Video-on-demand might not yet be the biggest threat to traditional channels of home entertainment like video stores, but already exciting new developments are bringing the industry closer to where this will be the case.
The first major player in the video-on-demand arena, DStv’s BoxOffice already has 300 000 rentals a month to its premium subscribers through PVR. The possible market for BoxOffice is currently thus limited to the amount of premium DStv subscribers that exists and the physical storage limitations of the PVR that caps the amount of titles offered at 15.
This is all going to change in September.
John Kotsaftis, CEO of DStv Online, told Moneyweb that in September the company is planning to launch an online BoxOffice where you will be able to rent movies and download them onto your PC or Mac, paying with your credit card. Between 60 and 70 titles will be available.
You will download the title and will have access to it for 48 hours before the license to watch expires. It will utilise BoxOffice Wallet where a voucher system will also be in use. The system was tested out with a beta version earlier in the year.
Suddenly the potential market grows exponentially from the more than 500 000 decoders that are currently in the market to everyone who has online access and relative bandwidth.
Kotsaftis says that this is the first step in DStv Online’s strategy to eventually offer content across all the platforms – including smart devices such as iPads and other tablets.
While Kotsaftis does not believe that video-on-demand is currently the biggest threat to DVD and video stores, he says that in the long-term the only restriction for growth in the market is the penetration of internet in South Africa and bandwidth issues. Currently video stores still have a lot more content, providing more options to the consumer.
Once this is solved all players in the home entertainment industry will face competition, especially the traditional channels such as DVD rental.
“It’s a factor of internet penetration,” Kotsaftis said.
Michael Caradas, CEO of Next Entertainment, a privately owned company that distributes home entertainment products in South Africa, says that he is not blind to the fact that there are challenges to his business, but that it will take a couple of years for digital content to become a real threat.
He said Next Entertainment is looking at its business model to adapt and is also working with the major Hollywood Studios to see if it can play a role in the digital sector.
“If we move into that space it would probably be more in a facilitating role between the studio and the digital distributors,” he said.
Kotsaftis said a big challenge for digital home entertainment players would be to keep up with user expectations.
“Once they start seeing these services offered, like BoxOffice online, they will want to be able to access the content at any one time on all their devices.”
Kotsaftis said that all the players – the service providers, the studios, the distributors – will have to work together to make sure that the content can be accessed across all the platforms.
Caradas said that the digital space is still relatively new to the big studios, but that they see the value in it as their share per transaction will be higher than with physical DVD rental.
Another benefit of BoxOffice could come in the form of another outlet for local producers, says Kotsaftis.
Although digital distribution will pose a threat to Next Entertainment, Caradas agrees that more support is needed for the local film industry.
“We invest quite a lot in local films and work with local producers. If they are getting some support from us and some support from BoxOffice in the long term this is good to achieve the critical mass in the industry to achieve success,” he said.
BoxOffice will not remain the lone player in the arena for long. Avusa’s acting chief executive announced in their results for the year ended March 2012, that the arrival of digital terrestrial television provides the group with opportunities to partner with technology companies in the provision of video-on-demand.
“There will be many new entrants in this space and many new players. In the end it is good for the customer. It will make our lives interesting and give competition, but we are up for it,” Kotsaftis said.
He admitted that DStv Online also sees piracy as a threat and that as soon as the internet bandwidth explodes, piracy will also proliferate.
“I do believe, however, that if the legal course is offered and at the right price and you make it accessible, there is value in that service and people will use it,” Kotsaftis said.