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DirecTV poised to launch premium video-on-demand as theater executives voice outrage [Updated]

DirecTV is in advanced talks to be Hollywood's first partner for early video-on-demand, a plan that is putting it in the cross hairs of the nation's top theater chains.

People familiar with the matter said the satellite TV company would likely be the first distributor to launch so-called premium VOD, through which consumers would pay about $30 to rent a movie via the Internet or cable 60 days after it opened in theaters and at least a month before it would become available on DVD.

The plan represents a significant step in Hollywood's strategy to make movies available in the home earlier and in new ways to generate fresh revenue as DVD sales continue to fall and domestic box office has been stagnant. It has previously taken a minimum of three months for films to shift from theaters into the living room.

DirecTV is looking to introduce its product by the end of June with movies from 20th Century Fox, Sony Pictures and Warner Bros. Walt Disney Pictures is also in talks to join the initiative, the people said, while Paramount Pictures and Universal Pictures are not expected to participate initially.

In a conference call with Wall Street analysts Feb. 23, DirecTV Chief Executive Michael White said his company was talking to studios about launching a "trial" by the middle of the year in which "perhaps we'll try something that's four to six weeks from theatrical release."

A spokesman for DirecTV, the nation's second-largest pay television provider with 19.2 million subscribers, declined to discuss the VOD plans. White’s statement set off alarm bells in the exhibition community, however, where top executive believe such a shortening of the wait to see a movie at home would discourage consumers from going to theaters.

"If a film has a four-to-six week window to a home, we're not going to give it screen time," said Amy Miles, chief executive of the nation's largest theater chain, Regal Entertainment. "That's outside the realm of any conversation we have had with the studios."

Gerry Lopez, chief executive of second-largest theater chain, AMC Entertainment, was equally adamant. "We do not intend to screen movies released under such circumstances," he said. "We understand the problem that studios are facing when DVD sales are nosediving, but we don’t see premium VOD as any kind of solution."

People close to the six biggest Hollywood studios have said they aren't considering VOD earlier than eight weeks. But while theater owners aren't threatening to boycott releases under such a scenario, they have said that even that amount of time would be destructive to the box office business.

The issue has strained the symbiotic relationship between studios and theater owners, who complain that they have not been included in the plans. In response, theater owners have become more vocal about preserving the traditional 90-plus-day wait before movies are released into the home market.

"What I'm concerned about is that we could end up hurting the business and trading a quarter for a dime," said Ellis Jacob, chief executive of Cineplex Entertainment, the largest theater chain in Canada.

However, some in Hollywood including Time Warner Inc. Chief Executive Jeff Bewkes and Walt Disney Co. CEO Bob Iger have argued that there is untapped revenue to be found with premium VOD, contending that it would provide an alternative to piracy and have little or no effect on ticket sales.

Still, studio executives are wrestling over just how much to accelerate home-viewing releases without threatening the still-vital movie theater business, which generated $10.6 billion in the U.S. and Canada last year. The worst scenario for theater operators would be if the studios decided to release a movie directly into the home on the same day it opened in theaters, though there appear to be no plans to do that at this time.

Movies that will be part of DirecTV's premium VOD launch have yet to be identified, in part because key details still need to be resolved. One is whether to bundle a DVD with the premium VOD. Under that scenario, consumers would pay $30 to watch the movie at home and then receive a copy of the DVD when it came out, possibly for an additional fee.

Cable providers including Comcast are also talking to studios about offering premium VOD rentals, but DirecTV is furthest along in negotiations.

DirecTV and other providers want to launch premium VOD with as many studios on board as possible. Negotiations are tricky, however, as movie companies are not allowed to discuss their plans with one another due to antitrust restrictions.

It remains to be seen, however, how many consumers will be willing to pay $30 –- about the cost of four average-priced movie tickets –- to see a film at home when it will be available to buy or rent on DVD in as little as a month.

At an investors conference on Feb. 17, Disney president of distribution Bob Chapek said that premium VOD could be particularly appealing for "families with very young kids, who can't make it to the theaters."

A studio trade organization, the Digital Entertainment Group, is working with its members to put together a brand name and industrywide marketing campaign to promote the general concept of premium VOD, a person familiar with the situation said. The studios have previously worked together in a similar manner to advertise other home entertainment offerings such as high definition Blu-ray discs.

-- Ben Fritz and Richard Verrier

Staff writers Dawn C. Chmielewski and Joe Flint contributed to this report.

[For the record, 4:41 p.m.: An earlier version of this post incorrectly stated that total box office in the U.S. and Canada in 2010 was $9.6 billion.]

 
Comments () | Archives (16)

$30 for premium VOD is extremely expensive, and will be unlikely to generate a lot of sales unless customers can hang on to the ordered movie for re-watching for effectively indefinite periods. I suspect this experiment will be a failure leading ultimately to a cheaper, earlier VOD release.

The theater chains really do not have much ground to stand on. Their business has been significantly less important than either the Home Entertainment market or Merchandising market for well over a decade, and I think it's only a matter of time before studios start to question why they should be granting the theaters first access to a movie.*

* This will be particularly potent if the VOD market that is emerging as a major source of revenues for certain types of films - particularly indie films - is a major success.

$30 for to rent a movie?! Good luck in this economy!

I cannot think of any movie for which I would pay any amount of money. I have DishNetwork Top-300 or whatever it's called. It is rare that a movie shows up on a channel that I even want to watch. I think the last one was No Country for Old Men, and it was a huge dissappointment because my expectations were high after hearing it praised so much. It wasn't even as good as a normal episode of The Shield or Breaking Bad. As far as going to a theater, I am amazed people didn't stop doing that when the VCR came out.

Your kidding right ? Pay $30 just to be able to watch a movie at home 8 weeks after it's theater release ? So your choice here is either put gas in your car to get to work or getting to watch Spiderman V in the comfort of your home. Good luck with that . . . . .

I'm with everyone else; 30.00 + the price of DirecTv service is too high. I think theater companies need to come up with industry-wide campaigns to market their services. There are severl reasons people go to a theater. One is the ability to be around others. Another reason is to just be out of the house. And still another reason people go to a theater is socializing and dating. Theater companies are not oing to lose revenue...if anything, they will gain revenue. There is something abou being presented with two choices...you're going to choose the most beneficial choice.

People are going to charge their friends admission to their living room.

But if a friend of mine invites me over, I might just accept - even if I have to chip in to watch the movie. I know they're probably not going to spend the whole movie making calls or texting. Can't say the same for a movie theatre.

Clearly the whiny, unmarried cheapskates complaining here are not the target market. For a family with two, three or more kids this could be just what the doctor ordered.

30 bucks per movie?????
Sorry. That's just to F uped.
No movie -- NO MOVIE -- is worth that. Especially outside a theatre.
No way the majority of American consumers -- the working middle class are going to afford this, let alone go for it.

Don't you hate it when I'm right.

"No way the majority of American consumers -- the working middle class are going to afford this, let alone go for it."
Your thinking in terms of yourself going to the movie and spending $10 on a ticket. Think about a family of 5 living in say NYC where its $15 per ticket, then think about getting a couple of popcorns and a few sodas at the theater. Your going to be in well over $150+ for a family night at the movies. Where at home $30 + a 2 liter soda and popcorn and candy from the grocery store. Your under $40.


" theater executives voice outrage"

Please don't cry instead learn how to be competitive after all these years of
milking movie goers .

Thanks for sharing.

Will there be 20 minutes of commercials spliced on to the feature? The reason theatre chains are losing business is simple. The fun of going to the movies was you watch a few previews then the movie. Done. Now you go sit in a large room and watch a big screen TV. Get back to the basics exhibitors. Stop being so greedy. I know of a theatre in Banning that shows first run features at a top price of $5 for adults. No commercials, spotless theatre, great projection. And the place is packed nightly.

I applaud the studio's creativity to try something new. But the sentence that got me was the question of whether or not customers would pay $30 just to get the movie one month before everyone else. My gut is this experiment will flop - especially as most Americans are putting their money into their gas tanks these days. This may be a play for families, but come on, I'm a parent and I'll just wait til I get the DVD so I can play it over and over again. If I can wait, then so can my kids. Besides, most people I think buy frantically during the new release week to get the cheap price. If they miss it, they rent it. Nice try, studios. Think of something else.

I’m sorry, but no movie is worth 30 bucks JUST TO RENT. If it was a movie I wanted to see that badly, I would have seen it in the theater, or, barring that, I can wait the extra month and just buy the DVD for half the cost of this “great deal”. As a DISH customer and employee I just can’t see paying so much just to rent a movie once. Seems a waste of money to me.

I pay $22.00 at the Gold Coast Theater in Old Town Pasadena PER ticket so I would gladly pay $30.00 to see the movies in the confort of my own home.

I can't wait - bring it on!!!


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