Digital video to overtake cinemas in three years?
James R | On 06, Jun 2014
“There’s eventually going to be a big meltdown,” Steven Spielberg said last year. Talking at an event with George Lucas, the pair predicted a Hollywood “implosion”, with fewer cinemas, higher ticket prices and longer theatrical runs – more like Broadway than picturehouses as we know them.
“There’ll be big movies on a big screen, and it’ll cost them a lot of money. Everything else will be on a small screen,” said Lucas. “What used to be the movie business, in which I include television and movies … will be Internet television.”
The comments were dismissed at the time as over-exaggeration. After all, who wants to believe the man who created the Ewoks? But new figures from PwC predict that video on-demand could start to outperform cinemas in as soon as three years’ time.
That is not to say that digital is causing the death of cinema. Industry experts – including the Head of Digital for the BFI – have all agreed that VOD is an additive rather than a replacement to old-fashioned distribution. Indeed, box office resilience underscores the continuing popularity of cinema, says PwC, with global box office revenue set exceed revenue from physical home video in 2014 and grow to $45.9 billion by 2018, 4.9 per cent higher than 2013.
But while PwC predict a 16 per cent increase in cinema ticket sales over the next five years, boosted by demand from the middle class, a rise in electronic home video will soon rival these traditional formats. It is no secret that more and more people are streaming shows and movies. Even the industry is aware: with Veronica Mars, Warner Bros. became the first studio this year to release a movie digitally day-and-date with cinemas. Meanwhile, Netflix’s membership continues to grow and expand into new territories. Even BBC iPlayer is consistently seeing its traffic climb, with views increasing 4 per cent in the last month alone.
Globally, the total combined revenue from OTT/streaming services and broadcasters’ video on demand services will grow at a CAGR of 19.9 per cent, forecasts PwC. This will exceed physical home video revenue (the sale and rental of DVDs and Blu-ray discs) in 2018, whch will see its revenue drop from $12.2 billion (now) to $8.7 billion. Perhaps more striking, though, is that in 2017, PwC predicts electronic home video will overtake the traditional cinema as the biggest contributor to total film revenue in the US, reaching a total of $17bn the following year – double the $8.5bn the sector currently generates.
Where will this growth come from? Subscription services, which are currently enjoying the biggest boom in VOD usage. Two of the best-performing consumer sub-segments give consumers 24/7 access to content for a fixed fee. Revenue from digital music streaming services, such as Spotify, will grow at a 13.4 per cent, while electronic home video OTT/streaming platforms will generate 28.1 per cent more.
Where audiences will go, of course, advertisers will follow: in 2018, reckons PwC, 33 per cent of total advertising revenue is forecast to be digital, compared to 17 per cent of consumer revenue.
“What used to be the movie business, in which I include television and movies … will be Internet television,” said George.
The “meltdown” predicted by Spielberg and Lucas may never materialise, but with Netflix’s revenue up 24 per cent in the first quarter of 2014, the rise of VOD is certainly happening. Maybe, the man who created the Ewoks is on to something.