Paying a Premium for Movies

With news leaking out that Warner Bros, Sony, Universal and 20th Century Fox are prepping a $30 a pop VOD service for some movies 60 days after their theatrical debut, the naysayers are out in full force.

 

The Diffusion Group points to its latest report on premium VOD rental windows, which found only 8% of survey respondents were willing to pay $25 to rent a movie the same day it was released in theaters. 21% said they were “highly likely” to spend $10 on a same-day rental. “While they may see the general value of early rental releases, consumers are unlikely to pay the more sizable premiums under consideration,” TDG said.

 

It’s no stretch to be skeptical. After all, the $30 price point is six times higher than the standard $5 cost to rent current, non-HD movies. What’s more, $30 doesn’t get you the next “Star Wars” or “Avatar,” but less popular flicks. One of the first titles expected to be available under the new service is Adam Sandler’s “Just Go With It.” DirecTV is expected to be the 1^st to offer the 60-day releases, with Comcast and other providers soon following suit.

 

"The tactical terrain between theatrical debut and the 90-day rental horizon is vast, so the industry has a variety of timing and pricing options available. And, yes, the 60-day model may have a future, but not at these price points,” said TDG founding partner Michael Greeson.

 

TDG isn’t the only doubter. A Wunderlich Securities report dubbed the offering a “too-high-for-mass-appeal price point that should have limited fallout for box office.”

 

Still, there is a belief that early VOD release at premium prices must happen. BTIG Research wrote in February that studios need to create these earlier release windows so consumers don’t have the ability to choose low-priced options like Netflix or Redbox. However, the firm suggested studios go beyond merely rentals.

 

“While the studios are focused on VOD/iVOD (meaning rental), we actually think selling the content digitally at the two month mark would be even more compelling to consumers, especially given the price point that is being discussed of around $20-$25 (with the studios keeping 80%-plus of the economics),” BTIG said.

With the first premium VOD rentals expected this month, keep an eye out for tinkering to the model.