NATO President 'Cautiously Optimistic' About Early VOD Movie Release Talks

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John Fithian warns studios of bad business models and says they should make films available via VOD ahead of DVDs, but keep VOD offers in the current home entertainment window.


NEW YORK -- National Association of Theater Ownerspresident John Fithian on Thursday outlined his organization's current thoughts on studios' plans to make films available in homes in a new premium VOD window soon after theatrical releases and before DVD releases, saying the idea is bad business, but adding that he is "cautiously optimistic" that current negotiations between studios and exhibitors will lead to results that will work for both sides.

"We believe discussions are encouraging," he told the Gabelli & Co. Movie & Entertainment Conference without sharing specifics.

He expressed hope that the conversations will produce "new business models that work for everyone and that create a new revenue stream for the studios without encroaching on the theatrical market," which are studios' strongest business, he emphasized.

Speaking at the investor conference, Fithian called the idea to make films available via cable and satellite distributors soon after their theatrical releases for what many film executives have recently pegged at $25-$40 "a bad business model." Studios may make a nickel for charging consumers "an awful lot of money," but would sacrifice dimes by hurting their theatrical business, he said.

Fithian said though that it makes complete sense to make movies available on VOD ahead of DVD releases, which these days often come three weeks before DVDs.

However, studios should ensure that VOD availability comes in the current home entertainment window, while further pushing"way back" films' availability via Netflix and Redbox, the NATO boss suggested.

That way, studios could test if people may pay more for VOD ahead of DVD. "That, we believe, is the model that's beginning to stick, Fithian said.

He said that most studios have stopped thinking about premium VOD releases 30 or 40 days after theatrical releases, with 60 days or later seeming like the current consensus.

"We'd like to push that even further," Fithian emphasized.

Among the business challenges of premium VOD, the NATO boss cited the fact that the industry can't measure how many people watch as early releases for a high price could lead people to invite the whole neighborhood into their homes.

Suggested prices for premium VOD are also a risk, according to Fithian. He pointed out that movie theater ticket prices continue to rise gradually, while studios have seen declining prices for films consumed at homes. "Studios have never been able [to hold] a price point in the home." Now studios want to suddenly charge a premium price in the home. "We don't think it will work," Fithian concluded.

He added that studios "shot themselves in the foot" by allowing Netflix and Redbox to teach consumers they can get movies in their homes cheaply.

Fithian also argued that premium VOD releases would make piracy worse. "You are essentially handing the pristine copy of the digital movie to the consumer and the pirates much earlier," he said.

Asked what type of fare makes sense for early releases, Fithian said studios may stay away from family titles given that families with young kids have a lot of time constraints and may therefore be lost as theater visitors if trained to watch at home.

Regal Entertainment CEO Amy Miles later at the conference also discussed the premium VOD situation. "We want them to find an in-home solution" that works for both sides, she said about studios. Exhibitors are not against new VOD models, but against "any window change with negative effect on the theatrical business," she said. If studios ended up offering premium VOD releases "too close to our window...we will react accordingly," she warned.

Miles drew a line in the sand in terms of the timing of the premium VOD window, saying that DirecTV CEO Mike White's recent suggestion that VOD product could be available as early as four to six weeks after a theatrical release would be too early. "We would not show the film," she said.

Fithian and Miles cited decisions on whether to show a film at all and on how many screens, but also the potential to charge for the trailers and in-theater promotions that exhibitors currently offer to studios for free as some of the levers at exhibitors' disposal.