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NATO Members Aware of Need for New Home Entertainment Revenue

12 Oct, 2011 By: Erik Gruenwedel

Theater trade group says its members are willing to work with studios on altering release windows on specific titles and markets

Theater owners’ euphoria over Universal Studio Home Entertainment’s decision not to release Tower Heist into the premium video-on-demand window 21 days after its theatrical launch could be short-lived, a representative said.

Patrick Corcoran, director of media and research with Washington, D.C.-based National Association of Theater Operators, in Los Angeles said the trade group is cognizant of the studios’ ongoing problems in the home entertainment market, including declining sales of DVDs.

“They have a problem in the home market and they need to somehow get back some of those revenues they’ve lost by the home market shifting to a rental market,” Corcoran told Home Media Magazine.

He said NATO’s worry is that when the studios get into a game of how short the window can be and at what price point, margins throughout the distribution food chain — including home entertainment — go out the window.

“As it stands right now, it’s a race to the bottom in terms of pricing,” Corcoran said, adding that studio efforts to impose release delays to Netflix and kiosks is the right idea.

The executive said NATO’s take on DirecTV premium VOD movies, released by studios six to eight weeks after theatrical bow at $29.99, thus far is that the consumer response has been tepid at best. The current theatrical window for a typical movie is four months.

Corcoran says the concern among theater operators is that the studios don’t fully understand the danger premium VOD poses to the entire distribution food chain.

NATO contends that studios have a marketing bonanza releasing movies first in theaters, a strategy that lays the foundation for home entertainment. Its concern is that should studios push the premium VOD window too close to the theatrical launch or reduce the price significantly, the result will be an indifferent consumer.

“Our concern is that you change that value calculation among the consumers,” Corcoran said. “People already make it when they see what movie is coming out. Now they are also making the comparison with other home entertainment offerings.”

Specifically, NATO believes consumers beset with home entertainment alternatives such as transactional VOD, subscription VOD, iVOD, rental kiosks and video stores have lots of options to watch movies, thereby reducing the need to watch the latest release.

“People in the home aren’t necessarily eager for new releases,” Corcoran said.

He said premium VOD, if reduced in price or encroaching upon the theatrical window, exasperates the home entertainment situation by cannibalizing theatrical revenue and confusing consumers.

“There really isn’t any consumer clamor to get theatrical releases into the home sooner,” Corcoran said.

Instead, he said theater operators are keen to work with studios to maximize home entertainment revenue by augmenting release windows in select markets on a title-by-title basis.

Corcoran said the current window affords studios the ability to adjust home entertainment marketing based on the title’s box office appeal. The studio argument to reign in marketing costs by releasing titles earlier into home entertainment to piggyback on theatrical marketing is specious, he said.

“Marketing for a title seems to dry up fairly quickly into the run,” Corcoran said. “No matter what, you are going to end up spending those marketing dollars for the home.”

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