Thursday, October 13, 2011

Premium On-Demand Derailed

DirecTv tried to offer theatrical releases 8 weeks after they hit theaters into the home at premium prices and the results were negligible. Universal and Comcast tried to put an even higher priced model together for a film released just three weeks after it hit the theater and that program has been dropped. "After drawing boycott threats from Cinemark and a few small theater chains across the country, Universal has decided that it will no longer release their Ben Stiller/Eddie Murphy vehicle, Tower Heist, on-demand." It seems the backlash from theater exhibitors has sent a message to online distributors, "don't mess with us."

But perhaps the analysts also saw that the consumer was not interested in paying such an exorbitant price, almost $60, for a 1 day rental. And while the thought was that families would throw a movie party and invite friends over to watch; in my family, that sometimes happens when my kids invite friends over for a sleepover and they are looking for something to watch on TV.

With the loss of DVD rentals, content creators, especially movie companies are seeking other windows to recapture lost revenue. But replacing a DVD window with a premium on demand window doesn't seem to accomplish that result. Rather than add revenue it causes a backlash that resulted in theaters dropping those films from screens. It seems, consumers, faced with an overwhelming array of online choice, prefer now to simply rent or buy digital copies. With renting, the choices are plentiful at prices far lower than the premium model. Subscriptions for endless titles at under $10 a month and even on demand from HBO, Starz, and others. For those that prefer to own, digital copies from Apple and Amazon top the list, also at prices far lower than a $60 rental.

With DVD sales declining, will consumers rent more or buy more digital downloads? Certainly Apple and Amazon are being aggressive as they build up their cloud-based services. And as car manufacturers better enable their back seat screens to connect with more than just a DVD player (iPods, iPhones, et al), consumers will buy more digital downloads for their families. Movie studios need to better embrace these new opportunities; distribution windows should continue to matter and it makes no sense to hurt theater owners when there is no revenue upside. The easier you make digital distribution, the more it will be used.

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