Leading Hollywood’s effort to take back control of the homevid biz, Time Warner is planning to launch a premium video-on-demand service in the coming months and lengthen the delay that prevents rental companies like Netflix and Redbox from offering new releases.
Conglom will significantly shorten the window between a film’s theatrical release and its VOD bow from 90 days to 60 and will charge about $30 for the pic on the earlier date, mostly via cable operators.
Company sees premium VOD (which would be offered before DVDs and Blu-rays are released) as an opportunity to collect more coin on films after they bow at the megaplex considering that 90% of their box office is generated within the first four weeks of release.
Time Warner is said to be eyeing a pricetag of $25-$30, though analysts believe such premium services could potentially charge as much as $60, depending on the property.
First title is expected to bow sometime during the second quarter — Time Warner had previously said the rollout would occur during the first three months of the year, but chose to delay the move.
Warner Bros. Home Video declined to disclose whether it had yet chosen a title to test through the new premium VOD offering.
So far this year the studio has released only exorcist thriller “The Rite,” starring Anthony Hopkins, in theaters; it bowed Jan. 28. Liam Neeson actioner “Unknown” follows on Feb. 18.
Time Warner chief Jeff Bewkes hasn’t shied away from wanting to wage war against Netflix and Redbox. Exec said Wednesday that “a clear acceleration in consumer usage” of those movie rental outfits has forced the conglom “to re-evaluate the terms” of its deals with them in order to protect the amount of coin DVD and Blu-ray discs generate at retail.
Bewkes said the homevid biz’s transition to digital is “arguably the area of our business going through the most change right now,” and many other studio toppers would agree.
As a result, the exec wants to protect a lucrative area of Warner Bros.’ bottom line by imposing a longer delay than the 28 days to which Netflix and Redbox have currently agreed before offering up new releases once a DVD or Blu-ray becomes available in stores. That could increase to as much as 45 days, industryites say.
That may not only boost disc sales but also increase the window Warner Bros. and other studios are looking to create with premium VOD.
At the same time, Bewkes told analysts the conglom will consider increasing the price it charges those rental firms for the discs they either stock in their kiosks or offer as digital streams. “The current pricing and window are not commensurate with the value those kind of films are extracting,” he said. “We just think the value that our company should get from that (window) is considerably higher than what is there now.”
Move comes as studios saw the first sign of blood in the water last month: Redbox was caught offguard by the effects of the 28-day delay during the fourth quarter, saying it “severely underestimated” the impact; company lost $6 million-$8 million in revenue from 14 million fewer rentals during the last three months of 2010 as a result.
While Redbox has clearly been impacted by the delay, there has been no slowdown in the number of new customers drawn to Netflix’s streaming service, especially its digital streaming service — Netflix now has more than 20 million members.
Time Warner has discussed its premium VOD plans for some time and got the greenlight to launch such a service last May when the Federal Communications Commission approved a request by the Motion Picture Assn. of America to allow recently released films to be transmitted to U.S. households via a “secure high-definition transmission line from their cable or satellite providers” prior to DVD or Blu-ray release.
The changing homevid sector made shaking up Hollywood’s release windows inevitable. Traditionally, pics were released on DVD four months after their theatrical run; on VOD 45 days later; on pay TV channels 18 months after that; and then shown for free on ad-supported broadcasters two to three years later.
Studios have already been experimenting. Last year Disney made “Alice in Wonderland” available 88 days after its theatrical run. Paramount had previously made “G.I. Joe: The Rise of Cobra” and “The Goods: Live Hard, Sell Hard” available after 88 days in theaters.
So far, Par has said it’s not interested in pursuing a premium VOD strategy.
Naturally, the decision has ruffled the feathers of the National Assn. of Theater Owners, whose members believe a shorter theatrical window would hurt the amount of money they can collect at the box office.
Patrick Corcoran, director of media and research for the National Assn. of Theater Owners, told Variety the org hasn’t changed its stance on the issue since Warners first alluded to a proposed VOD platform last year.
In June, NATO made its opinion clear when it placed an ad in the trades, describing shortened windows and price points as “a potentially destabilizing change in the existing windows platform” (Daily Variety, June 16). Corcoran said studios need to continue to work with exhibs to find a suitable VOD platform for both parties.
(Andrew Stewart contributed to this report.)