Studios, cable closer to home movie deals

Disney says premium VOD an 'interesting opportunity'

LOS ANGELES/NEW YORK -- Hollywood studios are getting closer to a deal to make new movies available to cable and satellite TV operators like Time Warner Cable and DirecTV as early as 30 to 60 days after their theatrical debuts, for a premium price.

Under terms discussed so far, cable or satellite customers choosing to watch first-run movies at home would have to pay around $24.99 for a movie 60 days after its theatrical release, and up to $50 for a 30-day window. Those terms are not yet finalized but studios have held talks in recent months with pay TV operators including DirecTV and Time Warner Cable, according to sources with knowledge of the talks.

Two sources told Reuters at least one studio is pondering a trial run as early as this fall with a yet-to-be-decided film, to gauge audience reception for the novel concept.

Talks about a so-called "premium video on demand" window have been on and off for years but have really heated up in past months as studios seek to maximize profits by reworking movie release windows, adapting to changing consumer behavior.

People familiar with the talks say a deal could be struck as soon as the fourth quarter, but could take longer due to the complex nature of the negotiations between operators and Hollywood studios.

One pay TV company executive said the talks have been difficult to manage because studios do not want to violate antitrust regulations by working closely together, while also keen to avoid upsetting their long-term theater partners.

"One or two studios this fall will take a film and make it a premium home event a few weeks after its release," said one source with knowledge of the discussions.

Both cable companies declined to comment. General Electric Co's Universal, Time Warner Inc's, Warner, Sony Corp, and News Corp's Fox declined comment.

"We're going to become aggressive in experimenting with new windows, including that one," Walt Disney Co chief executive Bob Iger said on Tuesday when asked on a conference call if Disney would participate in an early video-on-demand opportunity.

"It's too soon to make specific comments or predictions about that, but I think it presents an interesting opportunity. There are people who we believe would like to see movies sooner than later and would pay a premium price to do that."

Hollywood is testing the waters on a spate of initiatives designed to tap changing viewer habits. In the latest example of the shifting film distribution landscape, Netflix on Tuesday struck a deal to stream new films from three studios that own the Epix pay TV channel about 90 days after their premium pay TV debuts, which generally come about four months after their theatrical release.

But the premium video-on-demand window now being discussed among Hollywood and cable and satellite operators involves showing a film while it is still in theaters.

Such a move is likely to be controversial. It would disrupt the traditional release system that is the bread and butter for theater owners. The first source with knowledge of the talks said studios are concerned about alienating theaters and are considering how exhibitors would be compensated.

The exhibition industry is gearing for battle. In June, the National Association of Theater Owners took out full-page ads in trades Variety and The Hollywood Reporter, to make clear its position on the prospect of a premium video-on-demand window.

The ads said that whatever changes the studios sought to make to release-window models, it was absolutely essential that theater owners be fully involved.

Still, maintaining windows is increasingly challenging as viewers find more and more ways to watch movies whenever they want via devices and the Internet, and as DVD sales sharply decline.

"Studios in the next 18 to 24 months are experimenting with lots of things. It's like a chess game and each move requires them balancing out different business strategies," the first source said.

A second source said studios were hesitating, hoping to see someone else take the plunge before joining any deal themselves, leery of upsetting exhibitors.

A third source familiar with the talks said Time Warner Cable and other cable companies apparently balked at a 20% revenue split offered by the studios in any deal.

While exhibitors say an early home-viewing option would erode ticket sales, exhibitors like No. 1 theater owner Regal Entertainment Group acknowledged changes are afoot.

"We do proactively meet with the major studios to try to figure out how we can work together as partners, because we do recognize that we're in an environment where their business model is changing," Regal CEO Amy Miles said on a recent conference call when asked about a premium video-on-demand window.

But preserving boxoffice receipts remained critical. "In our most recent meetings with the major studios, it was clear that each one of those individual studios remain committed and understand the importance of a healthy theatrical window," she said.