Subscription VOD Earnings Do Not Offset Falling DVD Sales

Subscription Video On Demand services are helping ease the film industry’s pain regarding slumping DVD sales. But is it happening fast enough? Speaking at the Film Finance Forum West, Eli Baker, a partner at Hemisphere Capital Management, noted that determining whether the industry is making that money back dollar-for-dollar is a difficult thing to pinpoint — though he does say there’s reason to be optimistic.

These streaming services “are becoming a more vital resource for financing, especially in the independent sector,” writes Variety. “But with only a few years of historical data from SVOD players like Netflix, it’s hard for both financiers and film execs to quantify just how many digital dimes they can rely on. And with many financiers more risk-averse than before the 2008 financial collapse, there’s less of an appetite to lend or invest against unpredictable cash flows.”

According to Larry Wasserman, CFO of DreamWorks, while the digital platforms hardly factored into financial models a decade ago, they could now help a “good title” earning upwards of $10 million. “But, Wasserman also pointed out, those platforms are ‘definitely not off-setting the decline on DVD,’” writes Variety.

If it ever were to catch up, it would likely take years of business change. “That means that Hollywood has to adjust its cost structures to account for revenues that have changed drastically since DVD’s heydey,” according to the article. And it needs to begin by fixing production and marketing budgets, along with tightening costs within talent deals and P&A.

“You really need to adjust the cost side of the business,” said Scott Parish, CFO and COO of Alcon Entertainment. “You can’t rely on an opening weekend anymore… especially for younger-skewing movies… the word gets out, and you see the falloff happen a lot quicker.”