The steady decline in physical (DVD and Blu-Ray) sales has forced movie and TV distributors to try new strategies in the digital transaction sector to bolster sales and stem the outflow of cash from the home entertainment market.
Premium pricing of new-release content relative to older “catalogue” titles is an important distinction to make in any analysis of pricing models. Ampere’s research indicates that for HD digital retail content, studios and retailers have been better able to contain the erosion of pricing over the product’s lifespan. This is in stark contrast to physical products, particularly DVDs, which show a more dramatic drop-off in pricing following the initial release period. Inventory constraints, combined with fixed replication and distribution costs are issues not typically faced in the digital sphere.
Although initially starting at lower price-points than their physical counterparts, digital products typically maintain greater price stability longer term. By the time a movie title is 15 years old, prices for digital HD have dropped just 3%, compared to DVD prices which have dropped 35%. The opposite effect is observed for prices of a typical TV Season. Over the same 15-year time period, average digital TV season prices increase by 13%, while physical TV boxsets prices drop by almost 50%. The flexible nature of packaging digital content means that content providers can easily and efficiently offer multiple boxset configurations for TV content – a clear benefit over physical media, and a potential mechanism to better upsell TV-based content.