Heres the reality of home video: Most people still watch DVDs and Blu-ray
discs. The NPD Groups Entertainment Trends in America report released in April
found that consumers spend 78% of their home video budget on DVD/Blu-ray, 15% on
services that offer both physical and digital options like Netflix (NASDAQ: NFLX
), and 8% on purely digital services. Great. So Sony (NYSE: SNE ), News Corp.
(NASDAQ: NWS ), Time Warner (NYSE: TWX ) and other Hollywood companies fretting
about the disappearance of the disc have nothing to worry about, right? Wrong.
Its not how consumers spend their money that matters, but how much they spend
and they arent spending as much. Disc-based movie sales declined 9% between
March 2010 and March 2011 . Sales totaled $7.8 billion last year, down
drastically compared to five years ago, when they totaled $13.7 billion. So
heres the real reality: People watch discs, but they arent spending very much on
them, nor are they spending very much on home video at all. The hope is that
UltraViolet technology and now for Warner Bros in particular Flixster will
turn that trend around. What moviemakers and their shareholders need to
understand, however, is that consumers are becoming less and less interested in
ownership. UltraViolet, for those unfamiliar, is a cloud-based digital
distribution service backed by the aforementioned companies as well as Comcast
(NASDAQ: CMCSA ), Lionsgate (NYSE: LGF ) and Viacom (NYSE: VIA ). It gives
consumers who buy a DVD or Blu-ray version of a movie access to a digital
version of that movie, which can be downloaded repeatedly on other devices
because UltraViolet stores the users digital rights info. The first film to use
the service, Warner Bros. Horrible Bosses , released in October, but
UltraViolets true juggernaut is Harry Potter & The Deathly Hallows Part 2
released Nov 11. Warner Bros. also is in charge of the technology consumers use
to get their UltraViolet movies. Flixster formerly a social network for movie
fans purchased by WB in May for $75 million is the access point for downloading
UltraViolet movies . Users open an account, giving them access to purchased
movies, but also a Facebook-like profile that shows what movies they like, what
they own and what else theyve viewed through Netflix, streaming service Hulu or
even Apple s (NASDAQ: AAPL ) iTunes. Eventually, Flixster will itself be an
iTunes-style storefront, selling UltraViolet movies from all supporting studios
directly, thus replacing lost DVD sales.
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