As I was browsing through the Netflix Website to decide on movies to watch for my customary Friday late night movie marathon, I could not stop myself from thinking about how the home video business has changed dramatically over the last few years. The link(s) in the PDF/Presentation(s) is(are) not working due to some changes in the website. Please refer to the new link(s) http://bit.ly/lWaJnI http://bit.ly/fLbOJW

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The Need for a Scientific (Pre)view of the Home Video Industry
By Shravan Pai
As I was browsing through the Netflix Website to decide on movies to watch for my customary Friday late night movie
marathon, I could not stop myself from thinking about how the home video business has changed dramatically over the
last few years.
As a consumer, today, renting a movie has become a much more attractive proposition. I can order DVDs from Netflix and
keep them as long as I want without having to worry about paying extra charges if I could not return it on time. I can
stream a wide selection of movies online; or if there is a recently released one, which I can’t stream, I can walk down to
the nearest grocery and pick it from Redbox at $1 a night or stream it ‘On Demand’ using my Time Warner cable
connection. The dramatic improvement in both the efficiency and effectiveness of rental DVD delivery not only puts a big
question on the future of the neighborhood DVD store, it also forces the studios to think about the implications on their
business model (after all for studios, a consumer buying a DVD is much more profitable than one renting it).
Traditionally, a big chunk of studio profits came from sales of DVDs. Hence, studios were hit especially hard by the
downturn in DVD sales following the 2008 financial crisis. In order to bolster profits, it is expected that there would be a
much higher focus on cost management (an area, which would not have got as much attention earlier because of the high
margin nature of the DVD sales business). This has implications both on the marketing outlay and the supply chain
management policies. In the long term, the crisis could adversely affect the home video business by accelerating the
transition from purchase behavior to rental behavior.
The evolution of the rental and video-on-demand business and the effects of the economic downturn are not the only
changes that the studios are trying to manage. They are also trying to figure out how to manage the transition from DVD to
Blu-Ray. Though Blu-Ray is a welcome technology for the home video business, in the transition phase, it poses several
operational and strategic challenges. How should retailers plan the evolution of their Blu-Ray versus DVD category
spacing? How can they manage the pricing evolution of Blu-Ray? What fraction of the overall production for a given title
will be Blu-Ray? How can the assortment with reduction in retail space for DVDs due to the growth of Blu-Ray be
managed?
The home video industry is indeed in a state of flux, and the historical steady-state assumptions that drove many of the
business decisions are no longer valid. Today, it is imperative for studios to constantly assess the changes in the
marketplace and figure out how to respond to these changes. In this journey, studios need an analytical partner that can
help them with quick and accurate insights across the entire value chain — understanding consumer behavior; providing
strategic planning support; supporting retailer sales and category management initiatives; optimizing supply chain
management practices and aiding product design and marketing functions.
The psychographic nature of the movie business makes it analytically challenging. Every movie is unique. Understanding
how to deal with this uniqueness is critical to design effective analytical solutions for the business. WNS has proven
experience in understanding this uniqueness and incorporating it across the entire analytical value chain from basic
reporting to high-end modeling and business analytics.
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