Truisms about strict windowing of product may end up being tossed out the window
Comcast is quietly trying to wolf down Blockbuster’s lunch.Like other operators, the cable giant is hell-bent on tapping into the billions of dollars that people spend to buy and rent DVDs — and one scheme would put movies on Comcast systems the same day they touch down in the video store. The move comes as the key players concoct new ways to unite content with potential customers. The truisms about strict windowing of product may end up being tossed out the window. Sensing that the financially troubled Blockbuster is ripe for plucking, Comcast is sounding out the Hollywood studios on the following proposition: A Comcast customer with a digital box will see a menu listing for, say, “The 40 Year-Old Virgin” as much as six weeks in advance of its scheduled appearance on pay per view. For a fee of about $17, the subscriber could call up the movie for one immediate video-on-demand showing. Two days later, the DVD of “Virgin” shows up in the mailbox for the subscriber’s permanent collection. Universal hasn’t announced an exact DVD-release date for “Virgin” but it’ll probably hit Blockbuster within four months of its Aug. 19 theatrical premiere. If the “Virgin” DVD gets to the stores in mid-December, Comcast’s pay-per-view would most likely begin in late-January/early February. Russ Crupnick, media analyst with the NPD Group, a marketing/research company, dubs this strategy “instant rental with ownership.” Comcast and other cable operators who are exploring plans of this type are betting that for the first time the movie companies might be willing to collapse the exclusive window (anywhere from 30 to 60 days) that the video store has always enjoyed, lording it over the cable systems. Cable’s second-class citizenship during the last two decades prevented operators from turning pay-per-view into anything more than a lazily meandering revenue stream — just a trickle as compared to the multi-billion-dollar bonanza that changed the economic face of the movie biz when videocassettes, and then DVDs, created a whole new category of retailers. But cablers are convinced that times have changed. They plan to motivate the studios by awarding them the same generous split (as high as 80%) of each $17 DVD purchase that they get from Blockbuster or Costco. Offering fresh movies in video on demand, Comcast, for example, could turn its pay-per-view-movie operation, which grosses a half billion dollars or so a year, into what all operators seek: the killer application. Mike Egan, cable consultant and partner in Renaissance Media, says Comcast’s idea is the boldest strategy yet devised to counter “the poor treatment Hollywood has always given cable pay-per-view in the windowing of its movies.” “For individual subscribers who want to see movies early and are willing to pay for the DVD,” Egan adds, “it’s a good deal.” Major studios like Disney and Sony might spark to the proposition, he says, because “they could use Comcast as leverage against the big retailers,” like Wal-Mart and Costco. As a bargaining chip to get Wal-Mart and other discounters to pay a 10% hike for each copy of a new DVD, the studio might be prepared to keep it away from cable until the normal PPV window kicked in. The studios’ pitting buyers against one another would certainly be an unintended consequence of Comcast’s blueprint to drive the growth of movies on demand. One of the most vexing problems faced by Brian Roberts, chairman and CEO of Comcast, is that only 40% of the company’s 21 million customers subscribe to the digital box. That depressing statistic means that the other 60% have no access to Comcast’s digital services, from video on demand to personal video recorders to high-speed Internet access. Seeking aggressively to drag refuseniks into the digital world, Comcast has created an on-demand service that offers more than 300 movies and 600 different TV shows a month, 90% of them at no extra charge. Comcast has hired experts to negotiate with the major studios to buy as many as 50 library titles a year, at a total cost of $10 million, for use on an exclusive free-on-demand service called MoviePass. The service kicked off in January with titles from Columbia Pictures; it will soon add dozens of movies each month from the MGM library, a legacy of Comcast’s partnership with Sony to buy out the Lion last year. Meanwhile, going after Blockbuster’s DVD business is just another weapon in Comcast’s arsenal to make the digital universe so enticing that all of its subscribers will be compelled to install the souped-up boxes. But there are some skeptics. Tom Eagan, media analyst with Oppenheimer & Co., says the major studios may think twice about obliterating the video biz’ exclusive-window advantage over cable. Blockbuster may be struggling, Eagan says, but it still generates tons of rental income from DVDs, half of which gets funneled back to the studios in revenue sharing. If the buying of DVDs on cable poses a threat to the dollar volume from vidstore rentals, the studios may take a pass. And NPD’s Crupnick says that cable TV’s brainchild may sink of its own weight because most cable subscribers are unlikely to be interested in ponying up $17 to own the DVD of the typical theatrical movie. Instead, they’ll wait for six weeks until it becomes available for $3.95 on PPV. Or, if they insist on seeing it right away, they’ll repair to the corner store and rent it for $4.
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