When it comes to selling product digitally, the movie business is playing catch-up. The music industry, and to some extent gaming, have embraced digital as a key sales channel, with effective systems in place for years. For movies, "it's an emerging capability," says Moran. The industry is still "struggling with how to deploy these systems in a cost-effective way."
Movie distributors face much lower profit margins and a broader number of resellers in the digital realm. The product itself is more complicated as well. Fifteen tracks on a music CD account for 15 unique SKUs. The same is true for additional content on DVDs and Blu-ray disks, such as director's commentary and promotional material. Perhaps for that reason, no single content provider yet dominates the digital landscape for movies. "It's much less defined [than the music industry]," Moran says. "There aren't any 800-pound gorillas."
Long-term demand planning is difficult because the popularity of a given movie is often tied to unexpected events that are beyond the distributor's control. "Companies need to be positioned to respond to that spike in demand immediately," Moran says. At the same time, because each Blu-ray disk is equipped with a unique serial number, distributors possess detailed consumer data that can drive more targeted marketing efforts.
Managers of digital supply chains need to acquire a whole new set of skills, on top of the expertise that is needed to move physical product. The digital world demands deep knowledge of managed IT services, including data centers, networks and infrastructure. Making matters even more unpredictable is the shift by many software providers to hosted applications based in the "cloud." Says Moran: "The cloud is to the digital supply chain what just-in-time inventory management is to the physical supply chain - or it has the potential to be."
