Disney Tests Appetite for Premium VOD in Portugal

"Tangled" was offered on demand six weeks after the film opened in theaters; the results of experiment were underwhelming.

Are moviegoers ready to pay a premium to watch new movies in the comfort of their own homes? Disney has quietly conducted a test -- in Portugal -- and the response was underwhelming.

In January, only six weeks after Disney's Tangled was released in theaters in the small country, the animated film was offered for a limited time on VOD for 24.99 euros ($32.73 U.S.). Disney declined to discuss the results, but by all accounts, it wasn't considered a success, attracting fewer than 1,000 hits.

Word of the Portugal experiment comes as several other Hollywood studios prepare to shorten the theatrical window and launch a new VOD service in the U.S. via DirecTV. Theater owners are none to keen on the idea, but have come to accept that some sort of offering may be inevitable.

But timing and price remain major considerations as studios move forward with plans to carve out a new market.

Portugal was an ideal testing ground because there was little danger of theaters pulling Tangled, since the largest cinema chain in the country is the sister company of the distributor that licenses Disney product. Just as key, the distributor also has cable interests.

In Portugal, the Tangled VOD offering didn't appear to hurt theater traffic in any way. The toon has grossed north of $3.6 million in Portugal, making it one of the top grossing 2010 releases.

If studios were to offer movies in the U.S. only six weeks after their theatrical release, theater owners would likely revolt and refuse to play the titles. Studios say they are looking at an eight-week window, not six.

That paves the way for Warner Bros., Fox and Sony to strike separate deals with DirecTV and begin the premium service. Warners is particularly keen on the new VOD window.

At the same time, each studio probably has a different ideas of what a deal with DirecTV would look like, since they aren't collective negotiations. That could slow down the process.

There are other caveats. Some of the studios, including Fox, would likely make adult dramas available, but not other types of films. They probably don't want to lose out on family business at the multiplex, or fanboy traffic.

Also, a movie would probably only be made available for a limited time, such as 48 hours. There's also debate as to the price point; some have suggested the cost should be $30.

Driving the idea of a premium service is the downfall of the DVD market, which has deprived studios of a major revenue stream.

But not everyone thinks premium VOD is the answer.

So far, Paramount is opposed to the premium VOD service because of piracy concerns.

And even though Disney is at the forefront of the movement to shorten theatrical windows and promote new distribution models, it isn't ready to go with DirecTV.

Instead, Disney wants to work closely with exhibitors and do its own test in the U.S., according to insiders.