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Is Indie Premium VOD Getting a Pass?

31 Oct, 2011 By: Chris Tribbey

Margin Call

When Universal Studios Home Entertainment Oct. 5 announced it would offer Tower Heist on premium video-on-demand 21 days after its Nov. 4 theatrical launch, theater owners rebelled and industry analysts lambasted the $60 asking price.

A week later Universal dropped the plan.

On Oct. 21 Roadside Attractions’ Margin Call bowed in select theaters on the same day it was available on VOD, with the VOD price nearly 40% cheaper than ticket prices.

And nobody said a word.

The National Association of Theater Owners (NATO) and members of the creative community came out earlier this year strongly against a premium VOD plan by several major studios that would see certain films delivered to homes two months after theatrical. But Magnolia Pictures and IFC Films have been offering day-and-date VOD with theatrical  release for years, with Magnolia offering some films weeks before theatrical release. Very little pushback has been seen from the theaters.

Are independents getting a pass in the advance VOD world, while major studios face nothing but blowback?

“The day-and-date for VOD on something like Margin Call makes sense because they can leverage the theatrical spend on marketing, which is likely to be a lot less than for Tower Heist and take advantage of any early buzz,” noted Russ Crupnick, entertainment industry analyst for The NPD Group. “Plus, if it’s not heading for wide theatrical release, you’ve got an audience that might want to see it but won’t have options.”

It’s no surprise that more content owners — studios and independents alike — are turning to bolder VOD options.

While disc sales dropped 16.3% during the second quarter of 2011, according to DEG: The Digital Entertainment Group, rental — including streaming and VOD — grew 11.16% to $2.06 billion. During the first half of 2011, consumers spent $4.2 billion on transactional video, including VOD.

“VOD allows an independent film immediate access into 100 million-plus North American homes through cable, satellite, telco and online companies,” said Nolan Gallagher, founder and CEO of Gravitas Ventures, which specializes in worldwide independent VOD programming. “Films that are simultaneously in theaters will frequently receive prominent merchandising in VOD storefront areas [website or cable home pages listing VOD movies]. Consumers are becoming increasingly aware of these VOD storefront areas and appreciate the early opportunity to watch films that may not yet be at their local theater.”

Still, it’s not an easy sale for theater owners.

Greg Laemmle, president of Laemmle Theatres, a specialized theater chain in Southern California, said he understands content owners’ — especially independents’ — need to find ancillary revenue wherever they can. But that doesn’t make early VOD any easier for theater owners to swallow.

“We’re not opposed to dabbling in this, but from our experience, we see lower box office [revenue],” Laemmle said. “On certain titles day-and-date VOD is going to result in a lower audience. We have a very stable business with theatrical, and you have to be careful with it.”

Laemmle does see the difference between smaller titles such as Margin Call and major studio ventures such as Tower Heist: “With Tower Heist there would be a lot of teen boys who wouldn’t be in theaters with [VOD 21 days later].”

Independent analyst Rob Enderle said the expected demand by theater owners of major studio releases is why independents can experiment more with advance VOD, and profit from it.

“Independent movies often have low marketing budgets and limited demand, making them iffy already for the theater owners, with the risk of VOD pulling away some of that demand theater owners are worried about making a profit,” he said. “Larger titles are well marketed and tend to fill theaters anyway, plus the theater owners are aggressively chasing them and likely don’t want to upset the major studios. It’s a different dynamic.”

Ken Campo, SVP and GM of West Coast operations for independent distributor Questar, noted that major studio or independent advance VOD shouldn’t change the theater-going dynamic much.

“Major releases get all the attention when released early on VOD,” he agreed. “I just don’t see a consumer staying away from the movie theater because it might be available on VOD at the same time. It’s all about the experience.”

About the Author: Chris Tribbey

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