Closing DVD window would shut theater doors

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LONDON -- Theater operators in the U.S. are staring down the barrel of a gun if movie windows are collapsed, according to academic research carried out by a quartet of leading schools.

The controversial findings show that, should the day dawn in the U.S. when movies are released simultaneously in theaters, on rental DVD and VOD while maintaining a three-month retail DVD window, theater operators will see a 40% decline in revenue. It also shows that DVD rental revenue would plummet 14.9% but DVD retail would rocket 49.6%.

But the findings show that under that scenario, U.S. studios would see a whopping 16% uptick in revenues from simultaneous releases with a three-month retail window.

The study, compiled by the Bauhaus-University of Weimar (Germany), Cass Business School (London) and the Universities of Hamburg (Germany) and Missouri-Columbia (U.S.), also covered the markets in Japan and Germany.

The research team investigated revenue generation across four channels: theaters, DVD rental, retail DVD sales and video-on-demand.

The research drew on samples of 1,770 consumers from across the U.S., Japan and Germany and asked them about where and how they would spend their cash on consuming movies.

Lead researcher Thorsten Hennig-Thurau, professor of marketing at Bauhaus University and Cass Business School, said that the implications of collapsing distribution windows might transform the film industry.

"Many cinemas would have to radically scale down their operations or close their businesses completely," Hennig-Thurau said. "Those that remain would probably look different from today's cinemas, as they would have to provide consumers with reasons for preferring them to watching the same new film at home."

For Germany and Japan, the studios would also need to release DVDs for retail three months after cinema distribution for optimum profit, mirroring the U.S.

But should Japan and Germany give DVD rentals a full year after a movie's theatrical outing, the studios would see revenue increases of 14% in Germany and 12% in Japan.

In these countries, theaters would benefit from this adaptation by 6% in Germany and 15% in Japan.

Hennig-Thurau also said that the transition to new distribution strategies will certainly not be a smooth ride

"Aiming to offer alternatives to costly battles and boycotts, we tried to seek optimal scenarios in which every market participant gains or at least does not lose revenues," he said.

The research shows that such "win-win" scenarios exist in the U.S. and Germany, but not in Japan.

In both the U.S. and Germany, the win-win scenarios would require the release of retail DVD three months after the theatrical opening, with the rental DVD release following another three months later.

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