Film’s Streaming Future Could Be Its Physical End

As physical media sales continue to decline, thoughts on the future of watching movies


the numbers game Films Streaming Future Could Be Its Physical EndThe Numbers Game is a monthly column breaking down the economics of modern filmmaking to show just how big of an impact they have on the movies that make it to release. Ever wonder why (insert trend here) exists at all? We’ll try to help.

It used to be a lot simpler to work out whether a movie was yet available for home viewing or not. Either it was “on video,” or it wasn’t. If it wasn’t, that’s usually because it was either enjoying a nice, lengthy theatrical run, or it was at least making the rounds of second-run theaters the nation over. Failing that, you went to the local Blockbuster, and either a movie was on the shelf, or it wasn’t. Now, though, it’s a little blurrier. There are all sorts of offset releasing windows, from “digital HD” purchases that drop weeks before the physical films do to the delays that give services like Redbox an advantage over home rentals and streaming services. Now, there’s even the possibility that a film might be available sooner on one streaming service than another. It’s not as hard as it might once have been to imagine a future where each studio’s library is on its own streaming platform, or the biggest summer blockbusters can be streamed straight to your home for a marked-up cost, but these are the paths the industry has laid out for itself.

We also have a pretty big stake in those scenarios taking shape. In a nutshell: All those DVDs and Blu-rays you aren’t buying have forced studios to get creative, because home viewing revenue has tapered off pretty dramatically in the past 10 years or so. What was once a lynchpin of the film industry, home viewing revenue peaked in 2004 at $22 billion and has steadily declined ever since. Variety reported at the beginning of this year that “the $18 billion figure is an amalgam of several key revenue streams including sales and rentals of DVDs and Blu-rays; digital distribution options like VOD and electronic-sell-through options including iTunes, and subscription VOD options including Netflix.”

That last part is the real problem. Streaming platforms also entice viewers with original TV shows and films, so in this way, they’re both sources for revenue and increasingly direct competition for the studios. (Netflix and Amazon’s buying sprees at this year’s Sundance Film Festival are just one recent illustration of this point.) From that same Variety article: “The studios’ primary home entertainment revenue stream continues to be the sale of discs, which dropped from $6.9 billion in 2014 to $6.1 billion in 2015. The rate of decline accelerated from 10.9% in 2014 to 12% last year. Considering subscription streaming increased by a whopping 25% year over year for two consecutive years, 2016 might be the year that disc sales actually become the second biggest revenue driver in home entertainment given the current trajectory of both categories.”

Let’s unpack that. Studios have built their revenue streams around home purchasing and viewing for decades now. In 2002, the DVD overtook the VHS cassette in sales revenue for the first time. Before that, though, VHS had seen the advent of not only the rental business, but the home ownership of movies at large. The ‘80s saw the growth of an entire new industry for film releasing, one with a guaranteed back-end that could even help bolster a film that might not have succeeded in theaters. Yet in 1997, the DVD was released, and the revenue for VHS went from $12.2 billion in 1999 to virtual nothingness by 2008.

An incidental industry advantage of VHS as the dominant home format for a solid two decades or so is that it absolutely couldn’t replicate the overall quality of a projected film print. Anybody who grew up in the VHS era remembers the tricks: the pan-and-scan, the wonky aspect ratios, and the possibility that your tape would unspool and be rendered immediately worthless. The DVD brought audiences closer to the ideal, but in itself had the disadvantage of arriving at a crucial nexus in the industry’s history; it anticipated the shift away from the dominant use of the analog technologies the VHS represented, but was an early digital format that would quickly find itself outdated during an all-time great technological boom. So while DVD revenue was a cornerstone of the industry, it was only for a relatively brief time.

Returning to that initial Variety article, streaming has stepped in as the industry’s next true cash cow, increasing rapidly as physical media sales continue to decline. For each of the past three years, the percentage of decline in home video sales has continued to grow, and as previously mentioned, this could indeed be the year in which video streaming claims the dominant market share of home spending. If that’s the case, it makes eminent sense, coinciding with Netflix’s increasingly aggressive courting of name filmmakers for streaming projects and Amazon’s claims on would-be Oscar hopefuls like Manchester by the Sea. It’s also just a simpler rental format; now that the physical video store has become more of a fetish property than an industry standard, people will pay the extra $2-3 to simply rent a film in HD and stream it instantly, rather than wandering to their nearest Redbox in hopes that a Blu-ray copy is still available.

The line between home viewing and theatrical viewing is also slowly but surely blurring. With the rise of 4K televisions and ultra HD streaming/disc releases, there’s less of a distinction than ever before between going to see a film in a theater and watching it at home. I’ve already spent plenty of time touching on the inimitable value of the communal theatrical experience, but when theaters continue to struggle to pull in audiences for anything but the most name-brand attractions, the digitization of film distribution means that more and more of those viewers who wouldn’t go to more than a couple films in a theater in a whole calendar year are now tempted to omit the practice altogether.

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If anything, what might be sustaining physical film media at this point is the simple issue of timing. 4K televisions are still a luxury item and not an industry standard, and unless you happen to be living in an area wired for fiber optic internet, the odds are good that 4K streaming is not yet a viable option for you without paying an absurd amount of money per month to increase bandwidth. But when that barrier is eventually broken down, home sales will have to struggle not only against a cheaper, more immediately accessible alternative, but the proliferation of streaming services that look to eventually replace that income source in its entirety.

One of the bigger criticisms of Netflix and Amazon (to date) centers around how myopic their selections tend to be, favoring recent releases of wildly varied quality over older films. But later this month, TCM and the Criterion Collection will launch FilmStruck, a portal for classic film. Should FilmStruck prove successful, expect more niche streaming services in the vein of this one to begin cropping up. Digital films have become cheaper to buy, easier to access, and now, ironically enough, the home ownership aspect that made videos so appealing in the first place is being streamlined to the point of entire archival libraries becoming available for less than the price of a single theatrical ticket. The debate of physical media’s relative value has almost become secondary, because to the studios, it’s disappearing rapidly. And for as unnerving as it may be to think about, the audience in that coveted 18-34 set might be the first one to see it go away for good within their lifetime.