Digital Film Distribution

Digital Film Distribution

Warner Bros is making some of its films available on Facebook, opening up a new revenue source for the Internet social network and signalling new competition for online entertainment companies.
(Source: Reuters.com, March 2011)

Last week, Warner Bros and Facebook announced a potentially landmark deal allowing film fans to rent films through the social network site.  The pilot for the plan is The Dark Knight (the 2008 Batman blockbuster) – currently No 7 on the list of all-time box-office grossers, and holder of several sales records for DVD and Blu-Ray.  Consumers will be given a 48-hour window to watch the film, and will be expected to pay 30 Facebook credits, or $3 (£1.85).  Currently, this service is not available in the UK, but if successful, it is expected to be rolled out to other countries around the world, and additional titles are expected to become available for rental or purchase in the coming months.

Context

The market for Internet-delivered movies is not large; Screen Digest estimated it was
worth almost £16m in the UK in 2009 – less than 1% of the total UK home video market in the same year.  Of this total consumer spend, around 63% was generated via download-to-own retail transactions, with the balance coming from Video on Demand (VoD) rentals. 

By offering this service through Facebook, Warner Bros has secured instant access to more than 500 million people around the world.  Online video viewing was a big growth area in 2010, and the time spent by UK web users on TV and movie sites rose by 70% and 50%, respectively, from January to August 2010, according to comScore Media Metrix.

Background

Online video is growing in popularity (indeed “video viewing” is cited as one of the growth areas in online activities carried out by UK consumers in 2010 ), and the number of consumer devices and platforms used to access open Internet content have expanded in the last few years, fuelled by Internet growth on mobile handsets and increase in broadband capacity to the household.  These devices (which are now broadband-connectable and therefore able to receive Internet video) include:

• all 3 current generation games consoles (Nintendo’s Wii, Microsoft’s Xbox 360 and Sony’s PlayStation 3);
• set-top boxes dedicated to delivering Internet video to the TV;
• hybrid set-top boxes that are able to receive traditional digital TV and the Internet;
• a variety of portable/hand-held gadgets (including iPods, iPads and smartphones).

There is also an emerging class of TV sets that have a direct Internet connection that enables them to receive video services directly (indeed, this feature is becoming increasingly common across high-end models from leading manufacturers). 

Current Market

There are currently 6 VoD websites provided by major UK broadcasting companies:

When it comes to premium TV content, all the major UK broadcasters operate their own
online TV outlets that allow viewers to catch-up on recently broadcast programming.  The iPlayer service dominates online TV traffic in the UK, accounting for around 60% of all free-to-view long form online TV streams consumed in the UK in 2009.

Movies first began to be offered on a commercial pay-per-view (‘digital rental’) basis
over the Internet for viewing on PCs in the late 1990s.  However Apple began offering movies for rental and retail via the UK iTunes store in June 2008, and Screen Digest have estimated that Apple commanded almost 60% of the transactional digital movie market in the UK in 2009.

Current online streaming services include:
• Amazon
• Hulu
• iTunes
• Netflix
• Lovefilm
• Blockbuster

The Future

According to Entertainment Weekly, the audio-visual quality via the Facebook facility isn’t great at this point, which is obviously a drawback to using the service .  However, the VoD market is expected to grow, as the business models and technology constantly evolve.  According to Enders Analysis, VoD in the UK will generate £200m a year in revenue and another £100m in advertising by 2013.