Analyst: Extended movie release windows ‘illogical’
April 17, 2012
By Colin Mann
BTIG analyst Richard Greenfield, writing for the 2012 Tribeca Film Festival’s Future of Film blog, has suggested that forcing consumers to attend/pay for a movie in a theatre for the first three-four months of a film’s lifespan is increasingly archaic, with advances in display technology meaning the stage is set for the ‘home’ to become the new ‘theatre’.
Accordingly, Greenfield suggests that would be substantial consumer interest in offering movies in the home four weeks after their theatrical release at $20-$25, and there could be meaningful interest in offering movies day-and-date into the home at prices as high as $50.
“In a rapidly evolving media world, where HDTV penetration now exceeds 70 per cent and the average US living room TV sold is 44″, the concept of forcing consumers to attend/pay for a movie in a theatre for the first three-four months of a film’s lifespan feels increasingly archaic. The overwhelming majority of multichannel video homes are capable of utiliing video-on-demand, with the exponential growth of IP-enabled TVs (directly or via third-party devices); not to mention the growth of web-enabled iPads that have a sharper screen than any TV set. The stage is set for the ‘home’ to become the new ‘theatre’.
Asking the fundamental question: ‘Why Buy When You Can Rent?’, Greenfield suggests that falling DVD sales and consumers’ lack of interest in buying movies digitally (Electronic Sell-Through, EST) has received most of the blame for Hollywood’s financial problems. “Hollywood is hoping that expanding the functionality of digital content, meaning a cross-device, cloud-based storage system for movies (UltraViolet), will invigorate interest in buying movies. Unfortunately, the fundamental issue is that consumers no longer need to own content,” he notes.
According to Greenfield, the downward trend in movie attendance and DVD purchases are really the result of one, simple catch-all word: ‘technology’. “Technological advances in home theatre, especially since 2005 have shrunk the difference between watching movies in the home and watching in the theatre. Average television size growth hit a huge inflection point with the flat panel revolution, with the average television purchased for a US living room now a 44″ HDTV screen,” he advises.
Greenfield notes that factors such as the growth of broadband, emergence of OTT players and enhancements in navigational interfaces, depth of content and video quality has “raised the bar” for consumers to either leave their home and buy a movie ticket or to buy a movie on DVD or digitally. “We expect the bar to move notably higher over the next few years as an increasing percentage of TVs become IP-enabled. Studios need to understand the ‘new’ consumer and technological paradigms and work with them, not against them,” he advises.
Noting release dates and earnings forecasts for successful theatrical releases such as The Artist and The Descendants, which are likely to generate incremental revenues as they are released into the home entertainment channel (DVD, VOD, iVOD), Greenfield suggests that studios are simply not maximising the profit potential of a film by maintaining an antiquated sequential release pattern, a.k.a windowing.
“With consumers increasingly unlikely to buy a movie ticket in the theatre and/or end up buying the content on DVD or digitally, maintaining a three-to-four month window between theatrical release and home video release is illogical,” he states. “To make matters worse, studios are essentially marketing the same movie twice – with each set of marketing generating a lower return than in the past. Finally, movie industry piracy is flourishing during the two-three month period of time between when a movie has left most theatres and the time it reaches the home entertainment market,” he adds.
BTIG’s solution is to enable consumers to pay for access vs. ownership. “We believe there would be substantial consumer interest in offering movies in the home four weeks after their theatrical release at $20-$25, and there could be meaningful interest in offering movies day-and-date into the home at prices as high as $50 (not everyone bought a ticket to a Saturday night boxing match or a WWF event, with many choosing Pay-Per-View and subsequently VOD to access the content). Furthermore, releasing movies earlier at home should not simply be rental/VOD, but rather offer consumers the ability to own a digital copy (UltraViolet or iTunes) for a modest premium (sub $10 above the VOD price).
For Greenfield, the rationale behind four weeks is simply that most movies have completed the overwhelming majority of their theatrical run within four weeks, with Avatar a notable exception. “We believe you have a much better chance of convincing someone to spend $20 to access a movie four weeks or less after its release than you do four months later. Enable consumers to pay for ‘access’ to content earlier vs. ‘ownership’, he recommends.
“While we still expect a robust movie theatre going public, enabling consumers to leverage their in-home technology and reduce a wide array of non-movie costs should fuel consumer spending on movie content itself to the direct benefit of studios,” he says, suggesting that eliminating the two-three month dormant period for movies between theatrical and home entertainment would significantly reduce the leakage to piracy – giving those that want to watch at home a high-quality alternative to theft.
In terms of risks and problems with collapsing windows, Greenfield suggests that first and foremost, movie studios need to embrace consumer and technological trends, even if it applies pressure to the movie exhibition industry, but accepts that going fully day-and-date could increase the risk of piracy during the initial theatrical run. “Waiting one month would eliminate the vast majority of that risk. Yet, we cannot help but feel like the competition for consumers’ time as technology improves poses a far larger threat than piracy. Studios need to take risks today, even if there is some degree of cannibalisation to build a healthy movie industry for the future,” he concludes.