Saturday, June 23, 2007

How I See It...

Scott Eggleston commented on my previous post below:

Do you see digital downloads yielding more profit than DVDs, even for microbudget indies? How soon do you see it happening?

(Takes off glasses, cleans them)

From a very practical point of view, yes I think digital downloading will be more profitable than DVDs. It's a simple matter of there being fewer expenses, more inexpensive marketing opportunities, and a wider distribution field. Let's break that down:

Fewer Expenses:

There are all sorts of expenses for DVDs - mastering, authoring, replication, packaging, and shipping. This adds to the cost of the DVD, and delays getting that disc on the shelf for the consumer to buy it. That means for a disc that costs $3.00 to manufacture, it is sold wholesale to a retailer for $8.00 then sold to consumers for $14.99.

For digital downloads, all I have to deliver is a master to a server, create links to the download and I'm pretty much off and running. The consumer - no middleman really required unless desired - pays a couple of bucks to either buy or rent the movie. That means that if I were selling my download online for $3.00 then about $2.50 of that cost goes back directly to me to defray the cost of production. That $.50 goes toward...

Marketing Opportunities:

That money goes toward banner ads, press, and other expenses. No need to buy ad space in industry catalogs to the tune of about $5,000 each. You can reach your audience directly and by establishing a talkback forum online (the software is free) you can generate all sorts of PR and other opportunities.

People can sign up to get updates. Your can do co-op advertising and marketing with other like-minded websites, phone companies, etc... (example: Spout.com)

And let's not forget the merchandising opportunities as well. Establish a CafePress stor for no cost and design your merchandise. Sell the script as an e-book with production notes and pictures. Get the T-shirt, coffee mug, etc... No cost to you.

A Wider Distribution Field:

The net is everywhere as are cell phones, and ipods. More of these than there is shelf space available for your DVD. With the web your "store" is always open, and can be available around the world. No expense of selling deals territory by territory.

When it's Going to Happen:

It is happening now. Right now, and building all the time. The studios aren't TOO involved yet, but they will be involved. Very involved, and on a variety of fronts - content, infrastructure, acquistion of social networks to market from, and physical things like satellites and fibre optic cable delivery systems.

Welcome to the future.

3 comments:

Aric Blue said...

Maybe I'm just too old school, but I really have zero interest in downloading a movie so I can burn it to a dvd to watch--I'd rather buy it already made.

Though I do have younger friends who have no problem doing it--I just don't think it's going to overwhelm dvds that fast.

Bill Cunningham said...

You won't have to just download - you can stream it, send it to your ipod, etc...

And you don't have to burn it to DVD to watch it either.

Look at the figures in the PWC report in the previous post. That is going to be a phenomenal amount of growth in the next five years...

DVD sales are flattening out. DVD will figure into it but as a mechanism to archive content.

Don't believe me?

Then watch the TV ads for Netflix downloads and BB's online service.

Roger Alford said...

The other thing I love about this is that it opens up the "rest of the catalog" for the major studios. There are tons of movies, soundtracks, and TV shows that haven't received a DVD or CD release because the market for production isn't big enough. But take out disc manufacturing costs and you've got a whole 'nother ball game. Disney is already doing this with some of their soundtracks on iTunes (though I'm still waiting for Roger Rabbit). Who wins? We all do. We, the consumer, get what we want, and the studios have a new, growing revenue stream.