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Analyst: Studios Raising VOD Prices

9 Jan, 2014 By: Erik Gruenwedel

B. Riley & Co. analyst Eric Wold says pricing will increase by $1

Expect to see transactional video-on-demand pricing on new-release movies increase by $1 to $5.99 in 2014 as studios and content holders look to drive greater margins on digital rentals, according to Eric Wold, analyst with B. Riley & Co. in Los Angeles.

Home entertainment studios generated $2.1 billion in transactional VOD revenue in 2013 from multichannel video program distributors and third-party platforms such as Walmart’s Vudu.com, Target Ticket, iTunes, Amazon Instant Video and Best Buy’s CinemaNow, among others, according to DEG: The Digital Entertainment Group. That was less than 5% above what was generated in 2012.

Wold said the price increase would be rolled out on select rentals throughout the year. Electronic sellthrough (known as Digital HD) pricing remains unchanged at $14.99 to $16 depending on the title.

“Keep in mind that this is not something that can be done by all studios simultaneously, or that would be collusion,” Wold said. “They can obviously follow each other’s lead on price changes though.”

Regardless, Wold said the VOD price hike would be a positive for Redbox, which rents new-release DVDs for $1.20 ($1.50 for Blu-ray Disc). Of course, Redbox is subject to 28-day delays on new releases from Universal Studios Home Entertainment, 2oth Century Fox Home Entertainment and Warner Home Video.

“While the typical VOD customer may not be that price sensitive [to a price hike], we view a widening gap between VOD and kiosk rental prices as an incremental driver of both demand for Redbox for those customers on the fence as well as an opportunity for Redbox to consider additional price increases as the perceived value of Redbox becomes even greater for all consumers,” Wold wrote in a Jan. 9 note.

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