Study: Day-date threatens exhibs

Collapse of windows would lead to 40% revenue drop

Theater operators in the U.S. are staring down the barrel of a gun if movie windows are collapsed, according to research from a quartet of leading schools.

The findings show that, should movies in the U.S. be released simultaneously in theaters, on rental DVD and on 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 sales would rocket 49.6%.

Under that scenario, U.S. studios would see a 16% surge in revenue from simultaneous releases with a three-month retail window.

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

The research team investigated revenue generation across four channels: theaters, DVD rental, retail DVD sales and VOD.

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

Lead researcher Thorsten Hennig-Thurau, professor of marketing at Bauhaus University and Cass Business School, said 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 also would need to release DVDs for retail three months after cinema distribution for optimum profit, mirroring the U.S.

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

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

In 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.