Andrew Blake was among the first video legends to shift primary focus from DVDs to the Web. In January 2007, he launched AndrewBlakeHD.com, calling it his "new business model." At the time, he said he was giving up DVD production in favor of making high-definition video clips available via downloads from the website. "I'm so happy," Blake said back then. "It eliminates all of the middlemen except for the server. We've had so many problems with distributors, piracy and international rights."
Less than one year and several headaches, hurdles and revenue declines later, the award-winning producer-director of high-end erotica changed his mind after discovering that by eschewing DVD for the digital domain, he simply had traded one set of woes for another. "DVDs are being pirated, and Internet users just want to have everything for free," he said in November. "I still think [digital distribution] is the wave of the future, but brick-and-mortar keeps us alive.
"I would love to [go strictly digital], but I can't at the moment. The money just isn't there."
That's not exactly news to Vivid Chief Executive Officer Steven Hirsch. "There's a lot of money to be made out there in pay-per-minute movies [online]," he said. "The problem is [that] the theater sites are making all of it. We used to wholesale DVDs for $12 [each]. It's very difficult to make money when you're getting 25 percent of 7 cents a minute." At that rate - which is fairly common at video-on-demand sites - each buyer who would have paid $25 or more for a 90-minute DVD only has to pay $6.30 to view the entire movie online. Of that total, the producer typically sees only about $1.58, Hirsch said, and even cumulatively, that won't generate enough revenue to produce a new title. Therefore, he said, "I don't think [abandoning DVDs] makes sense at this point."
Worse, Hirsch said, is that over the past couple of years, he's witnessed power shifting from content producers to content distributors, especially in the digital realm. Part of the reason is that although traditionalists have kept pace with technology in the brick-and-mortar world, they haven't done quite as good a job of staying on top of digital trends. In essence, they feel overwhelmed - perhaps even a bit frightened - by the brave new world on the Web, and digital mavens are not above taking advantage of that.
"A lot of producers are at their mercy, and it's only going to get worse," Hirsch predicted. "Next, [digital] distributors will reduce payment models." In addition, audits of sales and revenue shares are difficult to accomplish because the only figures available are those provided by the online distributors themselves.
"What we need to do [as an industry] is take a step back and look at the bigger picture," Hirsch advised. "In the long term, if there's no money being made by producers, there will be no new product to distribute."
Another reason not to abandon DVDs, according to Hirsch, is producers may miss what he thinks is a developing trend. "Features are starting to come around again, mostly because there aren't a lot of them out there," he said, remarking about the not-particularly-profitable tendency producers have of "chopping up" their content into small scenes for online consumption. "Features and extreme content are cyclical. What we're hearing from consumers right now is, ‘We want happy, fun sex [in a longer format].'" Some consumers can't scratch that itch with individual scenes, Hirsch said, but some can, so "companies must decide whether to sell movies online by the scene - which is less profitable - or by the whole movie." Vivid has chosen to sell its movies only in their entirety and for a price that, while it may be less than retail, allows the studio at least to amortize its production budgets over more than one channel.
"Bottom line: It makes absolutely no sense to abandon DVD," Hirsch said.
