Let's Talk About Premium VOD
It’s not been a major topic of conversation in most circles outside of the movie industry, but right now, studios and movie theaters are involved in a huge struggle over Premium Video on Demand, i.e., the window between when a movie is released in theaters and when it is available for home viewers.
Revenue from theaters has basically flatlined in recent years, and it’s only been able to maintain that because of rising ticket prices, 3D and IMAX surcharges. Meanwhile, DVD sales are in the toilet. However, revenue from digital downloads is way up — in fact, overall, studios earn about twice as much from electronic home video as they do from movie theaters.
Still, movie theaters are a crucial part of the mix, and exhibitors are trying to keep pace with expensive upgrades and remodels — comfy chairs, reserved seating, better food, alcohol, etc. Obviously, movie theaters — who are putting a lot of money into these upgrades — don’t want to be undercut by digital distribution, so they’re resisting efforts by some of the major studios — namely Warner Brothers and Universal — to shrink the release window.
What many of the movie studios want to do is offer their movies for home viewing at a premium price two weeks after a movie is released. They’re currently in negotiations with Apple and Comcast to make those movies available for around $30 or $50 ($50 two weeks after release; $30 four-to-six weeks after release).
The question is: Who is going to pay $30 or $50 to watch a movie at home two weeks after it’s released? Wealthy people with big home entertainment systems, perhaps, and maybe families, who would be spending roughly the same amount to watch the movie as they would for ticket prices (this, however, fails to take into account the movie theater experience, which for a lot of parents (including me), is the biggest draw. We’ll either see it in theaters or wait and spend $4 to rent it when it’s available three months after its release).
It’s probably a moot point anyway, because PVOD is unlikely to come to fruition. Movie theaters will object by boycotting certain studios’ films, and the theatrical run still makes up 50 percent of a movie’s revenue. Right now, most insiders see this as posturing, a negotiation tactic by the studios over a long-term agreement over revenue splits.
In the midst of all this, of course, Amazon and Netflix are continuing to produce their own movies, which they can release into theaters and onto their own platforms soon thereafter (Amazon’s The Big Sick, for instance, will be available on September 5th, about six weeks after it went wide in theaters). Netflix has been making its movies available day and date, although I haven’t seen much evidence that Netflix has been very successful on the movie side — Brad Pitt’s War Machine didn’t make much of a splash, but the release of Will Smith’s Bright may tell us more. Disney, meanwhile, is staying the hell out of this, because with Pixar, Star Wars, and Marvel and other huge franchises, the studio obviously relies heavily on movie theaters to turn a profit. Plus, they’re in the early stages of launching their own streaming platform (and subsequently removing Disney titles from Netflix).
What is clear, however, is that consumers are coming out on top, as studios, movie theaters, and streaming services all compete to make us happy with better theaters, quicker availability to movies, and a plethora of choices.
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