How Subscription Services Killed Home Entertainment

A Window into Historic Entertainment Distribution


Wesley Morton

2 years ago | 5 min read

When is the last time you bought a CD or album? How about a DVD? A TV boxset? A video game? 10 short years ago, friends and family would gather around their entertainment libraries to pick out a movie to watch.

Music was downloaded onto iPods or Zunes (remember those?!). Video game cartridges were put into consoles. DVDs were bought, borrowed, and rented to fill a consumer entertainment stands.

Today hardly anyone buys entertainment, opting to subscribe to bundled services instead. Subscriptions have killed the home entertainment industry, and no one is talking about it.

It’s the type of slow, quiet death that doesn’t get much fanfare. It’s a story that coincides with the rise of streaming TV and music and ends with you never owning a piece of entertainment again.

A Window into Historic Entertainment Distribution

To understand this fundamental shift, we have must revisit ‘windowing’, the media industries’ historic model of delivering entertainment. The model below has been the entertainment standard since the VHS debuted at the Consumer Electronics Show in the 1970s.

In the model, intellectual property (IP) is distributed to consumers in windows of time, with partners and studios making a cascade of revenue as the entertainment goes from one medium to another.

Historic Entertainment Delivery Model
Historic Entertainment Delivery Model

Windowing necessitates time frames over the lifetime of IP in order to capture new revenue at each following stage. At each stage, movie theaters, retailers, and networks get to benefit in partnership with the producing studio.

The windowing period for all forms of entertainment has shrunk over time as consumers demanded more entertainment at home, but the subscription model has obliterated it. Take a look at the Netflix content delivery model.

The streaming subscription model
The streaming subscription model

No windows. No premium VOD, no home entertainment sales, no syndication on networks, and no theatrical releases (unless you’re Scorsese making the Irishman).

This means complete revenue loss for all retailers, theaters, or networks in the entertainment food chain. Talk about a middle finger to the establishment. No chill Netflix.

The Entertainment Direct-to-Consumer Future

Movies are not isolated; TV shows had a similar windowing strategy. A show would drop on a Network, then introduced in boxset DVDs, then syndicated to other networks.

Seinfeld, Grey’s Anatomy, and FRIENDS all debuted on Network TV only to be later boxed up and syndicated, including to streaming services. Now, TV shows drop the same day they are announced and live perpetually on their debut platform.

Music, the original didn’t see it coming industry, had its delivery window inverted. Originally releasing music as an album, then radio, then tours/merch, the record industry now releases artist singles on streaming subscription platforms and radio with tours/merch following.

Music record sales, their historic main revenue driver, are almost non-existent, replaced with royalty payments based on streaming plays, booking tours, and merchandise. The album has effectively disappeared.

Even gaming, the youngest entertainment player, has moved more and more to subscription models like Game Pass, PlayStation Now, EA Access, and Game Fly. Services like Game Fly mimic the success of Netflix, by offering unlimited number of gaming titles for a flat rate.

The subscription model has killed windowing and the home entertainment market.

Instead of buying individual pieces of entertainment at retail, consumers now subscribe to services that bundle collections of entertainment into a single platform. Your DVD, CDs, and games no longer live on your wall, they live in the cloud.

The relationship between entertainment firms and consumers has tightened, squeezing out 3rd party retailers in the process. Subscriptions necessitate direct-to-consumer (DTC) relationships between entertainment producer and consumer, making 3rd party retailers obsolete.

This is not necessarily a bad thing. Subscription services offer consumers instant gratification and incredible value. Instead of waiting 4 months to get the latest Superhero Movie on DVD, it becomes available in your home after 3–6 weeks.

All the titles in the Disney library for $6.99 is a better deal than individual movies for $19.99. At $22.95 a month, Game Fly offers unlimited leases which is a bargain for consumers who routinely spend $60 a game.

However, subscriptions transfer the ownership and access relationship consumers have with entertainment.

When you subscribe to a subscription service, you don’t own any of the entertainment you consume. You lease access to it.

Personally owned libraries have transformed into walled gardens owned by rights holders (Netflix, Disney, WarnerMedia, NBC) who then compete to sell us an entrance ticket.

The plethora of walled entertainment gardens have created a media ecosystem that is increasingly confusing and complicated.

You need HBO MAX for FRIENDS, Peacock for SVU, Disney+ for Marvel, Netflix for Stranger Things, Amazon Prime for Jack Ryan, and Crunchyroll for those weird animes you like.

The lack of distinct 3rd party platforms or outlets disincentivize studios to work together, forcing us into a 30-minute app-searching exercise every time we want to watch.

The direct-to-consumer transition has also wreaked havoc in the industry as third-party value chains have disappeared overnight. GameStop will likely go bankrupt. 3rd party streaming platforms without their own IP have ceased to exist.

Last year, Sony consolidated their TV Distribution and Home Entertainment Divisions and then laid off almost 33% of their staff. Newly merged Disney and 20th Century FOX laid off hundreds redundant and home entertainment employees.

It remains to be seen how many subscriptions a consumer is willing to tolerate. Personally, I’ve maxed out at 6 — Netflix, Amazon, Disney+, Hulu, Spotify, and Audible (which I will probably cancel).

Those 6 represent a DTC relationship with only 4 companies for all my entertainment needs. Add YouTube, the original ad-supported streaming gangster, and that’s only 5 companies that feed me entertainment.

Studies in 2019 suggest that the average American subscriber watches 3.4 services, paying an average of $8.53 a month for each one.

That’s not a lot of upside for new entrants when the market has a reported 200 TV streaming services available in 2020. It’s unclear how many services will survive with each reserving their originals and best library content for themselves.

What is clear — if you’re at a home entertainment division or a 3rd party entertainment retailer, it’s time to look for a new line of work. The future of the entertainment industry is direct-to-consumer.


Created by

Wesley Morton







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