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WHV's Lieberfarb Hints at Euro Day-and-Date Video Releases

30 Nov, 2001 By: Staff Reporter

MONTPELLIER, France -- Warner Home Video president Warren Lieberfarb gave the clearest indication yet Thursday that the distributor is going to release VHS sell-through and rental titles at the same time in Europe, mirroring its current DVD strategy there.

In an unscheduled appearance at the Perspectives in European Video conference, Lieberfarb said Warner intended to use the Rental Right Directive legislation to release all video product day-and-date.

The Rental Right Directive allows European distributors to charge different prices to rental and sell-through video retailers for releasing at the same time.

This would allow Warner to abandon the traditional practice of a higher-priced VHS rental release followed by a sell-through-priced release six months later.

Under the RRD, if a retailer intends to rent a title it must pay the distributor higher fees for each copy that the retailer intends to rent. Should a retailer want to have the title priced for sell-through it pays a lower price from the distributor, but has no privilege or right to rent that copy.

By comparison, in the United States no such restrictions apply.

"I would argue that the proper application of the Rental Right will bring more consumers into the packaged video business as both renters and buyers," he told an audience of around 160 European video executives.

"It will protect the video window against erosion from the television networks who want the product sooner and sooner and it will be a net benefit to both."

Lieberfarb stressed video's integral role in the revenues of the U.S. major studios.

Of the $20 billion -- $21 billion in film revenues generated by the studios, he estimated 56% comes from home video. "Video is the underpinning of the financial model. It isn't ancillary, it is primary," he added.

Key to the continuing survival of video as a format in the face of competition from television and video-on-demand, he argued, was day-and-date availability. While Warner had so far pioneered day-and-date availability of DVD sell-through product with VHS rental, he said this should be extended.

Lieberfarb said that Warners research had shown that awareness of DVD as a format was nearly 100% on a global basis, but that in Europe the interest in buying DVD hardware was 50% of that in America.

"One of the distinct issues limiting people's real interest in buying it or having levels comparable to the United States is that there is a significant amount of product in which there is a delay between the availability on VHS and availability on DVD. Hence, we are back to protecting the VHS rental model rather than moving to a new business model that I believe is proving to have the kind of growth characteristics that are beneficial to all classes of trade -- rental and sale -- and clearly beneficial to the entities and the artists who create the product," he said.

He went on to say that day-and-date releasing on video product would not be extended to the video-on-demand window.

He conceded that any discussion about VOD in Europe was largely academic because in the near term it was not a meaningful format but said: "I think we are going to get a higher return per household on the sale of a mass-priced DVD than we are going to get per household on a VOD use. The pricing of VOD will be comparable to rental, the pricing on a DVD -- because it is a packaged media that has a higher perceived value -- will probably be multiples of the VOD fee.

"And when you look at the revenue split between ourselves and the VOD operator -- versus our margin on selling a DVD -- our margin per household, in my opinion, will be better selling a DVD."

He also said he was not convinced that it was in "human nature to point, click and pay per use for programming made available on a television screen."

He doubted that VOD would ever become a mass phenomenon if it is based on a price per picture rather than a subscription model. "I have some real questions about whether -- not withstanding the convenience of VOD -- it follows naturally to buy individual movies when everything else is free or on a monthly subscription."

Lieberfarb then weighed into the theatrical to video window, calling it an "antiquated" model based on a time in the early 1980s when there were around 12,000 theaters in the U.S. "The movies liquidate their useful life much faster than they did 18 years ago and the convention of a six-month window is antiquated in the U.S., in my opinion, and I think the convention in Europe is also antiquated," he said.

"I think the strength of the exhibitor lobby and the politics that have gone into the theatrical to video window is ridiculous," he said.

Lieberfarb's appearance was organized by analysts Screen Digest. The two-day conference concludes today.

The main keynote speaker was Stephen Moore, president of 20th Century Fox International.

Moore, who spoke on the future of the home video business, also reflected on the declining importance of the international video business in the 1990s in comparison with the United States. From around 46% of the business, it has fallen to 27%. This, he said, would be redressed as the rest of the world caught up in terms of DVD hardware penetration. The United States currently has a DVD player penetration rate of 20-25%, while in the top 10 markets outside North America it is at 6%.

"Clearly there is significant room for growth and we should all be hopeful that there will be dynamic change in the future," Moore said.

--Sam Andrews for The Hollywood Reporter

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