Cable Operators

How Much Would YOU Pay for a Movie?

10/11/2010 3:38 PM Eastern

Cable operators
and movie
studios are trying
to write a
new script for
viewing movies
at home — a
premium video-
on-demand
window for recently released
theatrical movies.

They’re betting on blockbuster
revenue returns from consumers
who want to view hit current
movies from the comfort of their
own abode.

To some viewers, such as parents
who don’t get out much,
watching a recent theatrical release
is an answered prayer well
worth $20. To others, it’s what
home theaters were built for:
watching the (relatively) latest
movies from the comfort of your
living-room lounge chair. Still,
some respondents wouldn’t bother
at any price, saying the theater
experience is worth the expense.

Multichannel News cover art Oct. 11, 2010Warner Bros., Walt Disney Pictures
and Sony Pictures would likely
take the lead role, with cable operators
such as Time Warner Cable,
Comcast and Cox Communications
— represented by on-demand content
aggregator In Demand — selling
top-flight box-office hits on the
VOD platform some 30 days after
their theatrical debut, for rental at
$30 a pop. Consumers would have
24 hours to watch the films and
wouldn’t be able to record them —
but they would have unprecedented
early access to theatrical films prior
to their DVD release.

All the companies involved are
scrambling to answer one question:
How much would you pay?

Like a good movie, the proposed
premium window is filled
with potential plot twists — and
the ending doesn’t look good for
consumers expecting to see current
hits in their homes.

According to an unscientific
Multichannel News survey of
20 cable subscribers, demand for
$20 to $30 movies is pretty scarce.

A recent Federal Communications
Commission ruling cleared
the way for studios to activate anti-
piracy technology for movies, which has spurred interest in the
new premium VOD window, according
to sources close to the
talks.

Representatives from neither
studios nor In Demand would
comment for this story, but such
a plan would help studios recoup
lost revenue from the decline
of DVD sales and rentals, while
giving cable a leg up on DVD
sell-through distributors like Wal-
Mart, discount DVD rental outlets
like Redbox and Internet-based
digital movie competitors such
as Netflix.

“Traditional windows are
crumbling,” Fordham University
professor of communication and
media studies Paul Levinson said.
“This [effort] makes sense.”

WINDOWS CLOSING

The various movie windows are
already beginning to shorten. In
the past, a movie such as Warner
Bros.’ The Town would have a big
weekend premiere and remain in
the theaters for 180 days before
finding its way to local Blockbuster
or Wal-Mart DVD shelves.

After about 60 to 90 days for
DVD sales and rentals, The Town
would then become available to
cable and satellite providers for
video-on-demand distribution.

Currently, movies such as The
Town
typically stay in the theaters
four months before debuting
simultaneously in DVD stores
and on cable-distributed VOD.

Other studios have experimented
with narrowing VOD windows
— since 2006, Cablevision Systems’
Rainbow Media unit has offered
“IFC In Theaters,” art-house
movies made by its own IFC Films
studio and available on-demand
at the same time they are shown
in its IFC Theaters for $6.95 each,
a $2 premium to traditional VOD.

And in 2008, Sony Pictures, in
conjunction with corporate sibling
Sony Electronics, offered
owners of Internet-connected
Bravia TV sets the chance to rent
the movie Hancock for $10 about
two weeks before its DVD release.
Sony tried it again this year, off ering
new Bravia set owners the opportunity
to see children’s movie Cloudy With a Chance of Meatballs
for free for 24 hours about
one month before its DVD release.
Existing Bravia owners could see
the movie for $24.95.

Sony has said publicly that the
experiments were successful, but
did not release sales figures.

There’s only one fly in the popcorn:
Theater owners have vigorously
protested any shrinking of
their current 120-day theatrical
window, for fear the move would
deter moviegoers from plunking
down an average $7.00 for a theater
ticket and $4.00 for a box of
popcorn.

A theater owner told MCN recently
that cinema proprietors would
never accept a 30-day VOD window.

“It’s going to be a business decision
that will be discussed between
studios and the theater
owners, as well as the big retailers
that sell the DVDs,” said the
owner. “We don’t think it’s wise to
go too early to the home primarily
because it confuses your distribution
channels — bringing
in a VOD too close to the theatrical
opening starts to create price
pressure that’s not good for the industry
as a whole.”

Perhaps the biggest question is
how many consumers would actually
take advantage of the early
movie window at the proposed
price points. Viewers are certainly
preparing for a movie theater
experience in the home: a recent
Nielsen survey reports that
from third-quarter 2008 to second-
quarter 2010, the number
of HDTV sets 41 inches or larger
in the home have increased by
26.9%, while LCD flat screens are
up 48.2%.

Cable subscribers have shown a
proclivity to purchase VOD movies
when the windows are shorter than
on other distribution platforms. In
Demand has reported that VOD
titles that are offered concurrent
with the movie’s DVD premiere
generate 50% higher buys than
movies with a traditional 30-dayto-
45-day window.

An unscientific survey conducted
by MCN last week found
few people interested in paying
anywhere near $30 for the privilege of watching a theatrical movie
on VOD a month after its been
in the theaters.

Asked if they would pay $30 to
view a movie at home 30 days after
it premiered in theaters, only
three out of 20 people surveyed
answered yes, despite that fact
that it would cost a typical family
of four about $50 or more to attend
a movie, buy food and get a
baby sitter.

Further, fewer than one-third
would not even pay $15 to $20 for
the special window, instead opting
to either go to the movies or
to wait a few weeks to pay $20 for
the DVD.

STICKER SHOCK

Will Richmond, video analyst for
online publication VideoNuze,
said consumers already suffering
from cable-company sticker
shock will not pay an additional
$30 to watch a theatrical movie
at home, given other lowerpriced
alternatives like Netflix
and Redbox.

“Consumers are more valueconscious
today than ever, and
a $30-per-movie rental model is
out of sync with the consumer’s
focus on value and with all of the
alternatives available that offer a
lot of value,” he said. “To contrast
$30 for one movie versus Netflix,
which provides a $9 price for unlimited
movies, I think the effect
of that is to reinforce the idea that
to consumers, cable television
is overpriced, and it could be a
public-relations black hole for the
industry.”

BTIG Research media analyst
Richard Greenfield cautioned that
any prediction of success or failure
for the latest attempt to alter
windows is heavily dependent on
what is actually offered.

“At a $25 price range, it may not
be a massive market product, but
I think there is definitely is a market
for it,” Greenfield said, adding
that it is too early to predict success
or failure .

“We have to see what the actual
window is, what the price point is,
does it include the DVD when the
DVD comes out [and] how does it
actually work?” he said.

March