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New Research Report: Online Movies

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January 29, 2014 ( newswire) The raw economics of online movie distribution are compelling. Depending on your perspective they might also be exciting, or frightening:

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In 2014, movie producers worldwide will earn revenues of USD 29.6 billion from home video (DVD / Blu-ray) and all forms of TV licensing. Movie producers could earn the same amount by licensing all of their movies exclusively to online service providers - provided that these companies persuaded 45% of the world's broadband subscribers, or 348 million users, to each pay USD 15 a month for online access to movies.

While 348 million users might seem like a huge number, it is less than half of the worldwide installed base of Pay-TV subscribers (cable TV, satellite TV and IPTV).

According to this hypothetical business model, for USD 15.00 a month, subscribers would gain instant online access to all movies that have ever been produced, along with new releases as they come out. They would also benefit from a range of value-added services such as recommendation & discovery features, social functions and more. And everything would work on all their connected devices.

We think this would be a pretty good deal for users, for just USD 15.00 a month, that is.

As far as movie producers were concerned, because user demand for movie content would be unchanged (although it would be met differently to today), movie producers would be able to earn the same revenue as they do today and they would also be able to enjoy the same level of profitability. Movie producers would keep on doing what they do best, which is producing great movies and they would keep producing those movies at least in the same volume as they do currently, because their industry would be growing - just as it has done in the past.

We think most movie producers would be more than happy with this.

In this extreme view of how online movie distribution could work, the supply side (movie producers) and the demand side (movie viewers) would be unaffected by the internet. The impact would be felt on the distribution part of the movie industry - the part that sits in the middle.

To us, it is clear that there is a sound economic basis for online distribution. Because of this, it is also clear that the internet will precipitate a generational shift in how movies are distributed for non-cinematic viewing.

Click here to read the full report and learn more about how the internet is transforming movie distribution.

Andrew Sheehy
Chief Analyst
Generator Research, Ltd.
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