June 26, 2013
Will Early Home Release Change the Movie Rental Market?
By this time, consumers in the U.S. know how the system works. A new blockbuster is advertised online and on the television and you either go to see it in a movie theater or you wait until it’s out of the theaters to rent or buy the movie, with the wait time varying depending on the service used. All of that may be in the process of changing if a test being run by Sony Pictures Entertainment and Walt Disney Co. in South Korea works, according to The Wall Street Journal.
In a nutshell, the two studios are making the films available for rental only weeks after they have premiered in theaters and while they are still in theatrical release. In Sony’s case, "Django Unchained" was available for rental online or though cable only three weeks after it first hit theaters. Disney’s "Brave" was made available four weeks after it was first shown in South Korean theaters.
There’s a premium to be paid by consumers who want to see new films early without having to go to theaters. The Journal reports that in a 2011 test with DirecTV, consumers had to fork over $30 to watch a film 60 days after its run ended theaters compared to the 90 days it typically takes for a film to be available to the home market.
Earlier releases of theatrical films to the home market will not go over well with theater owners. The National Association of Theatre Owners told Variety that such action "muddies the value proposition."
While video on demand providers are likely to be intrigued by the prospect of early releases, much of the recent focus by Netflix and Amazon.com has been on developing original content that fits within their subscription models. Recently Amazon announced that due to the results of a pilot program, two comedies and three kids programs are being greenlighted to begin production. They will be available on Prime Instant Video later this year or early in 2014.
The Journal article points out that it may not be possible to project what happens in South Korea onto the U.S. market. Consumers in that country have wider access to faster internet speed than Americans and therefore make greater use of video on demand services. DVD sales and rentals are pretty much a thing of the past there.
- Hollywood’s New Screen Test – The Wall Street Journal (sub. required)
- Premium VOD War Is Back: Disney, Sony Early Releases Sure to Enrage U.S. Exhibitors – Variety
- Customers Have Spoken: Alpha House, Betas, Annebots, Creative Galaxy and Tumbleaf Chosen for Amazon’s First-Ever Original Series, Available Exclusively on Prime Instant Video – Amazon.com
- Are Amazon and Netflix Programmed for Success? – RetailWire
Discussion Questions
What changes do you expect to see in how films are released to the home market in the years to come? Will earlier home release appreciably hurt movie theater sales?
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I endured going to the movies yesterday. 40 minutes of TV ads made the entire experience rotten. I would never pay $11 to be treated as a captive audience. With rentals, you can do whatever you want to; earlier rental adds to their bottom line in my case.
If exhibitors don’t fix the experience, they alone will determine their own demise, not the consumer.
The movie industry and the theaters have a love hate relationship. Each is dependent on the other for success currently. VOD shift’s the balance of power to the movie industry.
Given the little to no money the theaters actually make from ticket sales, they naturally want to have an extended window of opportunity to get people into their seats. Perhaps one way to ease the tension that this concept is having is for there to be a split on the ticket revenue.
There is definitely a market of early home release. While the cost per movie may seem high, quick math shows that with theater tickets being around $10, plus a possibly equal amount for popcorn or other snacks and a drink, the cost of renting at home looks like a good deal.
Would it hurt theaters? Likely—the issue is to what extent. First, there are more reasons to go out to a theater than just the movie. There is the process of going out itself and socializing with friends, perhaps a dinner before or after, etc. Not sure that same experience can be replaced by having friends over to the house to watch a movie. Second, there is definite difference in watching something on the small screen as opposed to watching it on a theater-sized screen.
Edgar Bronfman, when he ran Universal Studios, and Barry Diller, soon after he left the helm of Fox, both advocated a simultaneous release system 20 years ago. The theater owners, so far, have been able to block it. Consumers want simultaneous release. It’s a matter of time.
Will it hurt theatrical revenues? Yes. Will it boost studio profits? Yes. As high speed broadband reaches more homes in America, consumer and studio desire will increase. The cost for two people, let alone a family, to go to a movie has ballooned to the point where many families would rather stay home and watch a film on their big-screen TVs.
The movie distribution business will change. The only question is how fast.
Let me propose this as a thinking out-of-the-box proposition: Could movie theaters, as we know them, be destined to go the way of the public phone booths or pagers we used to carry?
The results in Korea may not accurately project to the US market, however, this is an opportunity that will add new options to movie buffs. The chance to see a first run movie shortly after its release, in the comfort of your own home, without the hassle of theater lines and overpriced snacks will appeal to many people despite a potential premium price. Online movie sales could get competitive enough that the theater business will have the same restructuring that the retail electronics business has gone through.
This will hurt movie theater sales appreciably, but it’ll take awhile. I expect both pricing and timeframe of home release to be tinkered with until a successful model works out.
I don’t mind the lines, or the overpriced popcorn, as much as I mind the people who talk all the way through a movie. Years ago, I once asked a kid to shut up, and he got up and left. I thought it was over, but he’d gone to the theater manager claiming I had punched him. I was asked to come out to the lobby to sort it out, but refused, and it eventually all blew over. But it didn’t endear me to “going to the movies.”
It’s like everything else, if you want a business to remain viable, it must stay current.
Going to the movies used to be all about the experience. While some of that experience can now be duplicated at home, surround sound, big screens, and TV rooms, it would behoove the theater industry to look into creating new ways to entertain us.
Come on folks, we all need to get out of the house sometimes!!!
This is going to happen and will change the market, particularly as more moviegoers now have very large screens and powerful sound systems at home. The draw to the movie theater for the size/sound experience is slowly diminishing as consumers can now have the Dolby/THX experience in their own home.
I doubt theaters will disappear completely, but I would not be investing in movie theaters based on today’s business model.
Maybe I’m too demanding…as in demanding to know what’s new here, or why it will work if it never has before. Every complaint offered here—from bad manners (amongst fellow moviegoers ) to too many ads to just simply bad movies—has existed for the past century, and alternatives have been readily available for half that time. That theaters continue to exist—albeit with much smaller (relative) audiences than they once enjoyed—makes me think they will go on existing for some time to come.
It’s all about convenience and eyeballs. How convenient can the entertainment industry make it for the customer to see their films? There may be some “exclusivity” by holding back the home release. Customers may or may not want the theater experience. In the end, the entertainment industry wants as many eyeballs on their films as possible, and that will never change.
Theaters have already felt pressure from home release. It’s not just home release though. It’s any alternative to going to a theater. The dollars a consumer can spend on entertainment is what’s at stake.
Growing up in Chicago, I had the opportunity to watch White Sox, Cubs, then Bears, and eventually even the reluctant Black Hawks on television. Ticket sales at the venues didn’t go down as these pro sports teams expanded their audiences. They went up.
Movie theater sales can and will get a boost in ticket and refreshment sales, when selected movies are offered on home viewing via television or computer. Theater owners have to see this as part of bringing the consumer into the equation—it will lead to a stronger hand for them in placing butts in seats.