A fresh way forward for physical media?

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The announcement that Warner Bros and Universal are joining forces for their disc distribution may just have more pros than cons, argues Simon Brew.

Perhaps it shouldn’t have been, but it still felt like a surprise announcement in the middle of January when it was revealed that Warner Bros and Universal, two of the biggest entertainment companies on the planet, were set to merge their physical media efforts. Instead of distributing DVDs, Blu-ray and Ultra HD 4K Blu-rays individually, the two companies would come together and put their output through just one company.

The mechanics of the deal are thus. From the start of next year, the physical media operations of both companies will be merged into one. It’s a decade-long agreement, and who takes the lead on it varies country by country. In America, the merged entity will distribute physical disc releases from Warner Bros and Universal. In the UK, Italy, Belgium, the Netherlands and Luxembourg, Warner Bros will distribute both its titles and Universal’s. And in Germany, Austria, Switzerland and Japan, Universal will distribute its titles and Warner Bros releases too. Each studio will retain its own digital movie releasing operations. This new deal, which still has to be ratified by the US Department of Justice, will be for physical media only.

Surprise

The announcement, made on 15th January, seemed to come out of nowhere, with few aware that conversations between the pair were even under way. But in hindsight, it feels a logical way forward, and a way to cement a commitment to physical media for the immediate future. It’s little secret that for the studios, rather than the specialist labels, physical media has been in decline, and there are several indicators for that: the fact that only the biggest releases seem to get extra features of any note, the increasing number of titles that only get a DVD release and not a Blu-ray, and the films whose physical release seems tokenistic at best. On the flip side, as we discussed in a recent issue of our magazine, there are some fabulous independent labels in the UK pushing for extras-packed, quality releases. But the headline figures still indicate that physical media sales have been in double digital decline for years, and it’s hard to determine just where the bottom of the market is.

This move from Universal and Warner Bros, assuming it gets the necessary regulatory approval, at least cements the commitment from both towards physical, and judging by the decade-long commitment the pair are making (appreciating things can change) neither have any plans to abandon the market. One or two whispers we had heard – not related to Warner Bros or Universal – hinted that studios were seriously considering, giving the lower margins and sales of discs, whether to bypass them altogether. This move ensures that for the time being that’s not going to happen (not least because many filmmakers push hard for quality physical releases of their movies). As Warner Bros’ Ron Sanders said as the announcement was made, “the physical business is still an important and active category for the industry. This proposed joint venture with Universal gives us the best opportunity to foster innovation in this business, optimize the physical offering and extend the lifespan of the format for our fans and consumers”. All a bit corporate-speak, but you get the gist.

And he does have a point. That for all the doom and gloom around physical media, this is still an area of the market worth billions per year. The problem is that it’s just not worth the megamoney it was in the early 2000s, and the decline in disc sales has been indirectly blamed for studios taking fewer risks on material in recent years. Without the safety net of disc revenues, risky gambles now look like untenable ones. This deal won’t change that, of course, but it’s a further ramification of significant market changes.

Next steps

The full machinations of the deal are yet to be worked out, but the plan is that the new operation will be up and running in January 2021. There are still questions to be asked. Will there still, for instance, be the commitment to catalogue releases? Warner Bros in particular has been excellent at these in both the US and the UK, and if they can be ringfenced that would be very good news. Also, one interesting variable in the UK is that Universal is already the dominant distributor of physical media. It releases not just its own movies, but also the discs of Entertainment One and Paramount Pictures.

Whether Warner Bros will absorb those deals – whether it’s even allowed to – is still up in the air. Lots still to be worked out, then. But nonetheless, this all feels like a move that deserves a cautious welcome. Instead of getting out of the physical business altogether, two major studios have found a way forward, one that keeps sending discs out into the market. Don’t be surprised if other studios opt to follow their lead…