Australia’s film and home entertainment distributors face years of declining revenues and profits, according to a new report.
Market researcher IBISWorld predicts distribution revenues in 2014-2015 will drop by 3.6% to $1.8 billion, with a profits at 8.3% or $150.8 million.
Revenues are projected to decrease by 2.5% per year to $1.6 billion in 2019/2020 with profit margins declining to 7.9% , according to its Motion Picture and Video Distribution in Australia report.
“Industry declines have mainly been due to weaker DVD and Blu-ray disc rentals, sales and prices, while legal and illegal download volumes increased strongly,” the report says.
“The industry will continue to benefit from the introduction of new digital TV and multichannel services, due to rising demand for film content. However, this may be partly offset by constrained demand from pay-TV, as digital services will increase competition.
“While video- on-demand services may support demand from pay-TV operators, this will likely be at the direct expense of DVD demand from retailers and video rental stores. Other new distribution channels include legal movie download websites, tablets and gaming consoles.
“Overall, the industry will remain dominated by the major global film distributors over the next five years. The number of independent distributors is expected to continue declining, through mergers and acquisitions.”
The report estimates retailers generate 40.2% of the industry’s distribution revenues with cinemas at 22.5%, sales to TV broadcasters at 22.3% and 11% in direct sales to consumers (primarily iTunes). Illustrating the malaise in the DVD rental market, it reckons revenues from video stores contribute just 2.8%.
Film and TV product classified as M is the biggest selling segment with 34.5%, followed by PG at 22.7%, MA15+ at 22.5% and G at 15.3%.
In terms of market shares, IBISWorld has Warner Bros. Entertainment as the leader with 18.4%, which ignores the fact that WB is transferring its home entertainment distribution to Roadshow Entertainment on March 9.
It estimates Roadshow’s share at 16.7% followed by Sony Pictures/Universal Sony Pictures Home Entertainment at 10.9% and Fox at 6.6%.