Time Warner CFO: Windows Up Home Entertainment Margins 15%2 Mar, 2011 By: Erik Gruenwedel
Warner Home Video’s trendsetting windows erected around new-release movies offered to Netflix and kiosks (notably Redbox) has helped the studio realize a 15% margin lift compared with titles not embargoed at least 28 days from street date, according to parent Time Warner CFO John Martin.
Martin, who was speaking March 2 at a Morgan Stanley technology, media and telecom conference in San Francisco, said the studio is trying to drive consumer transition from physical media to electronic sellthrough or rental through pricing and windows.
“For us, digital transactions are better than physical transactions,” Martin said.
Indeed, Warner Home Video was the first studio to offer new-release titles on transactional video-on-demand the same day as DVD and Blu-ray Disc. Martin said the decision is based simply on margins, which he said are typically double for digital distribution than physical.
“You try to advantage the channels where you are earning the most money,” Martin said, adding that the industry as a whole appeared to be coalescing around the concept of premium VOD. That channel would make available select movies in the home in high-definition at a higher price (about $25) weeks after their theatrical debut.
“Putting in a window for Netflix and Redbox, we’re convinced, was helpful to us and the right thing for us,” Martin said. “We are currently evaluating the window and economics we are getting for those channels. You would certainly rather have the window than not have the window.”