Telco locks down major studio deals, uses 2-day window

Verizon Communications is stepping up to compete more aggressively for a share of the growing VOD biz, locking down film deals with all of the major studios and using a two-day rental period as an incentive to get consumers to rent more movies.

Company will start promoting its 48-hour VOD rentals through FiOS TV with 20th Century Fox’s “X-Men: First Class” today; the film was released on homevideo a week ago. Future pics include Universal’s “Fast Five,” Sony’s “Zookeeper,” New Line’s “Horrible Bosses” and Disney’s “Winnie the Pooh.”

Most VOD services, especially from cable and satellite companies, rent new titles for 24 hours. But they’re now likely to follow suit with their own two-day rentals.

For years, Hollywood has been unwilling to lengthen the digital rental window, but now that VOD revenue has become significant enough to boost bottom lines, studios are warming up to experimenting.

During the first half of 2011, VOD earned $929 million, up 4% over last year, while electronic sales of pics also rose 4% to $270 million, according to the Digital Entertainment Group. Subscription-based streams of rented fare through the likes of Netflix rose 46% to nearly $1.6 billion.

Verizon’s argument to studios was that the additional day will increase sales since consumers will be able to start a film one night and finish it the next.

“We’ve been working with (the studios) to move into this direction for a while,” said Garrett Rieman, who manages on-demand programs for Verizon’s FiOS TV. “The value proposition to the customer is significantly greater” with the extra time. “It just makes sense.”

The company didn’t disclose just how many people start and stop their rentals, but Verizon is eager to stand out from its cable and satcaster rivals any way it can as it builds up its VOD library, which contained 24,000 titles in April, with 15,000 of those free to view. Among those, 3,800 are in HD each month.

Comcast claims a library of around 25,000 VOD titles, while Netflix has more than 20,000.

Verizon rents titles as streams for $4.99 in standard definition, while HD versions are $5.99. It sells pics for $16.99.

Studios have been eager to get their films onto as many digital platforms as possible, believing incremental sales will add up over time to become a lucrative business that will make up for DVD’s decline.

Thus the studios have been attracted to Verizon’s Flex View service, which lets FiOS TV subscribers rent and purchase films day-and-date with their homevid bows and move those titles to their computers and mobile devices like tablets and cellphones — similar to how Comcast offers VOD fare through its cable boxes, online and its Xfinity TV iPad app that launched in May.

More of that’s expected in the future, with the mobility of purchases seen as another lure to increase digital sales of films and TV shows and get consumers to move away from rentals. Even Virgin America’s revamped in-flight entertainment service rolling out late next year, will push the sale of VOD titles onto mobile devices.

That’s especially going to be the case as companies from Disney and Apple to the consortium behind UltraViolet promote digital lockers to consumers who don’t want their digital files tethered to a single device.

“X-Men: First Class” is the first Fox title the studio is selling on Flex View, which offers 3,000 titles to purchase.

Verizon will promote the newer Hollywood releases on the Flex View guide and through banner ads, as well as to the 4 million subs that receive its Spotlight magazine and another 2 million that opt in to its email blast.

“We’re open to new ideas and trying things out,” Rieman said. “And over time when you’re the MSO that’s doing that others are willing to try new things with you.”

Only FiOS TV customers can currently use Flex View. But that could soon change as Verizon looks to pair up with other platforms like Sony’s PlayStation 3 and Roku to allow access to the VOD service the way Netflix, Amazon, Vudu and Hulu have apps on devices.

Deals come as Verizon’s FiOS TV and AT&T’s U-verse are in expansion mode. Whereas cablers and satcasters have seen subscriber numbers decline during the second quarter (down to 100.9 million from 101.4 million), Internet Protocol TV (also known as IPTV) providers like Verizon and rival AT&T U-verse boosted their numbers by 366,000 to 7.9 million subs during the period and are expected to grow 7.2% each year through 2015, according to research firm IHS iSuppli.

At last count, Verizon had 3.8 million FiOS TV customers and another 4.5 million FiOS Internet customers. There are 1.2 million Verizon FiOS TV households in Southern California.

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