Exhibitors, rental stores lose out

LONDON — The major studios could boost their U.S. distribution revenues by 16% if they released their movies simultaneously in cinemas, on DVD rental and video-on-demand, according to a new academic study.

The report, published by London’s Cass Business School, suggests that a radical restructuring of release windows could also lead to similar gains for the U.S. studios in Germany and Japan.

But under these scenarios, other participants in the revenue chain, notably exhibitors and DVD rental outlets, would lose out to varying degrees.

So the Cass study also suggests a compromise model for the U.S. and Germany, giving the U.S. studios a smaller gain, but ensuring none of the other participants would lose out.

However, it was unable to find such a happy compromise for Japan.

The study was conducted by academics at Cass, the Bauhaus-University of Weimar (Germany) and the Universities of Hamburg (Germany) and Missouri-Columbia (U.S.).

It investigated revenue generation across cinemas, DVD retail, DVD rental and video-on-demand — although it did not take into account TV revenues, or the impact of restructuring DVD windows on the TV value of movies.

The study found that the major studios can achieve the greatest boost to their revenues from U.S. distribution by releasing to DVD rental and VOD at the same time as theatrical, with DVD retail following three months later.

That scenario would, however, result in a 40.1% collapse in exhibitor revenues, and a 14.9% drop in revenues of DVD rental chains, although DVD retailer revenues would surge by 49.6%.

Lead researcher Thorsten Hennig-Thurau, professor of marketing at Bauhaus and Cass, commented, “Many cinemas would have to radically scale down their operations or close their businesses completely. Those that remain would probably look different from today’s cinemas, as they would have to provide consumers with reasons for preferring them to watching the same new film at home.”

A compromise scenario, with a three-month window to DVD retail and a six-month window to DVD rental and VOD, would give a 7.3% revenue boost to the studios, a 0.4% uptick to the exhibs, a 4.5% increase for DVD renters and an 11.1% gain for DVD retailers.

In Germany, the studios could get an optimum 14.2% gain by moving to a three-month window for DVD retail, with a 12-month window to rental and VOD. That would also increase revenues for exhibs (by 14.6%) and DVD retailers (28.3%), but would cause a 30.9% loss for DVD rental stores.

A compromise scenario with a six-month window to DVD rental would ensure that all the participants would enjoy modest or marginal revenue gains.

In Japan, the studios could maximize their revenue gain by introducing a three-month window to DVD retail, and a 12-month window to rental and VOD. This would boost studio revenues by 11.6%, exhibitor revenues by 5.7% and DVD retailer revenues by 65.8%. But DVD rental stores would lose out by 21.1%.

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