Logistics and the seventh art – Trilogy / Part 3
In previous posts about film logistics, we talked about the shipping and picking up movies to theaters and about the growing market difficulties for this distribution. However, the logistical saga of a title does not end there. It resumes shortly after the theatrical showing window, when the film is released on DVD, Blu-ray and distributed digitally on services. on demand and virtual stores. And it goes on forever, as we can still find the trilogy of The Godfather and other old movies at various branch stores. Post-screening receipts are a considerable part of the total amount that the film earns.
Although sales on physical media have been falling in recent years (more on that later), it still seems like a market far from extinction. The top 100 best-selling titles in the United States in 2015 totaled more than 140 million records sold. In 2014 alone, The film Frozen, for example, grossed over $334 million from DVD and Blu-ray sales in the US alone. And if this market multiplies the revenues of successful films, it also helps those that suffered big losses at the box office, like Waterworld: The Secret of the Waters to pay for themselves, which shows that it's a good idea to have the titles on the shelves.
Figure 1 – Several years later, and thanks to DVD sales and other revenue, Waterworld (1995) finally started to turn a profit
Source: Universal
The sheer number of SKUs is perhaps the industry's biggest logistical challenge, as around 650 unique titles are released annually in each format. There is also the variety of packages in which each film can be purchased, such as DVD, Blu-ray, DVD + Blu-ray combo, Blu-ray + Blu-ray 3D, Blu-ray + digital copy, all of the above, editions specials, collections, etc. Such a variety of options makes transport and packaging operations difficult for manufacturers and distributors in the area, such as Technicolor, as well as inventory management for retailers.
Figure 2 – Technicolor DVD and Blu-ray distribution center
Source: Technicolor
It is no surprise, therefore, that it is common to have hundreds of rare titles, very hard to find, and several others piled up in shelves at very low prices. We see both inventory costs and the myriad problems associated with break up jeopardizing the profitability of the chain.
Figure 3 – Stranded DVDs being offered
Source: Personal archive
The difficulty in transporting and storing discs is not only present in companies that sell films, but also in those that rent them. Calm down, you didn't read wrong. Rental companies are not dead yet, at least not those that made their logistics more efficient.
Netflix and DVD rentals
You're probably familiar with Netflix, the biggest streaming service streaming of films and series in the world, with more than 65 million subscribers. What some don't know is that before it became the nightmare of cable TV operators, the company was founded in 1997 as a DVD rental company by mail. This service is still used by just under five million people in the US, although that number was once more than 20 million. Despite this immense drop in the number of subscribers, the company refuses to abandon this niche of customers who prefer to watch movies on disks and dedicate themselves exclusively to the large market of streaming. Instead, to remain profitable, Netflix's DVD division invests in new technologies to reduce costs and improve service to build customer loyalty.
Figure 4 – Many people still receive films at home in envelopes like these
Source: Netflix
One of the big changes was the greater automation of the 33 distribution and collection centers for DVDs. With the introduction of machines like the “amazing arms”, which automatically collects, cleans, and verifies that returned discs are working, CDs can handle up to 3.400 DVD returns per hour, five times the manual process. The number of employees needed to handle discs has dropped from more than 100 to 25. The company has more than 93.000 titles on DVD, plus thousands more on Blu-ray, and delivers within one day to 92% of customers. its subscribers, a level of service that keeps the division active, and is only possible thanks to greater logistics efficiency.
Figure 5 – Netflix DVD Distribution Center – Handling processes have been automated to reduce costs and improve service
Source: doobybrain
Digital distribution, Omni-channel and trends
We've talked a few times here on the ILOS blog about Omni-channel. Being products of a digital nature, movies easily jumped on this trend, and today it is possible to buy or rent major titles digitally on any device that has a screen. Huge cinematic libraries are available at one click and ready to be downloaded or even viewed instantly by streaming services. streaming like the aforementioned Netflix. The market has seen explosive growth in recent years, and the tendency is for it to continue to take up more and more space, with an increase even in the number of productions that are released exclusively through digital distribution channels.
Figure 6 – Amazon video, one of many video on demand services today – store sells its movies both on discs and digitally
Source: infomediadigitals
That's not to say discs are going away any time soon. As mentioned earlier, many movies are released in bundles that include both disc and digital copies, a product that nicely spells out consumers' desire to watch their movies wherever they are, and still have the boxes on their shelves. In addition, a new media format, 4K Ultra HD, is already on the market, with titles such as Kingsman – Secret Service. It certainly won't ease the problem of the previously mentioned SKUs.
Figure 7 – Kingsman: The Secret Service (2015) in a bundle that includes Blu-ray, digital copy and the new 4K Ultra HD
Source: 20th Century Fox
Conclusion
Over the course of three posts, we've seen how logistics plays a key role in the film industry, allowing the great artistic productions we appreciate to reach us. We could see the difficulties of the area when inserted in a gigantic and extremely dynamic market, with new formats both in cinema and in home entertainment and for larger audiences. It remains to be seen how these changes will affect the logistics of the seventh art. And if Leonardo di Caprio will finally win the Oscar this time.
References
<http://deadline.com/2015/01/home-entertainment-spending-fell-2014-deg-1201342148/>
<http://www.the-numbers.com/home-market/bluray-sales/2014>
<http://www.the-numbers.com/home-market/dvd-sales/2014>
<http://www.the-numbers.com/home-market/packaged-media-sales/2015>
<http://deadline.com/2013/08/isnt-it-time-to-take-waterworld-off-the-all-time-flop-list-557797/>
<http://www.theguardian.com/media/2014/jul/22/netflix-dvds-mail-subscription>
<http://www.homemediamagazine.com/studios/sku-ed-perspective-26642>
<http://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/>
Fernando Chalréo
He has been working on consulting projects in Logistics and Supply Chain for 5 years, with experience in companies in the consumer goods, retail and food and beverage sectors. Types of projects already carried out: Sales & Operations Planning, Inventory Management, Network Planning, Business Process Review, Logistics Indicators and Transport Management
