For years, homevid execs dismissed video on demand as a distant threat to their business. Now they’re ready to embrace it — up to a point.
Apple’s much ballyhooed iTunes movie rental service boasts impressive studio support — all six majors are onboard — but it won’t compete with homevideo head to head. Most hit titles won’t actually be available on the service until the traditional VOD window several weeks after their DVD release. And Comcast’s latest VOD initiative, unveiled earlier this month at CES, is even more limited in scope. Its offerings — 6,000 VOD titles a month by next year, with half of them in high-def — still pale in comparison to those at Blockbuster and Netflix.
Why so restricted?
Because studios are doing everything they can to protect DVD, their aging cash cow, until replacement technologies with equally rich margins take off: DVD sales generated $16 billion last year Stateside, and consumers spent $7.5 billion more on disc rentals. By comparison, VOD brought in slightly above $1 billion.
Studios recognize there’s a continuing appetite for VOD and want it to grow — but not at the expense of DVD or electronic sell-through, which operates under the same window as DVD.
Several studios are experimenting with day-and-date VOD releases, and one recently conducted a major study determining optimum windows and pricing for electronic sell-through, VOD, high-def discs and standard DVD.
“We are at that point where we realize all this is coming,” says one home entertainment topper. “I think you’ll see a lot of us looking closely at our windows and business models.”
“We’ve got to follow what the consumer wants,” says Universal home entertainment topper Craig Kornblau. “The name of the game is to evolve.”
Kornblau believes the iTunes deal, announced last week, will jumpstart digital delivery. “You can’t have a huge digital business unless you have Apple.”
Indeed, delayed availability aside, the ability to view iTunes video rentals on iPods is a significant step forward; fewer users are expected to pony up for an Apple TV device that will enable them to watch the rentals in their living room TV.
Comcast and cable operators like Time Warner have one distinct advantage over Internet-based services like iTunes: They’re already in viewers’ living rooms. Users can access VOD content from a set-top box then sit back and enjoy the movie without worrying about pesky download glitches.
VOD has been growing by leaps and bounds at Comcast, where subscribers took in 300 million views last month. But Diana Kerekes, who heads the cabler’s on demand service, admits that more than 90% of programs accessed have been for free — either gratis TV shows, movies from feevee channels or older studio releases.
“It’s a completely different decision whether you buy something or rent it,” Kerekes says. “It’s like when you decide to go to a movie theater or watch a movie at home.”
But as far as homevid execs are concerned, digital copies embedded on DVDs are an even better option than VOD. Fox, Warner and Sony have all embraced this as a way to grant consumers portability and notch a DVD sale at the same time, and other studios are expected to follow suit.
“I’ve spent my whole career trying to get consumers in the habit of collecting and owning movies,” Kornblau says. “But there are consumers that don’t want to own movies. We’ll do whatever we can do to get them to access our movies.”