Seeking Alpha

Online movie sales keep getting stronger

  • Online purchases of movies rose 47% to $1.12B in 2013 in the U.S., according to Digital Entertainment Group. The striking growth rate has calmed fears that consumers would opt to wait for rental windows to open up before buying movies.
  • Streaming subscription rentals rose 32% to $3.16B during the period.
  • Kiosk DVD sales slipped 1%, but the aging business still commanded $1.9B in sales. Brick-and-mortar rentals were off 14.3% to $1.042B.
  • If there was a surprise, it might be the relatively slow pace of VOD movie sales, up only 4.8% to $2.11B.
  • Full report (.pdf)
  • Related stocks: NFLX, OUTR, VZ, CMCSA, CHTR, CVC, TWC, DIS, FOXA, DISH, DTV.
Comments (6)
  • andypochta1
    , contributor
    Comments (1054) | Send Message
    Here is how it is - Netflix goes under $200 bounces to $225 before heading to a reasonable $125.
    7 Jan, 12:35 PM Reply Like
  • agliata
    , contributor
    Comments (95) | Send Message
    And what about movie theatre stocks, time to short?
    7 Jan, 12:44 PM Reply Like
  • Sakelaris
    , contributor
    Comments (1409) | Send Message
    Please clarify, what is the difference between "online purchases of movies" and "VOD?"
    7 Jan, 02:18 PM Reply Like
  • skibimamex
    , contributor
    Comments (442) | Send Message
    online purchases is also called "Electronic Sell Through" where you purchase and "own" the license to view it for either download or to be held in a video locker in the cloud. Each of iTunes, Amazon, Vudu, Google Play, Samsung Media Center, Sony, and a zillion others can offer same. The studios themselves are packaging combination Blueray, Standard DVD, and electronic copy via its Ultraviolet content locker.


    The "VOD" used in this context is "Video On Demand" -- what the reporter really means is to call it "Pay Per View" which is a "rental" model, usually for one view, or for unlimited views over a brief time window (24 hours after initiating the content in the case of Apple iTunes). you largely get the same players as EST plus you add additional distributors such as the MVPD's (cable, satellite, Telco with IP video).


    basically it's either an ownership model or a rental model.
    8 Jan, 12:26 AM Reply Like
  • Sakelaris
    , contributor
    Comments (1409) | Send Message
    Thanks for that well-done reply.
    8 Jan, 05:54 AM Reply Like
  • skibimamex
    , contributor
    Comments (442) | Send Message
    By the way, "SVOD" is "Subscription Video On Demand" is how the industry describes Hulu+, HBOGo, WatchESPN, and Netflix. In other words, you get access to content via a subscription.


    Please note that the major studios have generally colluded together to establish industry "norms" in terms of exhibition "windows". Typically broad, and non-exclusive, theatrical distribution first; then after a seasoning period and I believe they protect the theatrical outlets with 120 day delay (maybe it is 180 days, I forget) before the studios release both EST and physical DVDs for an ownership model. It then becomes available, again still non-exclusive, in the PPV/VOD window, 60 days after DVD/EST initial release, for the broad distribution outlets both streaming AND via MVPD PPV. After 60-90 days during the PPV/VOD window, it then gets released, this time typically on only an EXCLUSIVE basis, to the "Pay cable 1" window, which is the window that Starz, HBO, and Netflix own the exclusive broadcast rights for shwoing to their subscribers. When it is in Pay Cable 1 exclusive window, it goes DARK in the PPV/VOD outlets; i.e. iTunes, Amazon, the MVPD operators can no longer show it on a rental PPV basis. However, these streaming outlets STILL CAN pursue an ownership model in selling EST digital copies (just like DVD's continue to sell) while it is in the SVOD exclusive window.


    Now you can understand why the studios, in offering discounts on DVD and rev share model to ala carte DVD renters like Movie Gallery / Blockbuster, if they would accept a 60 day delay from 1st Sale DVD before offering rental of studio new release content. This was to "protect" both the physical DVD sale and EST window. Redbox, which is much more dependent upon having available hot new releases (given its limited shelf space in a kiosk), decided to forego the discounts and instead rely on First Sale Doctrine and simply buy its DVD's in the initial release via wholesale. Netflix, which is much more of a catalog business in its DVD rental business (offering depth and breadth) instead took the discounts by accepting the 60-day delay and worked with the studios and their windowing.


    Similarly, both Amazon Prime and Redbox Instant offer a hybrid service combining subscription access (i.e. free streaming included) to certain content while offering ala carte PPV of a broader catalog. This contrasts with Apple iTunes, Google Play, and WalMart's Vudu who stick with the EST and PPV models and offer no subscription. I would argue that Amazon and Redbox are mainly using their subscription content offering in what I would characterize almost as a "teaser" menu in order to stimulate purchases of PPV (i..e. ala carte rentals) content of a broader scope (and non-exclusive, i.e. available at multiple venues) -- and where they make their money.


    As a consumer, i like to rent my content (on PPV) from either iTunes or Vudu, as I find their user interfaces and streaming quality superior to Amazon Prime. For SVOD, I happen to subscribe to pretty much all of them (except Redbox Instant which I find of no incremental value) such as HBOGo, Disney, Starz Online, Epix, Netflix,Hulu+, Amazon Prime, and many add supported such as Crackle, Viki, DramaFever. These "streaming" services are really "programming channels" analagous to either "basic channles"(i.e. free and ad-supported) or "premium pay channels" (paid subscription that offer differentiated content).
    8 Jan, 11:07 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector