Electronic Sell Through (EST) is clearly growing, generating revenues of $1 billion in 2013 according to the Digital Entertainment Group, a jump of 50% over 2012.
As Comcast Corp. (Nasdaq: CMCSA, CMCSK), Verizon Communications Inc. (NYSE: VZ), and other pay-TV providers begin offering subscribers the opportunity to purchase movies they love before they are available via DVD, the opportunity for everyone across the value chain will only increase.
Verizon showed early on that offering movies for purchase during an early release window -- ahead of DVD availability -- could pay off. Then, at the end of 2013, Comcast beat out both iTunes and Amazon with sales of Despicable Me 2, showing that MVPDs might just have an advantage when it comes to selling digital copies of movies subscribers love.
This past spring, parents of preschool-aged children had the opportunity to buy a digital copy of the movie Frozen weeks ahead of the official DVD release via both service providers. But many wondered what would happen to their digital copy of the movie if they moved, changed providers, or even upgraded their set-top box.
For those of us in the industry, EST's value is clear. The economics of digital versus physical copies of premium content make sense. And for younger viewers and power users, digital copies are easy to understand and early release windows make purchasing electronic copies very attractive. But the average consumer may still have some lingering questions about how it all works.
- If I buy the movie via my set-top box, can my kids watch it on their iPad at grandma's house in another state? I'm in grad school, and I want to buy this movie, but what if I move after I get my degree and have to switch cable providers? Will I still be able to watch it?
Industry initiatives like Ultraviolet, services like Flixster, and apps like Disney Movies aim to make it easy for consumers to purchase and keep their digital copies, but many seem stumped when it comes to movies purchased from their pay-TV provider. The good news is that both Verizon and Comcast are also making it easy for consumer to purchase and keep their digital copies -- even if they discontinue their service.
Pay-TV providers have a real advantage when it comes to EST -- the impulse buy with a pre-qualified entertainment enthusiast. Turning on the TV and seeing a banner at the bottom offering a digital copy of Lone Survivor before it is available elsewhere can be very compelling for a fan of the movie. And the ability to buy it with the touch of a button makes it very easy. But how many more copies of the same movie could studios, networks, and service providers be selling if consumers across demographics really understood how it works?
With the real estate they already have in the consumer's home, pay-TV providers are in a great position to increase their platform revenue and sales of digital copies through a sustained, proactive consumer education program. Will they take it on? If they don't, Apple and others will continue to sell digital copies of content that consumers know they can take with them on their devices.
As pay-TV providers meet the technical challenge of making the EST experience as easy and compelling as other more established retailers have made it, they must ensure they clearly communicate all the features and benefits. When they crack that code, they will be very tough to beat.
— Laurie Lawrence, CMO, Vubiquity