By R.T. Watson
Two of Hollywood's biggest studios are proposing to combine their North American home-entertainment operations, the latest sign of weakness in a segment that was once a bedrock part of the movie and television businesses.
Comcast Corp.'s Universal Pictures and AT&T Inc.'s Warner Bros. aim to form a joint venture tasked with distributing DVDs and Blu-ray discs in the U.S. and Canada, the studios said. The proposed deal, which is subject to regulatory approval, would include new and old movie titles along with TV programming.
The strategy highlights the medium's decline since the DVD boom of the early and mid-2000s, which peaked in 2005, when disc sales were strong enough to eclipse theatrical ticket sales.
U.S. DVD sales have fallen nearly 80% since that year's high point, when consumers spent $16.3 billion on the shiny discs, according to Digital Entertainment Group. Theatrical box-office receipts tallied nearly $9 billion that year. In 2019, Americans spent just $3.3 billion on all packaged home-entertainment products, according to the trade organization's preliminary statistics, versus a projected $11.4 billion in ticket sales.
Disc sales eroded under pressure from cheap rental options, such as Redbox and Netflix Inc.'s original disc-by-mail service, along with online sales and rentals like those offered by Apple Inc. Streaming services from Netflix and Amazon.com Inc. offered unlimited access to programming for a flat monthly fee -- and represented one more reason for consumers to forgo discs.
Digital home entertainment revenues in the U.S. surpassed sales from physical products in 2016. Last year digital sales in the U.S., which includes streaming and downloads, rose to $20.4 billion, according to DEG.
If approved, the joint venture would likely help Universal and Warner trim costs as both companies prepare to launch their own streaming services. The companies declined to say how much money they expect the arrangement would save.
Warner and Universal hope to have the joint venture operational by the beginning of 2021.
Additionally, the two studios want to enter an international licensing agreement to distribute each other's DVDs in various overseas markets. Warner plans to distribute its rival's titles in the U.K. and Italy. Universal would do the same for Warner Bros. in nations such as Germany and Japan.