJo Siwa'The Angry Birds Movie 2'

    Nickelodeon Star JoJo Siwa Gets Her Own Dance-Tour Mobile Game (EXCLUSIVE)

    Fans of JoJo Siwa will be able to join the teen influencer’s dance squad on stage — virtually — in a new mobile game. In “JoJo Siwa — Live to Dance,” players will become part of the Nickelodon and YouTube star’s worldwide tour on her professional dance team and experience what it’s like to be [...]

More From Our Brands

Access exclusive content