[Movie Studio Moves to release Video-on-Demand on the same day as DVD releases ]
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How Apple's Movie Move Helps Netflix
By Anders Bylund May 2, 2008
There's a new era brewing in the entertainment industry, as technological advances force movie studios and record labels to think and act in entirely new ways.
We just took another step into that brighter entertainment future, in which new content will be available in a plethora of convenient formats on the theatrical release date, and the consumer chooses not only what to watch, but also when, where, and how to watch it. Apple's (Nasdaq: AAPL) iTunes now sells downloadable versions of the latest DVD hits the same day those shiny discs hit store shelves, and Time Warner (NYSE: TWX) movies will pop up on video-on-demand (VOD) menus everywhere, "day-and-date" with the DVD release.
Why now?
An urge to jump on the digital bandwagon isn't the only motivation here. Time Warner CEO Jeff Bewkes explains that "the margins on taking a customer and moving that person from rental physical over to VOD day-and-date, it's like a 60% to 70% margin instead of 20% to 30%, so it's about a three-to-one trade. Very good for the film company." The company's test runs have also shown that VOD releases don't seem to hurt DVD sales at all: "In fact, they went up a little, because you are not seeing competition from used rental inventory when you do this."
That's also why Apple was able to convince everyone from Warner and Sony (NYSE: SNE) to News Corp.'s (NYSE: NWS) 20th Century Fox and General Electric's (NYSE: GE) Universal Studios to immediately sell and rent new releases through iTunes. The economics of on-demand and downloading are much better than those of pressing, packaging, shipping, and warehousing tons of physical discs.
What's next?
Time Warner's move to release VOD on the same day as DVD releases is a good start, and this exercise will let the studios get comfortable with the idea that movie releases can be profitable without a physical artifact changing hands in a store somewhere. Aligning downloads, DVDs, and on-demand with theatrical release dates is really where it's at, but it will still take a few years before any of the major players dare to attempt such an audacious stunt. Until then, Jake and Johanna Consumer will just have to wait a while before loading up Iron Man on their iPods and media-center PCs. |
