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Report: Consumers Will Pay More to Rent Hi-Def VOD, and Burn Movies to Disc

15 Apr, 2008 By: Erik Gruenwedel

Consumers are more likely to pay a premium for high-definition video-on-demand and Web-based movie rentals when released the same day as DVD, according to a new report.

Based on a study of 2,000 consumers, New York-based consulting firm Oliver Wyman said respondents would pay from $7 to $9 to rent HD VOD movies and $5 more for digital downloads if the files could be played on multiple devices, burned to a blank disc and stored online.

Closing the release window between DVD and VOD, coupled with HD and increased functionality for digital files could represent a $5 billion increase in net annual domestic movie spending based on current $3.99 pricing for standard DVD and VOD movie rentals, said the study.

Wyman said current combined annual movie spending in the U.S. is $50 billion, including $28.7 billion on DVD.

The study said consumers prefer DVD to digital download when purchase a movie, but might be more open to purchasing online if they felt digital files were secure and could be burned to a disc. Until that happens, consumers prefer renting (streaming) movies online to purchasing.

Still, Wyman said increased broadband penetration in homes, faster download times and consumer awareness will help spur about $2.5 billion in Web-based movie download sales by 2009.¬

The Wyman study also found that Blu-ray movies would help generate a 6% increase in packaged media revenue by 2010.

Wyman said same-day HD VOD and Internet rental would have a marginal impact on DVD sales. Indeed, the report suggested retailers could charge a $2 premium for DVDs that included a digital copy playable on other devices.

Indeed, ongoing tests by cable television operators and studios attempting to determine the effect same-day VOD and DVD releases have on packaged media sales have found DVD sales actually go up. Warner Bros., which has spearheaded the tests in Denver and Pittsburgh together with Time Warner Cable, Comcast and others, has said initial findings indicated a 10% rise in DVD sales and 2% decline in DVD rentals.

Wyman's report said studios could widen the release window for lower priced catalog fare.

Wyman said retailers should encourage sales of DVDs bundled with a digital file, establish Web-based relationships with customers while at the same time maintaining marketing efforts toward consumers who prefer packaged media.

“This research reveals a clear opportunity for the industry to introduce new offerings that tap unmet consumer demand, while fitting well with existing movie distribution channels,” said Mark Teitell, a San Francisco-based partner with Oliver Wyman. “Ultimately, the consumer will benefit the most, and be willing to pay for those benefits.”

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