Narrowing Cable's VOD Window - Multichannel

Narrowing Cable's VOD Window

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The August premiere of Warner Bros.'s theatrical thriller Cradle 2 The Grave on video-on-demand — via digital cable — will come after just 17 days worth of home-video and DVD exposure.

Although Cradle's
short home-video window is rare — the average for a theatrical release remains at around 51 days — industry executives hope its VOD performance numbers will soon convince studios to regularly reduce the time between a blockbuster movie's arrival on the video shelf and its debut on a cable-system server.

Operators and distributors have asked studios for windows tight enough to take advantage of the millions of dollars studios spend to advertise a film's home-video and DVD release.

Closing in

In Demand has aggressively touted the virtues of VOD and earlier windows to studios over the past few months. In addition to narrowing the Cradle 2 Grave
window (something about which neither Warner Bros. nor In Demand would comment), the VOD purveyor was able to work with the studio to offer The Animatrix, a collection of nine animated shorts based on the The Matrix
movie franchise, to VOD on June 3 — the same day it became available in video stores.

There's little question that PPV and VOD movies perform well within shorter windows. Sporting a 30-day PPV window, 20th-Century Fox's $70 million box office film Shallow Hal
was the industry's No. 1 movie in 2002. The comedy beat out a number of $100 million films, all offered in windows of 45 days or more.

"I think that clearly there's an upside opportunity to have movies at the same time either for sale or for rent," said Cox director of marketing for video services Kevin Hill. "People love purchasing PPV and VOD movies, but the main challenge has always been the value behind purchasing a $3.95 movie. If we can move that window up, we'll have a more exciting atmosphere."

A long struggle

Cable operators have been fighting an uphill battle with the studios over home-video windows since the dawn of PPV in the 1980s. Unwilling to upset the multibillion-dollar rental business, studios have been reluctant to provide windows anywhere close to 30 days after a title's home video bow.

But operators argue that PPV buy-rates would improve significantly if the titles were available to consumers earlier. The argument has grown stronger with the advent of VOD, which allows consumers to purchase movies at their own leisure, with fast-forward, rewind and pause functionality.

Thus far, operators report that VOD buy-rates are twice or even three times those of schedule-based PPV channels. Though available in only about 5 million households, VOD last year helped the industry record its highest PPV movie revenue take ever at $1.4 billion, according to Showtime Event Television figures.

Still, studio executives remain disinclined to give the industry any permanent window breaks, for fear of disrupting the home-video and DVD business.

In 2002 videocassette movie rentals generated $5.3 billion, down 25% from $7.02 million in 2001. But the burgeoning DVD rental business generated $2.9 million, to lift home rentals to $8.2 billion overall.

Add in the $12.1 billion in DVD and video purchases, according to Video Business
magazine, and the home-video business remains a very formidable fiscal opponent to VOD.

"[Windows] may not be as much of an issue on a rental basis anymore, but because of the inordinate money DVDs bring in today it does matter," said one studio executive. "I don't know if it's worth upsetting that apple cart until VOD becomes more widespread."

But In Demand senior vice president of marketing Sergei Kuharsky said that studio fears of cannibalizing home video sales with earlier PPV/VOD windows do not hold up well to history. There were numerous false predictions that home-video, PPV and multiplex movie channels would prompt the demise of the theatrical business, he noted.

Tapping ads

Kuharsky said In Demand is currently lobbying studios to move VOD windows to between 15 to 20 days, so the industry can take advantage of the additional marketing budget for home-video releases.

Studios spent approximately $3.8 billion advertising movies, he said — about $1 million of which was allocated to DVD and home-video advertising. Kuharsky said studios could maximize their own advertising outlays by promoting the home-video and VOD windows at the same time.

"With a DVD release, the advertising window is two to three weeks, during which time the viewer is aware of the product," Kuharsky said. "If that's the case, why would you not want to capitalize on your investment more by making the product more readily available to more people?"

Moreover, he said, 80% of a title's home-video rental and DVD purchase business is done within the first 30 days after it hits the video shelves, so there's little impact on a studio's home-video business if VOD windows are moved up.

"It's really an efficiency to have it available everywhere," said In Demand president Steve Brenner. "Studios are not going to put as much advertising into promoting PPV 45 days after home video — there's not enough revenue to support that."

Operators believe that to fully realize the revenue potential of VOD, the industry needs to play on a level field with the home video business, with regards to hit movies.

"The window is critical to that segment of the VOD business," said Millenium Digital Media senior vice president of programming and product development Peter Smith. "The fact of the matter is, an old title that you can fast-forward and pause is not as appealing a proposition as a new title that you can fast-forward and pause."

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