Home entertainment sector bullish despite the odds

MUMBAI: Despite the harsh economic climate, the home entertainment industry has much to be optimistic about. That was the key message to emerge from the Screen Digest PEVE Digital Entertainment conference held recently in Paris.

Over two days, approximately 250 delegates, representing all sectors of the home entertainment industry and drawn from over 100 companies in 17 countries, heard from an impressive line-up of speakers from both sides of the Atlantic.

In a well-received opening keynote address, Sony Pictures Home Entertainment president David Bishop, reminded delegates that home entertainment is a $50bn-a-year business that ‘continues to be a critical revenue stream for our parent companies’ and that ‘consumers are still buying packaged media in significant numbers’.

He went on to urge the industry not to ‘become a complacent, passive observer’ but to embrace new technological developments. Citing Screen Digest data showing that around half of all US homes now have an HDTV set while there will be 78.6m HDTV households in Europe by the end of this year, Bishop pointed out that the migration from standard to high-definition television is driving take-up of Blu-ray Disc (BD). The home entertainment industry can help increase this momentum, he added, and boost the format’s appeal by offering strong value-add material such as BD-Live content (which has already generated over 3m visits to Sony Pictures’ own BD-Live screens) and digital copy.

Bishop outlined how Sony Pictures is working with a consortium of media, technology and electronics companies, the Digital Entertainment Content Ecosystem (DECE) to create an industry standard that will allow consumers to play content from different online retailers on a wide range of devices and platforms.

But the biggest challenge facing digital rights holders, Screen Digest’s Dan Cryan told delegates, is how – and if – consumers can be persuaded to pay for content that is currently available for free. The need to compete with piracy – described by BlinkBox Entertainment CEO Michael Comish, as ‘a new channel … larger and more powerful than FNAC, Tesco, Blockbuster and Walmart combined’ – was a recurring theme over the two days. But Cryan, a Senior Analyst in Screen Digest’s Broadband Media team, pointed out that piracy is not the only competition; by 2011, according to Screen Digest forecasts, ad-funded, free to view TV shows will account for 10 times more US consumption than paid-for online content. Both pricing and windowing strategies must be rethought, he warned, if paid-for content is to compete with free.

More positively, Universal Pictures International president Eddie Cunningham, reminded delegates that ‘good content delivers in any economic cycle’, before leaving his audience with a clear ‘to do’ list, ranging from supporting the new BD format and getting actively involved in anti-piracy activities to surrounding themselves with positive people and ‘ignoring the naysayers’.

There were few naysayers in evidence when it came to the potential for BD. Although  European Logistics & Distribution for Cinram VP Jean-Michel Cathonnet, called on format backer Sony to do more to open BD replication up to other players and Sonic Solutions’ VP European Operations Chris Neely, expressed concern that too many independent authoring houses were ‘waiting for their first orders’ before investing in the new format, the general consensus was that adoption of the high definition format by consumers and industry alike is on track.

UK-based supermarket group Tesco category director – Entertainment Rob Salter, indicated that the chain is already allocating the format up to 20 per cent of video shelf space in some of its UK stores and welcomed recent moves by some distributors towards bundling DVDs with BD to ease the consumer transition. Meanwhile, both Salter and, Sony Pictures Home Entertainment Worldwide Operations EVP Aodan Coburn, agreed that it was probably time to review the current home entertainment supply chain model, under which up to 20 per cent of DVDs shipped are subsequently returned unsold to distributors.

Disney Consumer Products Europe Toys & Electronics senior VP Edward Catchpole,  provided an inspiring insight into how another area of the entertainment sector uses innovative marketing and product differentiation to drive retail sales. The addition of value-adds such as glitter, toy jewellery and a sound chip allowed Disney to incrementally increase the price of a single item – in this case a greetings card – by 1500 per cent, turning it into a gift proposition in its own right.

Looking ahead, Microsoft Xbox VP Strategic Marketing Interactive Entertainment Business EMEA David Gosen , told delegates that today’s ‘active, impatient, engaged consumers’ expect a new type of home entertainment. According to Gosen, ‘over 40 per cent of European online households had networks in August 2008′ and ‘over half of all people who own a [games] console are interested in fully connected services’. What is needed, he said, is ‘a simple, intuitive solution’ to bring fully functioning internet-enabled consumer electronics products to the living room. Speakers from Sonic Solutions, Toshiba and Macrovision agreed, all stressing that a workable and consumer-friendly interface was crucial to achieving consumer acceptance.

The final session of this year’s conference was a real eye-opener. Sponsored by consumer research company Interpret, it brought together five carefully-selected consumers, each representing one of the consumer segments identified in Interpret’s 2009 State of UK Digital Media Study on attitudes toward digital media and home entertainment. The resulting ‘live focus group’ gave a fascinating insight into the DVD and BD buying habits (or lack thereof) of consumers. Key issues to emerge were the impact of TV schedules on illegal downloading (the delay in hit shows reaching local networks was a key factor in seeking out P2P sites) and the extremely high perceived value (up to €10) of the packaging and physical presence of a DVD. The 17th PEVE conference – and the second Screen Digest PEVE conference – ended as it had begun, on a high note.