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Consumer spending on digital video entertainment hits a record $1.2 billion

by Simon Bush

Australians have long been recognised as being among the biggest consumers of video entertainment content per capita than just about anyone in the world. However, this year their fondness for technology pushed the domestic video entertainment market past a new milestone - consumer spending on digital video overtook spending on physical video for the first time.

Australian consumer spending on digital video surged to $1.2 billion, up 55% on the previous year, via Pay TV Video- on-Demand (VoD), digital retail, digital rental or digital subscription.

Subscribers to over-the-top (OTT) subscription services grew by 53% to just under 6.7 million, generating a return of $850 million, according to IHS Markit.

The combined digital transactional movie and TV market increased by 6.6% to $281 million, across retail and rental.

Overall, the Australian video entertainment market delivered a solid performance to reach $947 million as 78 million titles were rented or purchased physically or digitally.

The total market, including physical, is now on a trajectory to reach $3.7 billion by 2021.

The importance of the milestone can’t be understated; consumers have sent a clear signal that they’re willing to move more digital content to the centre of their personal home entertainment experience – and that they’re willing to pay for it rather than steal it.

Furthermore, Australian consumers are rising up the global ranks of those most willing to rent and buy digital video content. Last year they generated more digital rental and retail transactions on a per-capita basis than consumers in the US and the five major European market territories at 2.1 per person; the next highest were UK consumers at 1.8.

Many categories and segments performed stronger than expected. TV series remained the largest category in 2017 but lost some overall value as the number of seasons of Game of Thrones released during the period fell from two to one.

Box office conversions remained strong and the decline of catalogue started to slow as older franchise titles start experiencing the promotional benefits from the release of their newer descendants.<

However, there was also an acknowledgement that the growing amount of original SVOD TV content becoming available was continuing to place pressure on TV in the digital space and that could be more could be done to give digital a boost.

While physical home video disc sales remain under pressure there is still evidence that consumers have an appetite for the high-quality viewing experience that Blu- ray (BD) and its successor, Ultra HD 4K Blu-ray (UHD), offer.

In 2017 the first green shoots of interest in the newer UHD format started to appear and BDs proved to be a bright spot on the physical home entertainment landscape. BD took its highest ever share of disc revenue at 17% of total market value.

In 2017 consumers purchased 5 million BDs to generate sales of $109 million. The 7% year-on-year decline in volume was much slower than for DVD, which was almost double at 15%.

Demand for BDs was strongest in entertainment categories that have traditionally suited the higher quality format. In new release BD sci-fi titles, including Disney’s Star Wars Rogue One and Guardians of the Galaxy Vol 2, generated the highest volumes in sale. The format also performed well in catalogue, staying in positive growth territory with a 22% share of sales driven by titles including the Lord of the Rings movie boxset and Planet Earth II.

The UHD format started to show its potential taking a 5% share of all Blu-ray volume selling 256,000 titles. The format also accounted for 7% of revenue generated in the Blu-ray segment; however that was primarily due to a significant price premium for the format of $30 compared to $22 for standard BDs.

The local home entertainment industry is making own efforts to increase digital transactional purchases and rentals. The strategy is still in its early stages but could involve more consumer education or better cooperation between distributors and digital platform operators.

The aim is to make transacting digitally “habitual” rather than “occasional”, said one industry executive. And it appears that the time for partisanship on the issue has passed – there has never been more cooperative activity on the sector’s part to develop the digital business, the executive explained.

We want to grow the digital transactional category fourfold. That’s really a category job that can be done as an industry but can’t be done by one studio or business alone. The consumption barriers are known but that there are a lot of positive steps being taken to address some of them.

If either strategy succeeds, then it could inject a new level of vibrancy into Australia’s home entertainment industry and put it on a trajectory for a new level of strong growth.

Simon Bush is CEO of the Australian Home Entertainment Distributors Association of Australia.