Windows need to compress.” If you were on vacation for most of August, you might have missed that quote, uttered by a major media player. No, it wasn't made by an MSO executive, but by none other than Robert Iger, the soon-to-be CEO of The Walt Disney Co., once Michael Eisner steps down.
During Disney's second-quarter earnings call, Eisner and Iger spoke glowingly of digital technologies, including video on demand, and what they will mean for Disney.
Iger is leaving no doubt that media companies need to institute new thinking in a digital world where consumers take the lead in dictating when and how they get new content. One likely beneficiary will be cable's VOD business, both for movies and TV shows.
Why? Disney, like other major studios, is facing a number of negative trends few would have predicted a year ago. Total box office revenue is down, as fewer people go to see the movies Hollywood distributes. Worse, DVD sales have slowed.
DVD revenue has been the engine that has kept home video strong at the studios and kept VOD windows in the 30- to 60-day range.
Today, a movie's DVD has a shelf life of about one month, according to Iger. “If they don't move in the first month, they don't move at all,” he said. Given that, “we will have to look at window changes.” A second problem for studios is movies that don't fare well at the box office.
It has reached the point that Iger openly opined that a DVD could be released during the movie's theatrical window. That has already caused some howls of protests from theater owners.
But a studio that sees a movie die at the box office might want to get it on store shelves in three or four weeks, to take advantage of the buzz still in the marketplace. A studio also might move a VOD window much closer to DVD if it finds the movie isn't selling in home video.
Iger also commented that once a new TV show premieres, it doesn't hit reruns for six months. Without saying so, he indicated that there may be opportunities to generate VOD revenue before the network rerun. Eisner specifically talked about “never-before-realized” pay-per-view revenue that Disney could exploit, “beyond DVD and home video. It's encouraging.”
“All the rules should be called into question,” Iger concluded.
You can't underestimate Iger's and Eisner's remarks. When media companies debrief analysts, and talk about new platforms and new technology, usually they take one of two tacks.
One is to acknowledge the new platform, let analysts know the company is checking it out (so as not to fall behind the times) and speak politely about its prospects. For Disney, and other studios, that was the verbal approach to VOD, circa 2002 to 2004.
But a confluence of events — the music industry's Napster and iPod experience, the profileration of broadband PC and mobile platforms, the sharp slowdown in some DVD businesses — is causing these same media players to look at new broadband platforms as true growth vehicles, not afterthoughts.
This isn't limited to VOD. Disney has high hopes for its Disney and ESPN wireless phone platforms. Broadband online content is a constant source of development dollars. Even Wi-MAX has caught their attention.
But cable needs to be aware of the changing economics in the studio business, and what it means to their VOD business.
In this world of change, one thing is constant for the studios: movies cost more money to produce and distribute than they did yesterday. The huge DVD windfall served to cover those increasing costs, but now that revenue stream is starting to show signs of stalling. Studios are looking elsewhere.
It's playing into cable's hands. Windows for hit movies could shorten. At least Disney seems ready to have that discussion. TV network fare could come quickly to VOD, provided there is compensation, either through license fees or advertising revenue.
The window of opportunity is opening, for new talks and fresh ideas. It's in cable's best interest to take advantage of that trend.