The business models of the major media companies are all in flux because of the rapidly changing technology landscape. The newly created ability to give consumers entertainment programming on demand and over several new distribution routes has begun to destroy the existing economic underpinning that has supported television production for many years.
According to SNL Kagan research, DVD revenues were down 44% to $4.47 billion in 2010 from $7.97 billion in 2009. Video on Demand and Digital Downloads, however, were up 19% during the same period.
For the past several years DVD sales have been a major contributor to the compensation of the studios who create many of our TV shows. While the networks have always been the prime beneficiary of the success of any show in first run, the studios who produce the shows have traditionally made more money on the back-end through DVD, reruns, syndication and international sales, all of which generally began after the first run season. This has made sense because the network spends the most money promoting the program when it is first running, and it therefore deserves a higher piece of the revenue coming out of first run.
But besides the fact that there are now many more forms of distribution, it is also true that the new digital distribution methods allow a viewer to catch up on a missed episode of a TV show within hours, days and weeks on the initial airing. For obvious reasons this has begun to impact the value of any viewing alternative that is delayed significantly after the show airs, including DVDs or syndication the next year, for example.
In the old days viewers who liked a network TV show missed, on average, a third of the first run episodes of a that show. That created an instant audience for reruns or syndication or DVDs when they became available. They were the only way to see the missed segments. So now the market for reruns or syndication or DVD’s have begun to show the impact of a reduced audience for that. It’s simple, if I can see every missed episode of my favorite show in the week prior to the next episode coming out, I get a better experience from that show and I’m more likely to continue watching it.
DVDs will continue to exist, but their role in the change. They will continue to preserve programming for future use, but they won’t nearly the force they were for first viewing of television programming. The smarter content providers have already figured that out and have been working on building their digital distribution businesses. The rest will now have to jump on the bandwagon.