The days of physical media aren’t over yet, but it certainly is beginning to feel like the sun may be beginning to set.
According to a report from trade organization Digital Entertainment Group (DEG), 2017 was not king to the physical media category of home video revenue. Sales of discs declined by 14 percent overall to take in $4.7 billion in revenue. This follows on from a decline of 10 percent in 2016. Beyond sales, rentals from stores and kiosks such as Red Box also suffered as revenue fell to $2 billion, a decline of 17 percent over 2016.
Video-on-demand rentals declined as well in 2017 falling 7 percent to $1.9 billion after actually enjoying some growth in 2016.
Not all of the news was bad, however. Deg this year expanded its monitoring of subscription streaming numbers beyond Netflix to include other providers such as Hulu, Amazon, HBO Go and CBS All Access. The numbers grew by 30 percent to bring in around $9.5 billion. While the growth is good, it won’t make up for the lost revenue of studios from disc sales as the margins are much thinner on streaming than on the sale of physical media.
4K HD also saw some gains, it was not enough to balance out the loss of other sales. While 4K TV sales were estimated to be around 15 million units in 2017, the number of movies available in the format grew to 267 and accounted for $147 million in sales.
All told, the total spent on U.S. home entertainment in 2017 came to $20.5 billion, an increase of 5 percent. It is clear, however, that consumers are moving further and further to the side of streaming. As mentioned, the profit margins on this format is considerably smaller for movie studios, and they will have to rethink a lot of strategies to make up those declines.