7 Key Questions Surrounding DirecTV's Premium VOD Service Controversy

7:20 PM PST 04/19/2011 by Pamela McClintock
Sony

The Hollywood Reporter examines what's at stake when the company launches Home Premiere Thursday.

On Thursday, a new chapter in home entertainment begins when Sony's Adam Sandler-Jennifer Aniston romantic comedy Just Go With It becomes available for $29.99 on Home Premiere, DirecTV's HD VOD service. Theater owners bitterly oppose the premium VOD service -- supported by Sony, Warner Bros., Universal and Fox -- since it shortens the theatrical window to roughly 60 days. Studios counter that most movies make the majority of their money in the first 4-5 weeks.

In advance of the launch of Home Premiere, The Hollywood Reporter breaks down the issues driving the controversy as well as the mechanics of the new service.

What's really at stake?
Theater owners believe that a 60-day theatrical window is just the tip of the iceberg and that what studios really have in mind is much shorter. Exhibitors say it doesn't make sense why a consumer would pay $30 to see a movie that will be available on regular VOD and DVD in another month or two, but a consumer might be willing to fork over $30 or more for a movie that opened more recently. Studios say that isn't a legitimate fear, that premium VOD is designed to attract people who don't go to theaters, and they need a way to make up for the demise of the DVD business. They also counter that theater owners have hurt the exhibition business through in-house advertising and rising ticket prices.

How does Home Premiere work?
The 6 million or so DirecTV customers who have HD DVRs can buy the movie for 48 hours during a two-week period, after which the title will be pulled. The films will become available on the DirecTV Cinema Home Page, or in the DirecTV guide, at midnight on the day it launches. Just Go With It is being made available on a Thursday, but the release days may vary for other titles, according to DirecTV. The next two titles to be offered are Warner Bros.' Hall Pass and Fox Searchlight's Cedar Rapids, both of which apparently go out next week, followed in two weeks or so by Universal's The Adjustment Bureau.

What happens if a Home Premiere title is still playing theaters?
Don't be surprised if theater owners pull that movie from screens, although at 60 days, the title wouldn't be doing much business. Just Go With It, for instance, was still playing in 326 theaters last weekend (many of them discount houses). If its debut on Home Premiere was to match last week's box office gross of $270,000, approximately 9,003 people would need to purchase it at home. Just Go With It has grossed $102.3 million domestically. Studios won't say how much they hope to make from Home Premiere, but Disney was none too happy with the results of a premium VOD test it quietly conducted in Portugal in January, when it made Tangled available six weeks after its theatrical release for €24.99 (about $35). There were fewer than 1,000 hits.

Why have DirecTV and the four studios been so quiet in promoting Home Premiere?
Originally, DirecTV intended to make a big splash and announce Home Premiere on April 14. But those plans were scrubbed when word of the service leaked just as studios and theater owners were meeting in Las Vegas in late March. Theater owners were furious that they hadn't been officially briefed. And it hasn't helped the studios' cause that prominent directors, including James Cameron and Todd Phillips, have sided with the theater owners. Relations between exhibitors and studios are still at an impasse, according to insiders, despite assertions by DirecTV and Warner Bros. that they are trying to appease exhibitors by agreeing not to market a Home Premiere title until a week before its launch. Theater owners weren't happy with that assertion, nor by Warners' argument that charging $30 for a film on VOD actually underscores its theatrical worth.

Why aren't Disney and Paramount a part of Home Premiere, especially when Disney's Bob Iger has been so vocal about shrinking windows?
Paramount is worried about piracy, while Disney has told exhibitors it wants to do a test and keep them in the loop. But rival studios say Disney is the elephant in the room, considering Iger's comments regarding making new releases available across multiple platforms.

Is DirecTV the only company offering premium VOD?
Comcast and Internet streaming platform VUDU are expected to test premium VOD in select markets in the coming months, although that could change if Home Premiere is a bust. There's even talk that Home Premiere is being regarded as a six-month test.

Will it be successful?
Regardless of whether it works financially, studios say they have to try. More than anything, Home Premiere is a way to introduce the "premium" concept. It's also a way to experiment with timing and price points. But it's hard to find a studio executive who thinks it will be a monetary windfall. If they do, they're not saying. Exhibitors think $30 is too much, especially when considering that many DVDs come out after both 90 and 120 days.
 

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