Research: Early Windows Pay Off

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Cable operators have always said earlier pay-per-view and video-on-demand windows would boost movie buys.

Now, distributor In Demand believes research backs up the rhetoric.

Buy-rates can climb as much as 50% when the movies reach VOD platforms less than 30 days after titles hit home-video shelves, according to an In Demand analysis of over 100 Hollywood titles bowing on PPV in 2003.

As a group, titles with windows shorter than 45 days performed an average of 50% better than titles released 45 days after home video, according to the research.

The difference in buy-rates was even more pronounced when the comparison included titles with release dates longer than 45 days. All titles examined for the study had an average domestic box office of $50 million and were released to VOD/PPV between 30 and 90 days after the home-video window.

In Demand president Steve Brenner said the numbers confirm what the company has been emphasizing to the Hollywood community for years: PPV and VOD can be a viable revenue source for the studios if given the ability to compete more equitably with the home-video juggernaut.

"For VOD to fulfill its full potential, it's going to need shorter windows," he said. "All we want to do is compete on a level playing field. If our technology and manner of delivery is more convenient for the consumer, then we should win."

Studios, though, remain reluctant to jeopardize their profitable home-video (videocassette) and DVD rental businesses to support an unproven technology in VOD. In 2002, home video and DVD rental generated $8.2 billion, compared to $1.47 billion for the PPV/VOD business.

Despite the discrepancy, Brenner said the studios this year have offered more titles with less than 30 days windows than in previous years. "When we've received more movies in the early windows, and it was pretty clear that the windows make a difference," he said.

"The people on the home-video side are probably getting pressure from the Blockbusters of the world about keeping their windows, but that's keeping the studio from maximizing its revenue, which is wrong. The whole economic structure is based on competition, and what the [home-video retailers] are saying is they want to be spared from competition, which to me is nonsense."

According to the research, movies with modest box office receipts but short PPV or VOD windows often outperform top blockbuster titles. For example, the action thriller The Bourne Identity, which pulled in $122 million at the box office and had a 45-day window, performed more than 60% higher than the Tom Cruise-vehicle Minority Report, which garnered $132 million at theaters and then had a 73-day window.

In fact, in three of the past four years the top VOD/PPV title has been a movie released with a 30-day window, including 2003, which likely will see New Line Cinema's Austin Powers in Goldmember
claim top PPV-revenue honors.

Brenner said titles like Warner Bros.' Cradle 2 The Grave, which featured a rare 17-day window, perform significantly better than movies with much higher box-office revenue.

The industry will have several 30-day titles over the next three to four months, including Santa Clause 2, X2: X-Men United, Anything Else, American Wedding
and Underworld.

But until studios make the 30-day window the norm rather than the exception, PPV/VOD will not maximize revenue.

"While 30 days should be the de facto industry standard in 2004, the real power of VOD will remain unknown until studios release titles to PPV on the same day and date as home video," Brenner said.

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