Digital distribution, although a threat to revenue, will boost profit margins.
New York, NY (PRWEB) January 21, 2014
The Movie and Video Distribution industry has suffered in the face of external competition, as digital technology enables production studios to distribute their own content and bypass industry operators. Moreover, per capita disposable income has fallen in the past five years, suppressing growth in key markets, such as retail stores and movie theaters, and ultimately lowering demand for distribution services. Consequently, industry revenue is expected to decline at an annualized 1.7% to $2.0 billion in the five years to 2013. Curtailed by distributor bypass and declining sales of physical copies of media, revenue will drop an additional 1.3% in 2013. According to IBISWorld Industry Analyst Darryle Ulama, “To support revenue and offset waning demand for distribution, the industry has increased its reliance on existing libraries of content and independent productions.”
Digital platforms that allow consumers to indefinitely access media content have risen in popularity, due to their convenience and wider selection offerings. These platforms have the potential to boost consumption of movies because it limits the sharing of media content, offering a source of growth for the industry. However, digital distribution will also limit industry growth because it encourages distributor bypass by allowing studios to easily provide content directly to consumers. As bypass accelerates, the number of industry enterprises is expected to decrease at an annualized rate of 4.8% to 384 over the five years to 2013. Distributors have consolidated their operations in an attempt to broaden their value-added service offerings. Illustrating this trend, RLJ Entertainment acquired Acorn Media Group and Image Entertainment in 2012 to become a major industry operator and appeal to a larger market.
In the five years to 2018, growth in demand for TV and media content will slightly counteract distributor bypass. “Furthermore, the continued trend toward digitalization, although a threat to revenue, will cut time and costs for distribution companies, helping to boost profit margins,” says Ulama. Increasing media outlets, such as on-demand and online television, will also offer new opportunities to distributors, but will spur competition. Industry revenue is expected to grow slowly during this time period.
This industry has a low level of concentration, which can be explained by the fragmented and private nature of distributors that rely on industry contacts in niche and local markets. Distributors are heavily dependent on content produced by movie and TV studios, and must set up long-term contacts in cinema, TV broadcasting and retail industries to make sales. The personal nature of these contacts, combined with the costs of acquiring content, often limits distribution companies to a specific region or to a specific genre of content. In addition, the establishment of, and increased reliance on, in-house distributors of major movie and TV studios have further limited the content available to independent distribution companies. Nonetheless, consolidation is leading to an increase in the market share concentration. For example, RLJ Entertainment Inc. became a major company in 2012 after acquiring two prominent industry players: Image Entertainment Inc. and Acorn Media Group.
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IBISWorld industry Report Key Topics
The Movie and Video Distribution industry primarily circulates audiovisual works to cinemas, TV networks, other exhibitors and stores. The industry excludes movie and TV distributors that are also involved in audiovisual content production and retailers, rental stores and merchant wholesalers that distribute prerecorded physical media and music distributors.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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