A new movie service is proposing to bring Hollywood movies into subscribers homes the same day they hit theaters. The price tag for this ultimate home theater experience? $20,000 for a digital delivery system, plus $500 per film. While this may be at the extreme high end, it does seem to indicate the direction that film distribution is heading - a narrowing of the gap between when a film plays the big screen until it’s available on the small screen via DVD and the internet.
From the Wall Street Journal article “Movies at Home, for $20,000”:
The proposed system represents a twist in an ongoing debate over the future of “release windows,” the practice of staggering the distribution of movies through different channels to maximize profits in each. Traditionally, that has meant a movie hits theaters first, followed several months later by DVDs, video-on-demand, subscription-cable channels, and so on.
The windowing system has already come under pressure amid plummeting DVD sales and rising digital piracy. And consumers have grown accustomed to receiving entertainment content more readily than they used to.
One hot-button issue in that debate has been an early, “premium” video-on-demand window, in which cable subscribers could pay $30 or so to watch a movie a month or two after its debut in theaters.
Studios no longer make as much from DVDs. U.S. consumer spending on DVDs is down about 20% in 2010 from 2009, to $7.8 billion, according to media-tracking firm IHS Screen Digest. DVD spending is down 43% from its 2006 peak of $13.7 billion.
At the same time, consumer spending on video-on-demand services rose 17% in 2010 from 2009, to $1.4 billion, according to IHS.
Interesting to note the shift in consumer habits in Netflix as reported in an article in today’s WSJ:
The company, which says its customers now use its Web-streaming service more than its by-mail rentals, will charge $7.99 a month for customers that only want to watch films and TV shows delivered over the Internet.
“We are now primarily a streaming video company delivering a wide selection of TV shows and films over the Internet,” Netflix Chief Executive Reed Hastings said.
Netflix has said the costs of distributing DVDs—-including the roughly $600 million it will pay to the U.S. Postal Service in 2010—can ultimately be diverted into paying for content rights for online streaming.
Read more: http://online.wsj.com/article/SB10001424052748704243904575630441038304032.html#ixzz162bgsklD
It seems like Netflix is following a model similar to premium cable channels: revenue is generated through subscriptions versus ads. But to keep its audience it will need to create a more compelling reason for them to use its services. Watch for more original fare created by Netflix as it moves away from its mail-based business towards online streaming.
The WSJ posted in yesterday’s Opinion Page excerpts from a speech by Jeff Bewkes - chairman and chief executive of Time Warner, Inc. He foresees a new era of TV watching, augmented by 21st digital technologies, communications, and devices:
But now television is at a critical moment in its evolution. Whether audiences continue to enjoy this golden era of TV will depend largely on whether content creators continue to stay apace of consumer needs and make strategic decisions that favor long-term sustainability over short-term dollars.
I believe the best path for TV’s next phase is clear. For the past 15 months, Time Warner, along with a growing number of content and distribution companies, has been implementing a new strategy called TV Everywhere. It operates on a simple but powerful premise: If you have access to television in your home—whether through rabbit ears or a paid cable, satellite or telco subscription—you should be able to view all the channels you receive on demand on whatever broadband device you wish.
That means on-demand access to your favorite shows not only on the TV in your living room but also on your laptop or tablet wherever you might take it—all at no extra cost.
It’s interesting to note the business model that he cites as one of the reasons that TV has endured better than its other media brethren:
One of the reasons why television has performed well while other media industries have struggled is that TV has developed a system of dual revenues from subscribers and advertisers that has served viewers successfully in digital formats for three decades now, leading to an explosion of choice for consumers at a reasonable value and programming that is ever more original, diverse and daring.
A subscription/advertising model…hmmm, seems like several other internet content providers - like Hulu and Netflix - are also adopting this model. I wonder if this portends a time in the near future when internet and TV will mesh to form a new type of content delivery service?
Screenshot of HSX.com, site of proposed Hollywood Stock Exchange. Note the title of the Leonardo DiCaprio film - Oh, the irony!
Hollywood - for all its bright lights - still maintains a dense shroud of secrecy over how its net grosses are accounted for. The threat of fiscal transparency may have been a motivating factor in the industry sponsored provision outlawing movie-futures trading that was successfully lobbied into the July 21 federal financial reform bill. According to an article in New York Magazine about the failure of the proposed Hollywood Stock Exchange:
It’s not surprising that an industry steeped in financial shadiness feared such an idea. Despite the casual fluency with which many moviegoers now speak about per-screen averages and week-to-week holds, the way grosses are tallied is largely shielded from scrutiny. A company called Rentrak (which bought Nielsen’s box-office business) compiles the data, and the chief watchdogs preventing a studio from misreporting its grosses are … other studios.