“In this war, movie studios are siding with your couch”
The major movie studios are making noises about this as a means of increasing revenue:
Sony Pictures, Warner Bros. and Walt Disney Co. are in talks with the largest cable TV systems to offer films for as much as $30 per showing soon after they run in theaters.
The studios are talking with In Demand, a partnership of Cox Communications Inc., Comcast Corp. and Time Warner Cable Inc., Bob Benya, chief executive officer of In Demand, said in an interview. Disney is also discussing streaming films on Web- linked devices such as Microsoft Corp.’s Xbox console and Sony’s Corp.’s PlayStation 3, people with knowledge of the talks said.
Hollywood studios have been looking for ways to generate additional sales from movies as DVD purchases continue to decline. A so-called “premium” service would let consumers see movies on TV without waiting the typical three or four months for DVDs or cable companies’ $4 or so on-demand showings.
“I think there are a number of other products that we will be able to create through Internet-connected television, particularly when you consider our brand focus,” Robert Iger, CEO of Burbank, California-based Disney said at a Goldman Sachs Groups Inc. conference on Sept. 21.
It used to be that studios protected so-called “windows” in order to maximize profits on each movie as it played on all platforms:
The “windows” in reference are release windows, the prescribed time gaps between which films are aired over different media. Traditionally, that meant scheduling would begin with theatrical release, then, after a nice time gap, been followed by home video sales (and, generally, rental release). After retailers got a head start, next, Video on Demand (VOD), Pay Per View services, and hospitality distributers (airlines and hotels) would get a chance. A couple months later, those windows would close and then pay-cable TV channels (HBO, Showtime, Starz etc) would get a period of broadcast exclusivity. Finally, eventually, basic cable and broadcast would join in.
The idea behind the windows was to segment the distribution channels and give each outlet a period of temporal exclusivity. The theory was that this would maximize each channels opportunity and prevent cannibalization among them. Delaying TV offerings, in hypothesized, would give advantage to retailers. Per-viewing VOD revenue split between studios and cable co’s would be maximized if there was no competing outlet showing the same programming on TV. Similarly, delaying free TV, would give pay TV operators an advantage. Each stage of time was meant to justify different premium licensing fee structures.
One of the flaws of the traditional Window System has been its financial inefficiency. Studios spend fortunes promoting and hyping a new release but then a few weeks later when the next feature hits the big screen, those costs are sunk and marketing momentum is lost as the hibernation period before the next release begins. Instead of capitalizing on fan interest, the window system lets it idle. By the time second window opens, the marketing machine has to crank up again.
In December 2005, Disney’s Robert Iger called out this issue saying “[studios] could spend less money pushing the box office and get to the next window sooner where a movie has more perceived value to the consumer because it’s more fresh.” Allowing the gaps in the window system to remain, he argued, were unnecessarily wasteful.
So the studios have been thinking about his for years. And now it looks like it’s going to happen. How do you think theater chains / owners feel about this? Eh, not so good:
Such statements, however, aren’t likely to sit well with exhibitors. Their trade group, the National Assn. of Theater Owners, recently took out ads in the Hollywood trades cautioning studios about attempts to collapse traditional windows, which they fear would discourage consumers from going to the theater to watch movies and hence weaken ticket sales.
Here’s a prediction: No matter what happens, greed will win out.
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