“The Difficulty in Doing Windows”

Posted: 14 Jun 2010 01:47 AM PDT

By R. Thomas Umstead -- Multichannel News, 6/14/2010 12:01:00 AM

Time Warner Cable's recent proposal to movie studios to offer theatrical movies on demand 30 days after its release in theaters continues to be hailed by industry observers as a potential watershed for the fledgling video-on-demand category. But, as some executives speaking at last Wednesday's Multichannel News/Broadcasting & Cable On Demand Summit 2.0 conference lamented, that the proposal's happily-ever-after ending for VOD may be nothing more than a wishful fairy tale.

Certainly, there's no argument that shorter movie windows means bigger business for distributors that off er VOD. Theatrical movies debuting on VOD the same day and date as their DVD release perform 50% better than those released during the traditional 30-to-45-day VOD window.

Given those results, cable executives are salivating at the potential revenue that could be generated if top box-office movies like Shrek Forever After or Avatar could be accessed by consumers from their home lounge chairs with a push of a button from a cable remote barely a month after debuting at the local AMC or Clearview Cinemas theater — especially at a proposed retail price of $10 to $20 per view.

Some MSO executives, like David Purdy of Canada's Rogers Cable, believe that offering movies on demand day and date with their theater premiere is an even better and more practical business prospect for both the studios and the theater owners.

"There's a huge community out there that will never go to the cinema. But they're willing to pay a premium for that movie day and date … They'll pay multiples over what they currently pay for VOD," Purdy said during last week's conference in Philadelphia.

But while the proposal looks great on paper, it might be more difficult to implement in reality. First, theater-chain owners trying to protect their profits will fight the shortening of the theatrical window tooth and nail. While there will be some tests revolving around a shorter theatrical-to-VOD window, one theater chain owner who wished to remain anonymous said theater proprietors will never accept a 30-day VOD window, much less one that's day and date with their movie premieres.

Summit Entertainment president of domestic television distribution Alex Fragen also said during the conference that such a radical move with respect to windows would also be detrimental to the current movie distribution chain, which also includes pay TV and basic cable syndication opportunities.

Even if the operators are able to achieve their goals, they will have to employ a major marketing and promotional campaign to train consumers on the new VOD window opportunities, which could prove to be a greater hurdle for operators than the theater owners.

Operators would have to create a new VOD movie price level for these short-window titles, which would ultimately confuse consumers used to paying $3.99 to $5.99 for traditional VOD movies. Further, the proposed $20 to $40 price tag for a 30-day or same-day VOD/movie-theater window for a newly released film could present a negative value proposition for consumers. For a consumer that doesn't have a 50-inch HDTV with surround sound in his home, suddenly paying $10 to experience a film in a theater could deliver a greater bang for the buck than VOD.

"Convenience is great, but for the majority of households, the VOD experience in watching movies is inferior to that of going to a movie theater," said Leichtman Research Group president Bruce Leichtman. "It's clear the knee-jerk reaction from theater owners is that 'this is bad for us,' but there's another part of it that might put the price in perspective and actually benefit theater owners."

Cable has provided a sneak peek at their grand plan for offering Hollywood movies to consumers. But much like traditional movie trailers, the preview may be better than the actual event.

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