M+E Daily

At ESCA EDGE: Entertainment Supply Chain Execs Discuss Challenges To Developing Digital Markets

By Mel Lambert

Executives speaking at an opening panel session of today’s ESCA EDGE conference concurred that fragmentation — of everything from retailer practices to consumer habits — is among the most pressing challenges that the entertainment industry must overcome to establish new digital distribution models.

Fragmentation is even underway among entertainment companies themselves: while the industry agrees that physical and digital markets will continue to coexist, the balance between discs and digital products varies among individual studios, record labels, and game publishers.

“There is significant life left in physical media,” stated Dan Miron, EVP Worldwide Supply Chain Management at Warner Home Video. “We estimate that 67 percent of our business in 2014 will be from Blu-ray and DVD products,” with remaining third comprising digital media via rental and download.”

In contrast, Vinnie Freda, EVP Digital Logistics at Universal Music Group, said that that his record company is currently “seeing a 50/50 split between physical and digital,” with the latter format earning points among consumers for its portability and quality of experience. “But there are several factors,” Freda added, that are affecting further growth in the digital space.

For one, “there are too many incompatible [digital] file formats, whereas a Blu-ray or DVD can be enjoyed on any player. That adds a layer of unnecessary complexity,” Freda said. “Also, metadata is important. If you are selling something invisible you need to identify what you are sending to the retailer.”

Ellen Goodridge, VP Global Digital Operations and Product Development at Sony Pictures Home Entertainment, seconded Freda’s assessment. “Building the digital package should be a lot easier than it is,” she said. Also citing a lack of standardized file formats and metadata structures, Goodridge noted that “every retailer does something different.” That situation might be alleviated, Goodridge said, with the rollout of the UltraViolet standard for authenticating consumers’ access rights to digital content.

“We need more investment in the digital world,” cautioned Herb Daniel, SVP Domestic Operations at Paramount Home Entertainment. “We also have to identify the target consumers. Digital delivery is evolving with new customers and new retailers. We see an expanding volume of sales, but what are the costs? Efficiency is a key parameter.”

“Digital delivery costs have dropped,” noted Steve Dahl, SVP Global Operations at Walt Disney Studios Home Entertainment. But cost of distribution is only part of the equation; Dahl also observed that “the dynamics of the commercial relationships [that studios maintain with retailers and end consumers] have changed.”

The ESCA EDGE conference — produced by DEG: The Digital Entertainment Group and MESA — is being held today at the Beverly Hilton Hotel in Los Angeles. More coverage from ESCA EDGE conference sessions in Friday’s M&E Daily.

Mel Lambert is principal of Content-Creators.com, a Los Angeles-based consulting service.