Strategy worked for 'Twilight,' more titles to follow

Is “Twilight” the dawning of a new era for video-on-demand?

When Summit Entertainment released the vampire hit simultaneously on DVD and video-on-demand, it broke the oldest taboo in home entertainment: No other studio had released a pic grossing more than $100 million at the domestic B.O. that way, fearing VOD transactions would cannibalize disc sales.

As the entertainment biz inevitably moves toward a day when discs will give way to product delivered directly to TVs and computers, the business is poised somewhat uneasily on a tightrope. Summit and some majors like the day and date VOD and DVD release strategy; others are worried it will cut into DVD sales.

But that didn’t happen with “Twilight”: The March release became — and still is — the year’s top home entertainment title. Almost 8.5 million copies have been sold on disc or via download on sites such as iTunes, while rentals have exceeded 14 million transactions on all formats, with VOD accounting for a healthy portion of that.

Summit Home Entertainment prexy Steve Nickerson is convinced the release strategy paid off in greater overall coin.

“We’re pleased with the approach of offering consumers different ways to watch movies,” Nickerson says. “We were able to create a broader market and take advantage of marketing synergies.”

Indie suppliers such as IFC use the even more radical strategy of releasing mostly foreign and arthouse pics simultaneously on VOD and in theaters, but some majors are reluctant to condense the DVD window further. The stakes are higher for the majors, which is why –“Twilight” and some other titles notwithstanding — they are still hesitating to launch their biggest hits simultaneously on VOD and DVD during the all-important fourth quarter.

The day-and-date “Twilight” release fit Summit’s home entertainment strategy — make it simple for consumers to watch movies however they want — and served as a real eye-opener for rivals. Even Warner Bros., the most bullish studio proponent of simultaneous DVD and VOD releases, hadn’t tried it on a movie grossing more than $100 million before “Twilight.”

But in the wake of Summit’s success, the majors have begun stepping up their relationship with VOD. Warners released “Gran Torino”; the June release edged out “Twilight” as the top cable VOD title for the year. The studio will release “Four Christmases” and “Terminator: Salvation” simultaneously on both formats this fourth quarter.

Sony will release “Angels and Demons” that way Nov. 24 as part of a four-title test that also includes “Julie and Julia” and “The Ugly Truth.”

Universal, which began releasing smaller pics simultaneously in January, will bow “Bruno” on both platforms Nov. 17; Warners will also release “Orphan” simultaneously Oct. 27. The DVD-VOD windows of other major holiday titles range from one week to one month.

“Definitely, there are more studios experimenting with day-and-date releases than in the past,” says Kristie Fortner, VP of syndication for Rentrak’s Advanced Media & Info division, which tracks cable and telco VOD transactions.

According to Rentrak, in 2007, 10 movies were released day-and-date on DVD and VOD, a figure that more than tripled in 2008. That number already has been exceeded this year, with months to go. The average VOD window between DVD release and VOD availability is 21 days and dropping. That’s a considerable decline from the 45-day windows of the past.

There’s a good reason for the compression: Studios are trying to maximize coin at a time when the home entertainment biz has grown more fragmented. DVD sales are on the decline, Blu-ray has yet to take off, and Internet downloads are still tiny.

Studios don’t want to hurt DVD sales, but they also recognize that VOD fits into the trend toward consumers renting rather than buying. Studios vastly prefer VOD to disc rentals because they get a bigger cut of each transaction.

Studios also would much rather consumers watch movies on VOD than pay $1 for a Redbox rental, for example. Part of the reason several studios tried to impose revenue-sharing deals with the kiosk company was to ensure they got a bigger piece of each transaction.

Another reason to pump up the VOD: to harness marketing across distribution platforms. In the past six months, cable companies have begun to step up their VOD marketing in a bid for Blockbuster’s business, and to take advantage of new cable boxes installed during the digital TV conversion.

According to Rentrak, cable and telco VOD transactions are up 14% year over year. The research org has begun to track the much smaller Internet biz but does not release that data yet.

“If you consolidate that spending in all those markets, now it’s only up to consumers to decide how they want to purchase it, or if they want to rent instead of buying,” a studio exec points out.

To test how much this marketing might affect disc purchases, Warners recently tested pre-DVD releases of “Ghosts of Girlfriends Past” and “Observe and Report” with Comcast in Atlanta last month, and is considering another “try before you buy” VOD test with “Four Christmases” next month.

Warner will release “Harry Potter and the Half-Blood Prince” on VOD Dec. 15, one week after its DVD debut, and “The Hangover” will go VOD Dec. 22, one week after its bow on disc.

Fox, which released “Bride Wars” simultaneously in April, will launch “Night at the Museum 2″ on VOD 10 days after its early December DVD bow. The Mouse House maintained a 15-day window for “The Proposal.” And Paramount slotted “Transformers 2″ and “Star Trek” on VOD a month after their disc debuts.

However, companies like Summit question whether this old-fashioned window between DVD and VOD release does more harm than good in this fragmented media landscape, confusing consumers who want to see movies in myriad ways. Nickerson says his company believes in true content ubiquity.

This is why the studio continues to sell discs to Redbox and Netflix, and plans to stick with its day-and-date strategy — happily pocketing growing VOD coin in return.

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