Studios see light at end of ‘dark zone’

Fox digital topper touts strategies for harnessing digital sales in bid to grow homevid revenue.

Fox is trying to bring a little more light to “the dark zone,” but it’s a tricky proposition.

Peter Levinsohn, 20th Century Fox’s prexy of new media and digital distribution, detailed the film studio’s focus on harnessing the potential of digital distribution to enhance home entertainment revenue and combat piracy in his presentation Monday at Variety’s Entertainment and Technology Summit. Studio brass refer to the four-month period between the time a movie leaves theaters to its first availability on VOD or physical disc as “the dark zone,” Levinsohn told attendees at the Ritz-Carlton hotel in Marina del Rey.

“One of the problems with it is that during this time, if someone wants to watch a particular movie and it’s not available, they may be tempted to seek out one of the many illegal alternatives,” Levinsohn said. “This is obviously not a good thing for our business.”

The solution is not to do away with the traditional windowing pattern for theatrical features — not by a long shot, Levinsohn stressed. But Fox is experimenting with its Digital HD initiative to give consumers an early shot at owning a digital copy of a title two to three weeks before it hits as a physical disc.

Like all studios, Fox is treading cautiously in carving out new homevid windows so as to not antagonize exhibs. At the same time, to stabilize homevid revenue, the industry needs to move consumers toward higher-priced digital ownership rather than rental options. Fox has been encouraged by the early returns from its first big Digital HD release for “Prometheus,” which bowed Sept. 18 as a download-to-own title offered for $14.99.

“We’re very conscious of the importance of the theatrical window to the long-term viability of our industry, and the fact that what makes that experience so special is the capital investment required from our partners in exhibition,” Levinsohn said.

“Our strategy has been to keep an open dialogue with exhibition as we evaluate different models that might make sense during this period. The trick is to find the right balance between window and pricing for films no longer in theaters, which protects the value of the theatrical experience while also recognizing that there are other options that are much cheaper,” he said. “We’re still in search of the right model, but what we do know is that the dark zone isn’t good for anyone — not the studios, exhibition or consumers.”

As much as the majors are focused on growing the digital pie, Levinsohn urged caution in projections of massive shift in consumer behavior happening overnight.

“The notion that consumers are moving en masse from hard media to virtual offerings, or that they’ve stopped purchasing in favor of renting, is a gross oversimplification,” he said. “The great majority of consumers don’t act in only one mode — broader choice has actually made them more multi-dimensional. Often, the same consumer buys discs, uses VOD, subscribes to Netflix, purchases movies via download and maintains his (multichannel video distributor) subscription.”

In fact, Fox’s research indicates that consumers’ decisions on how and what to purchase “vary among offerings and content,” he said.

The sales activity for “Prometheus” — which was widely distribbed on a host of transactional platforms including Amazon, iTunes and GooglePlay — has been illuminating, Levinsohn said, because the studio’s research found that 30% of buyers were either new to digital-to-own transactions or consumers that “traded up” after typically renting film titles online.

“This gives us great confidence that with a more compelling consumer offering and sustained support, we will be able to dramatically expand the digital ownership market,” he said.

Levinsohn pointed to other important factors driving the growth of digital distribution as a mainstream entertainment options, chiefly the accelerated pace of broadband penetration and improvements in download speeds. He referenced Google’s nascent test of a bundled Internet and video service under way in Kansas City that aims to offer download speeds of 1 gigabit per second — which would mean a two-hour high-def movie could be downloaded in less than one minute.

“This just goes to show that the possibilities for the distribution of content will explode in the years to come,” he said.

On a separate panel later in the day, more studios execs echoed Levinsohn’s sentiments. Mitch Singer, chief digital strategy officer at Sony Pictures Technologies, seconded the notion that there’s only so much adjustment of windowing that’s possible. “I’m not so sure it’s easy to go day and date, it’s very disruptive,” he said. “You will see some studios playing around the fringes but I’m not optimistic it is going to become the model for the future.”

Dennis Miller, head of digital at Lionsgate, fell in line behind Levinsohn and Singer. “I do believe it’s a problem for the industry but I don’t believe there’s an easy solution,” he said.

Singer also predicted that studios will continue to adjust the electronic-sell-through window for features as Fox has done with “Prometheus.” He noted that Sony has been experimenting with release dates, citing its early digital window for last year’s comedy “Bad Teacher.”

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