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Warner Extends Disc Embargo to 56 Days

10 Jan, 2012 By: Erik Gruenwedel

As expected, Warner Bros. Home Entertainment Group Jan. 10 formally extended the existing 28-day embargo on new release DVD and Blu-ray Disc titles in select channels to 56 days.

Warner made the announcement at the Consumer Electronics Show in Las Vegas together with Netflix, which going forward will make available to subscribers the studio’s new releases 56 days after the retail street date.

The impact should be negligible to Netflix, which continues to put all of its resources and marketing into streaming and not packaged media. Warner is balancing its home entertainment revenue streams by creating different times at which a product is available at different prices. A staggered schedule allows the studio to maximize the sales potential of its theatrical new release titles and VOD offerings.  Agreeing to the embargo, if nothing else, underscores Netflix’s desire to help Warner sustain sellthrough.

"Since we implemented a 28-day window for subscription and kiosk, we have seen very positive results with regard to our sell-through business," said Mark Horak, president, Warner Home Video North America. "One of the key initiatives for Warner Bros. is to improve the value of ownership for the consumer and the extension of the rental window – along with our support of UltraViolet – is an important piece of that strategy."  

“Netflix wants to ensure members have continued secure access to Warner Bros. DVDs and Blu-ray discs and, as such, is accepting the 56 day holdback,” said Netflix VP of content Anna Lee in a statement.

Russ Crupnick, senior industry analyst with The NPD Group, wonders whether studios' attempts to manufacture scarcity of new product through windowing matters anymore to consumers in today's movie retail environment.

Crupnick said NPD research indicates that more than 90% of renters would not consider acquiring a title through alternative channels, i.e. sellthrough.

"The challenge is that the extended window will likely help only a select number of titles, and extending the window may actually hurt some fringe releases," Crupnick wrote in a blog. "Consumers will simply rent them later on, or maybe not at all."

At the same time if the extended windows increase sellthrough at higher margins just 3%, it's an incremental win for studios, the analyst said.

He said the effect spearheaded by Warner to establish "appointment" viewing of movies is diminishing with the rise in VOD options and DVR use. A core value of home entertainment has always been the direct impact on studios' bottom line, which results in the production of more compelling movies. Yet, Crupnick wonders when a "Triple-A" title isn't available for rent on street date will consumers simply switch to time-shifted TV content or streamed episodes of "Breaking Bad" on Netflix.

"The question is whether this longer window between release and rental availability will have the desired result," he wrote.



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