Analysts Predict the Future of Optical Discs

At about the same time, two research companies have published their prediction on the optical disc media market. For Futuresource Consulting, Blu-ray video disc production is on track to exceed 400 million units in 2010, an increase of nearly 60% compared with 2009, and to reach 2 billion by 2014. For In-Stat, DVD retail sales will decrease by $4.6 billion from 2009 to 2014 because of internet-delivered video growth. Here are the two reports:

Worldwide pre-recorded Blu-ray video disc production is on track to exceed 400 million units in 2010, an increase of nearly 60% compared with 2009, according to a new research report from Futuresource Consulting. When factoring in PS3 titles, overall BD production volumes are somewhat higher.

"Moving forward we expect to see continued expansion in BD video
production volumes, with our forecasts indicating that annual global
output will reach two billion discs by 2014," says Michael Boreham, Senior Consultant Disc Manufacturing & Storage Media at Futuresource.

The BD replication industry has seen capacity utilisation improve markedly during 2010.

"As a result of this output expansion, BD capacity utilisation will hit nearly 80% in the US during Q4 of this year and 75% in Europe," says Boreham. "This
is about as high as it can comfortably get, and given the continued
market expansion expected over the next few years, which is being driven
by growing player ownership and falling disc prices, the industry will
need to invest further in 2011 to prevent peak quarter disc shortages.
Production quantities are boosted by the continued pipeline fill and
infrastructure requirements. Studios remain committed to maintaining
inventory levels to ensure demand can be met in a growing market and
retailers are keen to maintain a good level of copy depth in store, to
strongly promote BD and eliminate out-of-stocks and lost sales."

Fiona Hoy, Market Analyst at Futuresource, adds: "Bundling discs with
hardware is also a factor, and the launch of 3D BD titles has added
extra importance to this. As 3D is ideally suited to the BD delivery
platform, this is clearly a long-term opportunity for the industry to
further sustain consumer interest in packaged entertainment media. From
2012 we’re going to see very strong demand for 3D content, which will
fuel additional growth. A number of bundled exclusives are already
boosting demand from this sector, such as Avatar with Panasonic displays or How To Train Your Dragon with Samsung displays."

Futuresource Consulting’s Blu-ray Disc Replication Report was released
in November 2010 and explores the current and future developments within
the Blu-ray Disc industry across the USA, Western Europe, Canada,
Mexico, Eastern Europe, Japan, Asia, Australia and South America.

InStat:
DVD Retail Sales to Decrease by $4.6 Billion
From 2009 to 2014

Home video retail revenue has fallen precipitously over the past five years. Worse yet, double-digit declines in annual retail sales of physical discs are expected, resulting in a drop of $4.6 billion from 2009 to 2014.

To replace retail DVD revenue losses, the online digital paid video download and streaming segment, (which includes both purchase and rental) is expected to show high revenue growth. Annual revenue is forecast to grow from $2.3 billion to $6.3 billion within five years, says In-Stat.

The battle lines for online offerings are continuing to be drawn and are intensely competitive. Online à la carte rental of TV episodes will directly compete with online subscription TV services, such as Hulu Plus and Netflix, and may detrimentally impact the use of TV Everywhere services.  Further competition will come from paid online video stores, such as Apple iTunes, Amazon, Vudu and CinemaNow.  
 
"Video disc rentals will continue their significant decline," says Keith Nissen, Principal Analyst. "Netflix is already shifting its focus to online streaming, and Red Box is evaluating a similar strategy. The convenience and utility of the online offerings are simply too compelling. Online rentals permit the selection of any movie or TV program from the Video-on-Demand library. Ultimately, it will be impossible for physical disc kiosks to compete with the in-home or in-store download-to-rent business model."
 
Some of the research findings include:

• US TV download revenue will more than triple between 2010 and 2014.
• Premium channels (HBO, Showtime, etc.) are in competition with online video subscription services for both subscriber spending, as well as movie licensing rights.
• The emergence of electronic sell-through for online video purchases and rentals will transform the digital entertainment industry over the next five years.
• Online VOD (Video-on-Demand) subscription revenue is expected to approach $3.5 billion by 2014. 

Recent In-Stat research The Battle for OTT Video: Redistributing Video Industry Dollars (#IN1003966MBI, 38 pages, $3,495) reviews the economics behind the video entertainment industry today, encompassing:  

• 2009 revenue and expense totals for each market segment including; theater box office, home video, pay-TV, premium TV channels, broadcast networks, online video, and video disc rentals.  
• Segmentation of online video revenue includes electronic-sell-through (EST, download-to-own), VOD rentals, and subscriber VOD.
• Three critical market scenarios are assessed from a revenue and profit standpoint: Apple’s 99-cent iTunes video rentals, online TV rentals as replacement of retail DVD/Blu-ray disc sales revenue, and the viability and impact on the pay business model.