How MVPDs Can Grow EST Sales
With multichannel video programming distributors eyeing Electronic Sell-Through (EST) as a new revenue opportunity and a means to increase subscriber stickiness, an increasing number of marketers and strategists are focused on the key question: How do I maximize my EST sales?
The three primary paths to driving EST sales are:
1) Convert traditional (physical) buyers over to digital video purchasers;
2) Compete for existing digital buyers, and convince them to switch; and
3) Promote increased purchase activity among your existing digital customers to drive up buy rates.
It’s tempting to focus on existing digital video buyers, such as iTunes users. After all, they are tech-savvy and already engaged. However, consumers are fiercely loyal to their chosen digital ecosystem. Once a customer is a committed iTunes user, complete with iPhone, iPad and Apple TV, it very difficult to draw that user to a new platform. Also, the more movies the consumer accumulates in a digital library, the higher the switching costs.
The better opportunity for MVPDs is to target the consumers that still buy physical videos. There are currently on the order of 12-15 million U.S. consumers that purchase digital video to own (EST). Meanwhile, there are well over 100 million consumers still buying physical video.
MVPDs have a particular advantage in capturing these traditional physical buyers. While EST buyer demographics naturally align with over-the-top providers, the demographics of physical video buyers align more directly with the MVPD subscribers. Plus, the set-top-box purchase experience doesn’t rely on new users buying and setting up a streaming media player or even a smart TV.
While MVPDs have key advantages in converting physical buyers, they still face the common challenges of changing the behavior of physical buyers. The primary challenges are awareness and confidence. Many physical buyers aren’t aware of the option to buy digitally or simply don’t care. Those that are aware may not be comfortable with the concept of digital ownership, particularly cloud ownership. Successful campaigns will focus on this education process. Finally, beyond just the baseline barriers, digital retailers have to become better at title-level merchandising to compete against the physical retailers, like Wal-Mart, Target and Best Buy, who have this part mastered.
There is significant upside potential for MVPDs. Verizon and Comcast already appear to be driving up overall digital sales. The Digital Entertainment Group (DEG) reported that EST sales are up more than 37% in the first half compared with 2013. Digital sales of new-release movies were up 90% in the same time period. These results point to MVPDs gaining momentum in the market and the positive impact of early release windows on EST.
While converting physical buyers is a first path to growing EST revenue, the three paths identified above are not mutually exclusive. Once you capture a new EST customer, building repeatable behavior is critical to growing buy rates and stickiness.
Mark Kirstein is a seasoned market intelligence executive in the media, Internet and technology markets. Contact him at firstname.lastname@example.org or via www.ntkinsights.com.
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