business news in context, analysis with attitude

by Kevin Coupe

Yet another example of the world is changing...

The Los Angeles Times reported over the weekend that the research firm IHS Screen Digest is projecting that in 2012 consumers will watch more movies online than they will on DVDs - the first time that the balance of movie power has slanted in this direction.

However, despite the shift, the economics of home movie viewing are still very much weighted toward DVDs; it is projected that in 2012, “people will spend only $1.72 billion on digital movies, compared to $11.1 billion on DVDs and Blu-ray discs.”

From the perspective of those in the movie business, this would qualify as a “whew!” moment, since streaming is not as profitable as DVDs because of “the array of low-cost options to consume movies online, particularly ‘all you can eat’ subscription services like Netflix, which streamed more than 2 billion hours of video during the fourth quarter of 2011.” This means that movie studios have to figure out ways to protect traditional revenue streams even as consumers move toward less expensive options.

In so many ways, this seems like an object lesson for marketers in a variety of businesses. First, the technology makes it possible to get a product more conveniently than ever, and consumers flock to this new option, even though this isn’t necessarily good for the product supplier, which then has to figure out ways to maintain profit margins in a changing world.

The one thing you can’t do, it seems to me, is deny that the shifts are taking place. This is reality, and all marketers have to learn how to adapt to it, whether by figuring out even more efficient and profitable distribution systems, developing new pricing models, or coming up with proprietary product that will allow them to exert more control over the supply chain.
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