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Digital Window Not Ready for Prime Time

Cloudy With a Chance of Meatballs
Cloudy With a Chance of Meatballs

By : Erik Gruenwedel | Posted: 01 Apr 2010

Hollywood’s aim to create a retail window for new release movies has some analysts singing praises for another window, the so-called “hospitality” or “digital window,” whereby titles are made available at a premium price for electronic rental, ahead of the DVD/Blu-ray Disc release.

A stepchild to the groundbreaking 28-day buffer Warner Home Video created for its titles prior to their rental dissemination via Redbox kiosks and Netflix, studios appear reluctant to throw major titles at a pre-emptive digital window despite some initial efforts, significantly greater margins and reduced exposure to piracy.

Satellite operator DirecTV has been offering subscribers video-on-demand (VOD) access to the movie Pirate Radio more than a month before the title’s April 13 release on DVD by Universal Studios Home Entertainment.

Sony Pictures made available for rent the animated title Cloudy With a Chance of Meatballs to the owners of Web-enabled Sony Bravia televisions and Blu-ray players ahead of the packaged media release in January.

Starz Media last fall bowed Rob Zombie’s new animated film, The Haunted World of El Superbeasto, on VOD to DirecTV, Dish Network and Comcast subscribers for $6.99 — $2 more than the typical VOD new release. Starz released the movie in limited theaters a week later, and on DVD and other VOD channels three weeks thereafter.

“We expect more studios to implement a digital window,” Richard Schackart, media analyst with William Blair & Co. in Chicago, wrote in a note.

Schackart said the changing market for home entertainment continues to challenge existing business models and create new opportunities.

Speaking last month at a conference in London, Jim Wuthrich, president of international home video and digital distribution at Warner Bros. Home Entertainment Group, said the studio realized margins of from 60% to 70% for titles released on VOD day-and-date with packaged media.

Wuthrich said Warner’s top VOD title in 2009, Gran Torino, generated $60 million, including electronic sellthrough (EST), with worldwide digital revenue to increase 19% this year, including $900 million for EST.

Analysts say studios could circumvent existing distribution deals by releasing new releases electronically via a “hospitality window” earmarked for alternative audiences such as those aboard commercial airplanes, public places and hotel PPV.

Richard Doherty, director of The Envisioneering Group, a Seaford, N.Y.-based media and technology think tank, said tweaking license contracts for evolving technologies has been a principle laggard in Hollywood. 

“If you call digital download hospitality, those deals could happen much quicker,” Doherty said.

The analyst said discussions at the studios continue, underscored by the projected fall launch of the Digital Entertainment Content Ecosystem (DECE), which is intended to provide a uniform file format allowing content to play on any service or device built, including a set-top box or portable media player.

Disney has said it would roll out later this year another initiative, “Keychest,” which also allows consumers to purchase movies and TV shows online and watch them on their computers, mobile phones and other portable media devices.

“You and I will know its real when we see theater trailers for it,” Doherty said.

Indeed, representatives from 20th Century Fox Home Entertainment, Universal Studios Home Entertainment and Lionsgate all said there were no plans this year to pre-release theatrical titles electronically ahead of packaged media.


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