CES: Studio Execs Bullish on Digital Growth

CompleteCoverage: CES 2013

Studio were very optimistic about the prospects of their
digital distribution business, noting that digital revenues were finally
beginning to replace the lost revenue from DVDs, Blu-ray and physical media in
recent years.

Mike Dunn, worldwide president at Twentieth Century Fox Home
Entertainment, said that "we are at very critical point. It looks like a
renaissance period," thanks the huge number of CE devices connected to the Internet
that are capable of receiving video.

Even better, he and other studio executives said that they
had not seen any cannibalization of their physical media sales by releasing
some titles early for digital purchase at a price under $15.

"In the first three or four we haven't see any
cannibalization," Dunn added, noting that the early releases in digital helped
them attract new buyers. "13% hadn't been in digital before and 17% who
purchased had only been renters," he noted.

"It is like Alabama right now in the first quarter against
Notre Dame," he quipped, during the "Conquering the Film Distribution Maze"
panel at the Variety Entertainment Summits at CES. The panel was moderated by
Deborah Bothun, U.S. advisory leader for PricewaterhouseCooper's entertainment,
media and communications practice.

David Bishop, worldwide president, Sony Pictures Home
Entertainment, said that they had released about 20 titles for early digital
purchase and "had not seen any cannibalization."

"It is a very exciting time right now," said Thomas Gewecke,
president of Warner Bros. Digital Distribution. "[2012] was the first year
where we have seen digital really make up for changes in physical sell through."

The fact that digital distribution had not been making up
for sales of physical media has in recent years created a number of concerns about
the future of the major studios, who had been so reliant on DVDs for funding
new films.

Looking forward Gewecke also pointed to the growth in the
UltraViolet initiative as providing additional grounds for optimism.

He said that the effort, which allows consumers to access
digital copies of disks they've purchases on multiple devices via the cloud,
has already attracted over 9 million users.

Studio executives expected that number to grow as the year
goes on, thanks to increased promotional efforts. During CES, the studios
announced promotional alliances with CE manufacturers that would make 10 titles
available for free to people who purchased certain new TVs or Blu-ray players.

Studio executives also stressed that digital distribution is
providing them with a huge amount of information about consumer habits that
would be important in marketing and helping consumers discover new titles.