Overall consumer spending on home entertainment dropped below $18 billion for the first time in years, with packaged media (disc) sales dropping nearly 11% from 2013 (from $7.7 billion in 2013 to $6.9 billion in 2014). The good news is that overall electronic sellthrough (EST) of digital media was up 30% in 2014 from 2013, though the actual dollar increase ($362 million) doesn’t make up for the loss in physical media revenue ($845 million). Still the major Hollywood studios claim they see an upside. From Home Media:

“We are encouraged by the continued growth of the digital business,” said Ron Sanders, president of Warner Bros. Worldwide Home Entertainment Distribution. “The video box office was down year over year, so that will clearly affect the total consumer spend, but digital ownership continues to expand.”

Mike Dunn, president of 20th Century Fox Home Entertainment, agrees. “Consumers are quickly evolving,” he said. “And we stay ahead of our consumers by growing engagement across digital platforms, fostering partnerships with top consumer electronics brands, implementing industry leading multi-platform marketing initiatives and investing in research and development to future-proof our products.”

I think there’s no doubt now that what we’re seeing is the start of a rapid shift from physical media (discs) to digital (EST, streaming, VOD) when it comes to home entertainment content. Further, I think it’s clear that whenever we talk about physical media consumers going forward, we’re going to have to acknowledge that they’re becoming the niche audience and not the mainstream portion of the market. The mass consumption of entertainment media is going to be digital. Period. It might take a few years yet to finally cross that threshold, but there is no doubt that it will be crossed. The days of mass physical media format success with consumers – like that of CD and DVD – are probably gone for good.

BUT… I wouldn’t make the mistake of saying that discs are dead, because I think that’s ridiculous. I do continue to believe that collectors and enthusiasts – at least those of the current generation, who grew up with vinyl LPs, cassettes, VHS, laserdisc, CD, DVD and now Blu-ray – are going to continue to want the quality and tangible comforts that only physical media can provide, at least for the next decade or two. That’s why I do believe that Ultra HD Blu-ray – provided the studios support it adequately – will find an audience. It’s just going to be a relatively small audience compared to the size of the market overall. And over time, younger generations of consumers – who’ve grown up with cheap/free and widely available streaming content via YouTube, Pandora, Netflix, Amazon Prime, and future services yet to be created – will come to dominate the consumer media market. What we must hope, and indeed demand, is that digital film, video and music quality continues to rise and that there will always be options available to consumers to easily and legally purchase, own, and back-up their content.

A couple other interesting notes from the DEG at CES 2015: HDTV penetration in the U.S. currently sits around 110 million households (compared to the total number of U.S. TV households which is estimated at about 120 million). And the penetration of Blu-ray playback devices in the U.S. (including set-top boxes and game consoles) is at about 87 million households. Note that these are updated numbers provided by the DEG just this afternoon. Here’s the quarter by quarter breakdown for the year:

U.S. HDTV Penetration (2014) as of:

Q1 – 99 million households
Q2 – 101 million households
Q3 – 104 million households
Q4 – 110 million households

U.S. Blu-ray Playback Device Penetration (set-tops and game consoles – 2014) as of:

Q1 – close to 75 million households
Q2 – 76 million households
Q3 – nearly 80 million households
Q4 – 87 million households

The following actually took place in mid-2014, but in anticipation of lossless audio digital music services like Pono, the DEG’s Producers & Engineers Wing officially approved a standard definition for what can be called High Resolution Audio, with agreement between the DEG, CEA, The Recording Academy and major record labels. From the press release:

High Resolution Audio is defined as “lossless audio that is capable of reproducing the full range of sound from recordings that have been mastered from better than CD quality music sources.”

In addition to this definition, four different Master Quality [MQ] Recording categories have been designated, each of which describes a recording that has been made from the best quality music source currently available. All of these recordings will sound like the artists, producers and engineers originally intended.

Those categories are:

MQ-P – From a PCM master source 48 kHz/20 bit or higher; (typically 96/24 or 192/24 content)
MQ-A – From an analog master source
MQ-C – From a CD master source (44.1 kHz/16 bit content)
MQ-D – From a DSD/DSF master source (typically 2.8 or 5.6 MHz content)

Also at CES this week, the DEG has announced the winners of its annual DEG Awards for 2014 (I was once again honored to serve as a judge for the Creative Excellence Awards portion). They are as follows:

The 2014 DEG Retailers of the Year:

DEG Hardware Retailer of the Year 2014 – Video & Audio Center
DEG Digital Retailer of the Year 2014 – Comcast
DEG Software Retailer of the Year 2014 – Walmart

The DEG Emiel N. Petrone Innovation Awards:

Best 4K Ultra HD TV – Samsung UN65F9000 4K Ultra HD TV
Best Hi-Res Audio Product – Sony HAP-Z1ES Hi-Res Audio Music Player
Best Connected HD Device – OPPO BDP-103D Blu-ray Disc Player
Most Innovative Home Entertainment Product – Sharp SD-WH1000U Wireless High Resolution Audio Player

DEG Creative Excellence Awards:

New Release on Blu-ray – Guardians of the Galaxy (Walt Disney Studios)
Classic Reissue on Blu-ray – Halloween Complete Collection (Anchor Bay Entertainment)
New Release on Digital HD – X-Men Days of Future Past (Twentieth Century Fox Home Entertainment)
Classic Reissue on Digital HD – Stop Making Sense (Cinedigm)
TV on Blu-ray – Batman: The Complete Television Series Limited Edition (Warner Bros. Home Entertainment)
Hi-Res Audio Download – Kind of Blue, Miles Davis (Sony Music Entertainment)
Concert Video on Blu-ray – Quadrophenia: Live in London, The Who (Universal Music Group)

All right, that’s enough CES 2015 news for today.

In release news this afternoon, while there’s no official street dates available for these titles yet, Into the Woods, Inherent Vice, A Most Violent Year, Whiplash, Unbroken, The Gambler, Annie, and American Sniper are all now available for pre-order on Blu-ray and DVD on Amazon.com. Surprisingly, Christopher Nolan’s Interstellar isn’t yet available for pre-order, though we would expect that to change very soon.

Finally today, a title update: Universal has officially released revised final cover artwork (see below) and extras details for their upcoming Blu-ray release of Studio Ghibli’s The Tale of the Princess Kaguya. In addition to video of the press conference announcing the completion of the film, and trailers and TV spots, the Blu-ray will include a feature-length documentary on the making of the film called Isao Takahata and His Tale of the Princess Kaguya. I finally had the chance to see Princess Kaguya over the weekend and it’s just magnificent – mature, intelligent, and absolutely gorgeous, like watching a watercolor painting come to life. Definitely check this film out when you have the chance.

Here’s more new Blu-ray cover artwork to close out today’s update…

And that’s all for now. Stay tuned!

- Bill Hunt