The film industry was banking on digital distribution eventually replacing the
income it generates from sales of DVDs, which have been in steep decline for
the past two years.
But while sales of digital films rose sharply in 2007 and 2008 growth
stuttered in 2009, according to a report by Screen Digest.
The media research group had forecast total online movie sales in the US of
$360m (€264m) for 2009, based on the sharp growth of 2007 and a near
doubling of sales in 2008 to $219m.
Yet after a slowdown in the second half of the year, US revenues for 2009 were
substantially lower than forecast at $291m.
Market cooled off
“The market just cooled off,” said Arash Amel, a research director with Screen
Digest. “This wasn’t caused by economic factors…the level of interest in
digital downloads just isn’t there.”
He believes consumers have been deterred by an array of competing online
platforms that prevent viewers from watching digitally downloaded films on
the devices of their choice.
A consumer buying a film from Apple’s iTunes store is unable to watch it on
their Microsoft Xbox console, for example.
“Digital downloading is characterised by its restrictions – it’s all about
what viewers can’t do, rather than what they can do,” added Mr Amel.
Hollywood has moved to address problems associated with digital distribution
yet the industry is divided on the best way forward.
Walt Disney has created Keychest, which it describes as “enabling technology”
that allows consumers to buy a film once and watch it anywhere.
But the rest of the industry is supporting the rival Digital Entertainment
Content Ecosystem coalition, which is backed by Sony Pictures.
Competing platforms
With no immediate solution in sight, the Screen Digest report is likely to
make grim reading in Hollywood.
The private equity and hedge fund money that poured into the industry fuelling
a production boom has evaporated following the financial crisis, leaving the
studios desperate for new revenue sources.
Studios have made efforts to cut the pay offered to top stars while the number
of films going into production in 2009 fell almost 20 per cent to 520 and is
forecast to fall again this year.
Screen Digest has slashed its growth forecasts for digital film sales by 30
per cent after the smaller-than-expected rise last year.
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