DVD to VOD: Video Content Goes Digital

Nikki Tang
With a drop in DVD sales and rentals and the increasing popularity of video-on-demand services, numerous companies in both the adult and mainstream entertainment industries are embracing the trend by offering more content online.

Mainstream giants Netflix and Blockbuster, among many other companies, currently offer downloads and streaming plans and they continually update and expand their policies regarding online content. Netflix, for one, is planning to offer streaming-only monthly subscriptions in 2010, and the Internet Movie Database recently announced a plan to offer streaming for all 1.3 million titles in its index.

"We want to put a play button on every single page of [the Internet Movie Database]," founder Col Needham said. "Our strategy is to allow people to click the play button and they will be able to legally watch and entire movie for free."

The adult industry also has jumped on the bandwagon, with a growing number of companies offering their content online for free or by subscription. Some of the top professionals in the industry, including SugarDVD CEO Jax Smith, are looking to online content to make up for a drop or flattening in DVD sales and rentals.

"We added a pay-per-minute VOD service to our site about two years ago, and then [a few] months ago, we added flat-price streaming on our website, which allows people to buy an entire movie for a fixed price," Smith told XBIZ. "I don't feel like VOD has cannibalized our rental service. With DVD rentals, we saw a flattening out in the last quarter. But VOD has made up for the decrease, so we were happy we added VOD when we did."

WantedList, a rental website based in Van Nuys, Calif., also features a VOD service in addition to its DVD rentals.

"We've never seen our site as just a DVD rental service," WantedList founder Anh Tran told XBIZ. "When we started rentals were our primary business, but we always knew that the physical disc would be eliminated by other delivery methods. So we've always seen rentals as just one way to get content out to our customers."

Bill Treadway, president of newly launched distributor TriadReleasing, agreed.

"Electronic delivery is going to be the method of the future," he told XBIZ. "As a man, I understand the need for instant gratification, and it's just so easy to go online and be able to choose from hundreds of different genres of anything that you're into. It's anonymous, it's quick and it satisfies needs right away. And there's not a physical DVD that you have to hide from the wife and kids."

Treadway added that TriadReleasing plans to offer all methods of content delivery, including both DVDs and VOD services.

Although the adult industry has experienced "an industrywide drop in DVD sales," according to Treadway, the mainstream industry also has been affected. Blockbuster, for one, suffered a reported loss of $360 million in its fourth quarter.

Many, including Treadway, claim such losses are a result of a combination of factors rather than just VOD.

"People like to blame the fall in DVD sales on something," he said, "but I don't think it can be completely blamed on Internet VOD."

Fox News attributed Blockbuster's "financial bind" to the fact that the company's "7,500 stores around the world have been losing their appeal amid an array of alternative movie rental options that deliver entertainment through the mail, cable and satellite TV services and high-speed Internet connections."

Not everyone is in such a bind, however. Smith said SugarDVD, based in Chatsworth, Calif., has actually seen several benefits, including a slight growth in sales, because of its VOD service.

"VOD seems to have helped the site with the extra ads we're running on VOD," Smith said. "We're running two ads for the same movie — one ad for VOD and one ad for DVD — so we've gotten more exposure. We're seeing an overall increase in traffic. And VOD covers the cost of ads, so we're able to have more ads without spending more money per se."

Smith, Tran and Treadway all said they didn't consider the increasing popularity of movie streaming and VOD an immediate threat to the adult industry.

"I do think that over time, you're going to have better ways to deliver content, and naturally, people are going to gravitate to those superior ways," Smith said. "But VOD is in some ways not superior to DVDs by mail right now. However, VOD could make some improvements over the next five or six years. We still have plenty of people renting by mail right now, though. There is a huge number of people who are still not renting movies online yet, so I always try to remember that many people are slow to adopt new technology."

Tran said the online trend is "just part of the natural evolution of business. As our customers get more used to watching movies online, they'll start using one service more than the other. However, what's important is that they're still our customers. I guess the answer is that if a company looks at its delivery method as evolving, then one doesn't really effect the other."

Since the DVD-to-VOD transition is still evolving, consumers aren't going to change their preferred method of content delivery overnight. As such, many, including Netflix CEO Reed Hastings, claim that offering content in both physical and digital form is an effective business tool.

"Right now, the power of the service is that hybrid message – the best of both," Hastings said. "So we're putting most of our wood behind that. But we recognize at some point in the long term, the streaming will be good enough that an appreciable number of people will find streaming is all they need."

Whether mainstream and adult industry professionals opt to continue their expansion of Internet content and offer more downloads and streaming plans or focus on their physical content and put more effort into revamping their DVD quality and features, Treadway said it's important to note that "electronic delivery is not going anywhere. I think it's going to continue to grow. And as a businessman, I think it needs to be embraced rather than resisted."