From the folks at SNL:
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Tuesday, August 12, 2008
VOD vs DVD
When Pay Per View became popular, movie studios worried that movie theater revenue would decline. It didn't. Radio didn't kill TV, on-demand hasn't killed linear TV. Each finds its place as technology changes usage and preferences. And so to read that the movie studios are afraid of losing DVD revenue by releasing the same movies on-demand is simply misguided.
"'We believe VOD day-and-date with DVD would be a grave mistake for the movie industry, as it would dramatically increase the volatility of the business,' wrote Pali Research analyst Richard Greenfield in a report last year. Jeff Bewkes of Time Warner sees it differently, "'No, we have not seen cannibalization so far,' Bewkes said. 'I don't think it's right to think that the margins are lower. So we think that since we haven't seen cannibalization on sell-through, that it's going to increase margins and profitability going to day-and-date.'"
And while I understand Greenfield's fear, I agree with Bewkes. It is stopping their ability to maximize their revenue. As video stores close, consumers not interested in purchasing the DVD will remain patient till the VOD window opens up.
I do believe their are ways to differentiate the DVD experience from the VOD experience enough so that a day and date approach does not cannibalize each others profit margin. What makes the DVD different are the extras, additional footage and features, unique games, and other "exclusives" that simply have to be marketed correctly to the consumer. For the viewer who simply wants access to the feature film, VOD is not only profitable but may also offer another "opportunity" to sell the viewer to purchase later to take advantage of those extras. In short, VOD enables sampling and the ability to rent first before buying. To me, that represents the opportunity to own the customer twice!
Some studios remain cautious to this opportunity, others are embracing it. It remains our nature to be cautious about change; but it is happening and those that take advantage of it will benefit by leading the charge.
"'We believe VOD day-and-date with DVD would be a grave mistake for the movie industry, as it would dramatically increase the volatility of the business,' wrote Pali Research analyst Richard Greenfield in a report last year. Jeff Bewkes of Time Warner sees it differently, "'No, we have not seen cannibalization so far,' Bewkes said. 'I don't think it's right to think that the margins are lower. So we think that since we haven't seen cannibalization on sell-through, that it's going to increase margins and profitability going to day-and-date.'"
And while I understand Greenfield's fear, I agree with Bewkes. It is stopping their ability to maximize their revenue. As video stores close, consumers not interested in purchasing the DVD will remain patient till the VOD window opens up.
I do believe their are ways to differentiate the DVD experience from the VOD experience enough so that a day and date approach does not cannibalize each others profit margin. What makes the DVD different are the extras, additional footage and features, unique games, and other "exclusives" that simply have to be marketed correctly to the consumer. For the viewer who simply wants access to the feature film, VOD is not only profitable but may also offer another "opportunity" to sell the viewer to purchase later to take advantage of those extras. In short, VOD enables sampling and the ability to rent first before buying. To me, that represents the opportunity to own the customer twice!
Some studios remain cautious to this opportunity, others are embracing it. It remains our nature to be cautious about change; but it is happening and those that take advantage of it will benefit by leading the charge.
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