Coupons?! Studios mull free DVD with VOD

Goal: calm retailers anxious over early PPV release

Hollywood is cooking up a batch of proposals for hastening the release of pay-per-view movies, and that could prove heavenly for coupon-clippers.

Theater operators hate any narrowing of their traditional release window, but DVD retailers could be hurt worse if consumers are able to watch films on their TVs more quickly than on disc. So under one idea under consideration, those paying $25-$50 to watch a movie on their cable or satellite PPV service would qualify for a coupon redeemable at disc retailers for a free DVD of the same title.

"There's been some discussion of that as a way to calm retailer fears," Adams Media Research's Tom Adams said Tuesday. "The other reason for doing it is that they would be asking consumers to spend a lot of money for the initial rental."

Dubbed "premium video-on-demand," the accelerated-release plan has been mulled by execs at most of the studios during the past year and also could include Internet-based VOD. (PPV and VOD are essentially interchangeable terms, though the former tends to indicate cable-delivered content.)

There's an outside chance that one of the most aggressive studios -- meaning Disney or Warner Bros. -- might experiment with premium VOD by year's end, but most expect the first rifle shot in a sure-to-escalate war of nerves to come in the first quarter. There's mixed opinion whether it will be fired Stateside or somewhere else, perhaps Canada.

For years, exhibitors have fought any encroachment on the traditional theatrical window, a roughly four-month span between a movie's release and its debut in home video. The VOD window lagged the DVD/Blu-ray Disc window until studios recently began releasing some or all of their home-entertainment titles simultaneously on disc and VOD, citing studies showing minimal impact on consumers' willingness to buy discs.

But the premium VOD plan would be even more jarring for traditional home-entertainment retailers, whose partnership with Hollywood is projected to register $16.1 billion in DVD and Blu-ray sales and rentals in the U.S. this year. The corresponding reaction from retailers also could be dramatic.

After all, would Wal-Mart help Paramount Home Entertainment move hundreds of thousands of copies of "Iron Man 2" this week if customers of In Demand -- the three-way venture of Comcast, Time Warner Cable and Cox -- were able to watch the movie via VOD?

Now consider that five mega-merchants -- Wal-Mart, Target, Best Buy, Costco and Amazon -- control about 60% of the DVD market, and the prospects of a major blowup over premium VOD would seem at least equally as likely in the retail community as among theater operators.

Given the market sensitivities, some suggest the first experiment with premium VOD will be with a non-tentpole release made available not 30 days after the film's theatrical opening but 60.

"The 30 days proposal may be getting thrown around so that there will be a sense of relief when something longer is tried," a exhibition insider said. "But even 60 days still would be too short."

Indeed, even less dramatic moves by studios have triggered big blowback. The nation's three largest circuits pulled Sony's "Cloudy With a Chance of Meatballs" from theaters last year after Sony released the animated comedy on disc 88 days after its theatrical bow.

Meantime, studios approach release windows from a dizzying array of perspectives. For instance, though all other studios release most DVD titles either simultaneously on VOD or within several days of their disc "street date," Sony clings to an average 33-day interval between disc release and VOD as its movies skew more heavily to the rental market.

At Warner Home Video, execs are more sales-minded and thus refuse to give dollar-rental operations movies for their first month on disc, a policy emulated by a handful of other studios. Yet Warners -- though no longer connected to Time Warner Cable -- is among those most bullish on premium VOD.

"We simply don't believe there will be any cannibalized disc sales as a result of a carefully approached premium VOD window," a Warners insider said.

Several versions of premium VOD are being discussed with cable operators. Under one plan, consumers would have to pay a whopping $50 to see a movie just a month after its theatrical release, or $25 after two months.

Yet the question remains: If the idea of consumer coupons does assuage home-ent retailers, what to do about theater operators?

"There's not a lot you can do, other than to say at four weeks into a film's theatrical run they're not doing much business anyway," Adams said. "But the counter argument from the theater owners is that you are demotivating people from going to the theater at all, as opposed to just waiting to watch the movies in their homes. So you might have to give the theaters a bigger split of the boxoffice, maybe a couple more percentage points."

Whatever strategy develops, studios are certain to limit the premium service to owners of high-def TVs after an FCC ruling allowing studios to disable the recording capability of such sets. Older televisions --- including even some first-generation HDTVs -- would not be included in premium VOD plans, as their recording capability cannot be disabled.

"They're playing with fire for what's a very small market right now," an exhibition insider mused. "If they do it, there will be a big reaction."
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