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Moody’s: Premium VOD on the Ropes?

7 Jul, 2011 By: Erik Gruenwedel

Possible revoke of controversial VOD platform is lone bright spot as declining attendance, waning consumer interest in 3D and underwhelming titles contribute to theatrical woes

Hollywood’s controversial attempt to sell consumers access to movies in the home for $29.99 months before their disc release soon could hit the cutting room floor, according to a new report.

In a critical mid-year report of the theatrical market, Moody’s Investor Service — according to online reports — says studios will revisit the strategy of yanking select movies early from their theatrical run and releasing them on premium video-on-demand “because it is in their economic interest to do so.”

To date, satellite TV operator DirecTV has been the only major multichannel video operator to offer premium VOD — dubbed “Home Premiere” on a nationwide basis. It currently offers drama Water for Elephants from 20th Century Fox Home Entertainment.

The operator has not released any data on consumer response to premium VOD, which theatrical operators have universally decried as an affront to their business.

Moody’s said studios would be better served allowing movies their full theatrical run — and not doing so undermines long-term support for packaged media (DVD/Blu-ray Disc), transactional VOD and pay-TV channels.

Theater operators earlier this year lambasted efforts by major studios to roll out select titles on premium VOD eight weeks after their theatrical release. Several chains threatened to not screen titles earmarked for premium VOD, in addition to removing theatrical signage, among other retaliatory measures.

Meanwhile, Moody’s analyst and the report’s author Karen Berckmann wrote that studios must jettison “complacent” strategies, including shortsighted attempts to boost revenue through 3D.

“Otherwise, they may have to rethink their longstanding complacency with high debt levels and shareholder-friendly policies in order to maintain their ratings,” Berckmann wrote. “Despite the ups and downs of the summer box office, we think U.S. movie-theater attendance growth will continue to weaken, making it harder for theater owners to increase [pre-tax earnings] over the next five years.”

Indeed, Transformers: Dark of the Moon, which was primarily shot in 3D and generated 60% of its opening box office revenue in the format, disappointed analyst Eric Handler with MKM Partners.

“Given Paramount’s big 3D marketing push for Transformers, we are a little disappointed by this outcome,” Handler wrote in a note.


About the Author: Erik Gruenwedel

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