Movie studios may be hoping that a new Premium Video on Demand service that will stream movies into homes 60 days after their theatrical release date will revolutionize the movie industry, but analysts aren’t so convinced. The problem: Who really wants to pay $30 for a movie rental?
It’s not just the cost that makes Piper Jaffray analyst James Marsh concerned; it’s also the lack of clear target audience:
It’s not clear to me who the market for this product is,” said Marsh. “I hear studios talk about people who wanted to see the movie but couldn’t get a babysitter. But in general, people who go to the movies go for other reasons than just to see the movie. They want to get out of the house or see it in Imax or 3D or go on a date. The bulk of cannibalization would probably come not from the theatrical window but from VOD. The studios will up-sell some people who would normally pay $5 for regular VOD releases. I think that’s a tough sale… I’m not sure what the incentive is to pay six times what you would pay for a regular VOD title just to see it 60 days earlier [than on regular VOD]. It’s going to be a marketing problem. I think it’s a very small group of people that will want to see that — maybe if they have a bunch of people over at their house and they can justify the price that way.
It doesn’t help that studies — including a recent one by PricewaterhouseCoopers — suggest that people don’t necessarily care about the timeliness of VoD releases. (Only 29% polled said it was a priority or that they’d be interested in paying more to see a movie sooner.) In fact, cost is a much greater concern among consumers, and the average price people want to pay for a movie on VoD is $3, not $30. “Many consumers said if they really wanted to see the movie, they would have seen it at the theater,” according to PWC.
To make matters even worse, the studios involved with the plan to launch a Premiere VoD service through DirecTV this month (Warner Bros, Sony Pictures, Universal and 20th Century Fox) seem to want to test the service with less-than-blockbuster titles; relative box office flops Just Go With It, Cedar Rapids and Unknown are some of the titles being floated as potential launch movies. But, if audiences wouldn’t pay $30 to see these movies at the theater, how likely are they to pay $30 instead of $5 – or less, if you consider monthly Netflix disc rental charges – to see them “early” on VoD?
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