Windows Breaking the Mold

5 Mar, 2010 By: Susanne Ault

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Let’s say you need to shut down a Hollywood industry party. Instead of “Fire!” you might just whisper the word “windows.”

Tweaking the timing of when movies get into homes after the theatrical run is now a popular strategy in boosting flagging disc revenue. However, there is no real consensus on where the change should focus. Shorten the window between theatrical and disc? Eliminate the space between DVD/Blu-ray and video-on-demand? Or how about creating entirely new windows, such as premium early VOD and priority sales frames? Do all of that? Pick one or two?

The problem is that while all of these windows strategies are being tried, it’s too early in studio experimentation to know if anyone is getting it right. For example nearly all the studios rolled out select DVD/Blu-ray titles on the same day with VOD availability last year; but that didn’t stem an overall decline in home entertainment spending from 2008.

With that uncertainty, studios are not exactly speaking freely about decisions to alter windows. In fact few executives want to speak even on background about any aspect of the timing to view films at home.

“If you laid out all of the different delivery mechanisms and platforms, and you went to all of the different studios and asked what are you doing with these things, you wouldn’t get the same answer about what is most important,” said one studio president. “There’s no real consistency from studio to studio.”

Theatrical-to-DVD Window

Generally in the United States this window has remained relatively stable, with the average space between theatrical and DVD/Blu-ray release clocking in at 130.1 days (about four months) in 2009, according to Rentrak. That is actually slightly longer than the 128.7 average in 2008.

Theatrical exhibitors are scared that consumers will bolt from screenings if they think DVDs are just around the corner. Yet there is some evidence this window is under pressure to tighten, as consumers may be more willing to buy a DVD if it’s still fresh in their minds.

Plus, piracy fears appear to be pushing many studios to speed up the release of the film on disc. If studios can quickly offer legitimate copies to people, the thinking is that they will beat pirated product to market.

Tellingly, for the most important studio tentpoles making more than $100 million in U.S. box office, the average 2009 window was about a week less than in 2008, at 143 days. 

Out of piracy worries, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment are among studios that have moved to severely shorten the theatrical-to-DVD window in Russia to four weeks. There are similar efforts underway by studios to significantly cut this same window in China.

“We are seeing with the emerging markets of the world that the window has got to close,” said Alison Casey, head of global content at Futuresource. “Studios want to close down the ridiculous amounts of piracy there.”

Paramount Home Entertainment recently made some attempts to shorten the theatrical-to-DVD window with mixed success. With G.I. Joe: The Rise of Cobra and Paranormal Activity, Paramount released the titles on DVD and Blu-ray with about two to two-and-a-half month windows,  squeezing them into the fourth-quarter sales season and causing furor among exhibitors.

“They knew exhibitors would be upset with a short window on Paranormal, and they held off as long as they could in [noting a] DVD release,” said one industry source. “Paramount was taking retail orders on it before announcing it. But they still ended up losing some theaters.”

Paramount did not comment by press time.

In the latest window eruption, Walt Disney’s Alice in Wonderland is expected to street on disc in the United Kingdom three months after its theatrical bow, four weeks shorter than usual. Theatrical exhibitors objected, with Odeon cinemas reportedly first declaring it would boycott showing the film in affected territories, and finally relenting. Walt Studios Disney Home Entertainment did not comment, though reportedly the studio promised theaters the short window would only happen on a few releases a year.

DVD/Video-on-Demand Window

This window has experienced serious compression in recent months. Almost all of the major studios have trotted out certain DVD and Blu-ray titles the same day that they also made them available for VOD users. Warner Home Video and Summit Home Entertainment are consistently releasing the majority of their movies on disc and VOD simultaneously. Sony, MGM, Fox and Universal also are regularly offering such releases as well.

In 2009 more than 100 movies were offered on DVD and VOD simultaneously, which is about triple the amount that unspooled this way the previous year, according to Comcast.

The huge studio appeal for day-and-date is the profit margin. Studios can erase much of the transportation and manufacturing costs when delivering a digital signal versus a hard disc.

However, this trend has some holes in it, as Warner has recently pulled back on offering day-and-date movies, most notably with Harry Potter and the Half-Blood Prince and The Hangover. In these instances VOD availability came about a week after the titles streeted on disc in December. The studio made this call to boost the titles’ sales potential in stores.

“The sellthrough potential was pretty extraordinary, and the VOD was held back,” said a Warner source. “We wanted to do everything possible to enhance the sellthrough. The general policy is that virtually all our titles go out day-and-date with VOD. But maybe there are cases where you need to move the needle five degrees to make minor adjustments for a better return.”

The cable/satellite companies are pushing for studios to ramp up the frequency of day-and-date VOD releases. Their customers are increasingly demanding seeing movies in this fashion. Comcast reports eight of its top 10 watched VOD films in 2009 were released day-and-date with disc.

“One pragmatic reason for this is that viewership follows the marketing of DVD/Blu-ray, where the VOD title is more fresh in people’s minds if offered at the same time,” said Derek Harrar, SVP/GM of video and entertainment services at Comcast.

Early VOD, Priority Sales

Early VOD is an emerging window idea meant to target movie fans who would likely skip the showing in theaters. But they may pay an attractive premium for the privilege of digitally watching the films at home well before their disc release. The hope is that studios could create a new revenue stream for their films with people they wouldn’t normally be able to reach.

“It wouldn’t be above $30, and it would target a combination of younger adults who have new kids or empty nesters — people who like to go to the movies but aren’t into going out all the time,” explains one studio source.

Theatrical exhibitors are a major foe to this new window, as it would presumably cut the time they would exclusively hold onto a movie. Traditional video outlets are also wary as it may reduce the demand for the eventual disc release.

“We’ve always been interested in making this happen, but I personally don’t think this will happen too quickly,” added the studio source. “Exhibitors are pretty staunchly traditional when it comes to windows. And you don’t want to sacrifice your traditional home entertainment sellthrough revenues.”

Nevertheless there has been some spotty experimentation in this area. Last year Sony Pictures Home Entertainment offered an early VOD viewing of Cloudy With Chance of Meatballs via select Web-enabled Sony Bravia TVs and Sony Blu-ray players. Current owners paid $24.95 to watch weeks ahead of the title’s Jan. 5 DVD and Blu-ray bow; new purchasers of the hardware got to view for free.

Universal will roll out Pirate Radio for all digital platforms about one month before the DVD and Blu-ray streets in April. Retailers seem to bless this case as mostly a way to promote an indie film that few people saw in theaters.

Warner is pioneering the idea of a priority sales window by way of distributing its new releases to rental outlets Netflix and Redbox about a month after they bow elsewhere. The studio believes consumers will spend more for their titles if they want them fast. Netflix and Redbox are on board because they are getting Warner titles on the cheap.

For similar reasons Fox and Universal also are distributing titles to Redbox 30 to 45 days after they bow elsewhere, though not yet with the kiosk company’s approval.

At this point it’s impossible to predict how the window tinkering will shake out. But it’s a fair bet that 2010 will continue to bring experimentation.

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