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Analyst: Studios Must Cut Theatrical Window in Half

1 Feb, 2011 By: Erik Gruenwedel

With Netflix subscribers topping 20 million, Amazon on the cusp of launching its own streaming service and January box office revenue significantly down from a year ago, BTIG Research analyst Richard Greenfield says studios must cut the theatrical window by 50%.

Specifically, Greenfield said studios should expedite new releases on electronic sellthrough eight weeks (not 16 weeks) after their theatrical release. By doing so, the analyst believes studios can realistically charge $20 to $25 for electronic distribution while keeping about 80% of the revenue.

“Studios need to create an earlier release window where consumers do not have the ability to choose low-priced options such as Redbox or Netflix,” Greenfield wrote in a post. “Given that the first-sale doctrine does not apply to digital, it is logical to offer digital movies for sale/rent well before physical versions are made available.”

Currently only Warner Bros. has indicated it plans to bow select premium (rental) VOD releases in the first quarter. For some time now, studios have been touting transactional VOD and iVOD day-and-date with packaged media in an effort to generate higher-margin electronic rental revenue compared with physical.

Indeed, The Walt Disney Co. created an uproar last year when it cut two weeks from the theatrical window of then No. 1 box office movie Alice in Wonderland so it could expedite the title into the retail channel.

Santa Monica, Calif.-based research firm Interpret found that 11% fewer active moviegoers (those who watch at least three movies in the past six months) are going to the theater, and those who do are watching fewer movies. At the same time, more moviegoers (36%) are streaming full-length movies online, increasing 16% in the past year, according to Interpret, which said the data underscores a growing trend among consumers showing less interest in being the first to see movies in the theater.

Greenfield said higher ticket prices for 3D showings were a double-edged sword that helped minimize theatrical revenue decline in 2010 but also contributed to a 5% decline in actual theater attendance.

The analyst said he doesn’t doubt theater operators would balk at the concept of downsizing their business model 50% but believes the alternative to the studios is worse in the long run. He said theater operators pose a compelling argument that theatrical trailers help sell DVDs and theatrical revenue supersedes the amount of revenue studios could get from the same consumers buying/renting the movie separately.

“But who cares?” Greenfield wrote. “Disregarding what consumers want in a period of rapid technological change/development is a recipe for disaster.”


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