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Studios Pull Out All the Stops to Pump Up Digital Movie Purchases in the Streaming Age

This used to be Hollywood’s favorite time of the year.

Studios would watch with dollar signs in their eyes as consumers snapped up VHS cassettes and discs by the handful during the holiday shopping period. But then shelves filled up and consumers began streaming or renting movies more cheaply instead.
Margins shrank and so did the festive mood.

Studios have been trying to get consumers back in the movie buying habit ever since. They have promoted new formats (Blu-ray, Ultra HD 4K) and digital locker services that have so far failed to take off, and piled on the extras as purchase enticements. To encourage higher-margin digital sales, they make those versions available for purchase first, sometimes with their own bonus features, followed by disc versions.

Still, streaming services have continued to grow in popularity and number as disc sales have deteriorated.

There have been some promising signs for studios — consumer spending on digital purchases increased 7.9% through the third quarter of this year, according to the Digital Entertainment Group trade organization. But spending on subscription streaming rose 21.6% to $5.5 billion during the same period, more than three times the $1.6 billion digital sales tally. Disc purchases, down 10% to $3.3 billion through the first nine months of the year, still accounted for twice the spending as the category studios refer to as EST, short for electronic sell-through.

Now, as the industry gathers for Variety’s annual Press Play: Home Entertainment and Digital Hall of Fame event in Beverly Hills, hopes rest on Movies Anywhere as a new sales stimulus. An outgrowth of Disney’s proprietary digital locker service, it launched Oct. 11 with the support of four rival studios: Sony, Universal, Fox and Warner Bros. Digital retailers iTunes, Amazon, Google Play and Vudu are also on board.

Under this cloud-based service, consumers can access purchases from participating digital retailers and create a digital library available for streaming or download across devices. They can also buy new digital movies through the app and redeem codes from DVD and Blu-ray purchases to access digital copies of them.

The service’s boosters point to the broad studio backing — Paramount and Lionsgate are notable exceptions — and ease of use as strong factors in its favor.

“Five major studios and four major retailers [to start] have come together to participate and enable content interoperability across platforms — that is significant,” says Michael Bonner, executive vice president, digital distribution, Universal Pictures Home Entertainment.

When rival service UltraViolet launched in 2011, it also had the support of five major studios at launch, but Disney, Apple, Google and Amazon weren’t on board. That limited its flexibility; the service has also been criticized for a lackluster user experience.

“Movies Anywhere is a lot easier to understand,” says Denis Cambruzzi, VP of Ampere Analysis, who is a marketing vet with three decades of experience in the industry. “It has removed some of the obstacles and objections to other locker services.”

Jim Wuthrich, Warner Home Entertainment president, the Americas and global strategy, acknowledges negative consumer feedback about digital lockers in the past. He says consumers found it confusing that they could not create a unified library in their lockers under UltraViolet.
That’s no longer a problem with the Movies Anywhere service.

Movies Anywhere allows consumers to bring all their purchases together into one virtual library, which “increases the utility of the collection and makes it easier to interact with it,” says Wuthrich, a Hall of Fame inductee this year. “The more studios, the more retailers that participate in the shared ecosystem, the more value it brings to the consumer.”

Disney home entertainment exec Chris Oldre says that Movies Anywhere’s accessibility has made the digital purchasing experience better than ever.

“Consumers no longer have to worry about where they bought their movies and [can] play back across multiple platforms and devices, offering an unprecedented ease of access,” says Oldre, exec VP, pay-television, digital, Canada and international distribution, for Disney/ABC home entertainment and television distribution. “We believe that by offering a great consumer experience, digital movie purchases will grow.”

DEG president Amy Jo Smith is similarly bullish about Movies Anywhere’s sales stimulus potential. She envisions consumers binge buying through the service and linked-up digital retailers.
“It will help the whole entertainment ecosystem if it is done really well,” she says.

To entice new users, Movies Anywhere is offering up to five free digital movies: Those who register and connect one digital retailer will receive Sony’s 2016 “Ghostbusters” and Fox’s “Ice Age.” Those who link a second digital retailer get digital copies of Disney’s “Big Hero 6,” Universal’s “Jason Bourne” and Warner Bros. “The Lego Movie.”

Karin Gilford, general manager, Movies Anywhere, Disney/ABC home entertainment and television distribution, says the freebie offer has been a big driver for early registration. “We have seen an incredible consumer response to the launch of Movies Anywhere,” she says. She and Disney did not provide further launch details.

The true test will be how many consumers use their digital lockers on the Movies Anywhere service — and whether it will help drive digital purchases as hoped.

In order for locker services such as Movies Anywhere to take flight, studios must keep selling consumers on the benefits of movie ownership. Home entertainment execs are clear-eyed about the appeal of streaming services that offer vast TV and movie options for a low monthly fee. But they would still prefer consumers buy movies digitally when they are first available.

To that end, they are getting creative about digital extras, while promoting visual and audio enhancements.

“What we need to do is to continue to improve the value proposition for consumers,” Wuthrich says. “Digital ownership is the first home entertainment window for the content so it has an inherent value proposition there, but that’s not enough to grow the business. We need to enhance that experience.”

“It is more important than ever that we provide great value to the consumer through the ownership model,” concurs Jason Spivak, Sony Home Entertainment exec VP, worldwide digital distribution & North America sales. “It starts with great content, but we also must deliver great image and sound quality.”

Studios have long piled on the extras for home-entertainment releases, be it behind-the-scenes footage or bloopers. In the digital era, those extras have gotten more elaborate, running the gamut from interactive games to virtual reality features.

Warners put on a drone light show at Dodger Stadium as part of its splashy “Wonder Woman” home- entertainment launch and uploaded footage of the event to digital purchasers as part of its next-generation program. The content then automatically populated for connected users. “That’s an example of how you can keep a product constantly updating, adding value for consumers,” Wuthrich says.
It didn’t hurt that Wonder Woman herself, Gal Gadot, tweeted drone footage the night of the event and urged her 1.47 million followers to buy the movie on digital now or Blu-ray five days later.
According to Wuthrich, the majority of Warner releases get some sort of bonus features. “Not all titles get the super treatment, which is the next-gen treatment, because that’s a fairly large investment and we need enough content to make it work,” he says.

So far, its next-gen content is available on Vudu and Warner All-Movie Access, but the studio is looking to expand to other digital retailers.

Home entertainment divisions design extras with the audience in mind. “For a family movie, we might see high engagement with casual games,” says Universal’s Bonner. “For others, it could be a user-controlled 360 degree exploration of the set. On a connected device, we can continue to enhance the content to keep the experience fresh each time a consumer comes back.”
Extras have been popular with Vudu customers, according to VP-general manager Jeremy Verba, another Hall of Fame inductee this year. “When you are able to give them something extra, above and beyond, they consume it and they like it,” he says. “Often it’s different from what’s available on the disc, not always, but it depends on what’s available from the studios.”

Cambruzzi believes studios could unlock even more sales revenue by further experimenting with digital sales price points and compressing windows between movies’ theatrical and home entertainment debut.

“There’s a lot of room for growth,” he says.

He doesn’t see the growth in streaming services slowing down anytime soon either. Studios freely acknowledge the appeal of such services and are moving into that arena themselves. Disney, for example, announced this summer that it will pull its product from Netflix in 2019, when it plans to launch its own initiative.

For all the popularity of streaming services, consumers still like to be able to have their own copies of movies to watch when whenever they want, studio execs say. It may not be as pronounced as it once was, but consumers haven’t completely lost that buying feeling.

“One of the things we’re seeing on the physical and digital side is, consumers still want to collect,” Smith says. “Just because it’s digital doesn’t mean it can’t be cool and attractive to

Stephanie Prange contributed to this report.

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