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Industry Embraces On-Demand DVDs - Broadcasting & Cable

Industry Embraces On-Demand DVDs

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Will “on-demand” finally be the next buzzword in the TV-on-DVD marketplace?

The conventional marketplace for popular television product on DVD is slowing down. So studios are pushing lesser-known shows into the on-demand DVD world, where consumers can order DVDs burned to order.

Last week, Viacom's Nickelodeon, Comedy Central, MTV and VH1 licensed Amazon.com to sell DVD versions of some of its animated TV series via on-demand ordering. Amazon.com's CreateSpace unit will duplicate DVDs to fill orders as they come in.

While on-demand isn't geared toward the big titles that can bring upward of half a billion dollars in revenue, it is an emerging revenue stream, albeit a perfect example of the long tail theory. It services a relative trickle of buyers, but could also be a proving ground. “There is the possibility that if any title scales [with unexpectedly large sales] we could distribute into the national retail market,” says Alan Fergurson, VP of home entertainment sales for MTV Networks Music & Logo Group.

Last week, Amazon began selling a slew of on-demand DVDs for titles such as MTV's Newport Harbor and Celebrity Rehab With Dr. Drew, and Nickelodeon's Hey Arnold!

A CreateSpace deal with HBO, which dates back to June, covers documentaries such as When I Knew. “On demand is definitely meeting, if not exceeding, our expectations,” Henry McGee, HBO Video president, said in an e-mail.

Disc manufacturing costs are relatively high for big-title box sets, but on-demand manufacture offers big savings because there are no warehousing costs and no returns from stores, both of which mass-produced DVDs shoulder. Also, there's little upfront investment since DVDs are created as orders trickle in.

On-demand DVD kiosks were expected to be widely tested in 2008, but that looks like it won't begin until 2009.

On-demand is usually limited to single DVDs—no multi-disc packages. Prices range from $10-$25 at retail. One reason for the recent groundswell is improved anti-copying encryption, say executives.

But the big money is still in new television hits, which are becoming fewer and further between. There also may be a temporary stumble because broadcast networks have relatively few new scripted series due to the recent writers' strike. Industry sources say that current hit scripted series typically sell high single-digit millions or tens of millions of dollars in DVDs domestically per season.

The top-selling TV series of all time in packaged video is Sex and the City, which collected $490.3 million in net distributor revenue from U.S. sales for all seasons as of end 2007, estimates Adams Media Research. Next are Friends, The Simpsons, Seinfeld and Family Guy. “Some of the biggest shows are creeping up to half a billion in lifetime video sales,” says Jan Saxton, analyst with Adams Media.

Perhaps the most surprising aspect of TV series sales on DVD is that classics are not big sellers. Adams Media says the only classic series to crack the Top 25 sales list is M*A*S*H, which ran on CBS from 1972-1983.

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