Windows test benefits sell-through, VOD
By Jennifer Netherby -- Video Business, 6/4/2007
JUNE 4 | Releasing movies on video-on-demand and DVD the same day boosts sales of both significantly but cuts into disc rentals, according to initial results from a two-market test between Comcast and six studios begun last year.
Warner's The Astronaut Farmer will have a day-and-date VOD and DVD release.
With that data in hand, Warner Home Video will build on the test by beginning to offer a few titles day-and-date on VOD and DVD nationwide, including July 10 release The Astronaut Farmer, a drama starring Billy Bob Thornton that pulled in $10 million in theaters.
On average, VOD buy rates in the Comcast test were 50% higher in the two test markets than in control markets, while DVD sales were up 10% on average and DVD rentals fell 2%, according to Warner Bros., which analyzed data from Comcast and Rentrak. The studio looked at activity on releases from all participating studios between November and April.
Warner and other studios have extended the test with Comcast, which began in late November in Pittsburgh and Denver. Studio participants include Warner Home Video, Paramount Pictures, The Walt Disney Co., NBC Universal, 20th Century Fox and Lionsgate.
As part of its agreement with Comcast, Warner required the cable company promote its new releases as being available on DVD and VOD.
Warner Bros. digital distribution VP of on-demand Andy Mellet said the studio is still analyzing the data for the DVD rental business, however, he added that DVD sales are the studio’s priority.
“We’d love to see it help all the segments,” Mellet said. “Just seeing the messaging out there could boost the rental business as well. But the sell-through portion is what’s truly important for us.”
Mellet couldn’t say whether the gains in VOD revenue were enough to make up for the 2% drop in DVD rental, but he noted that the company gets better margins on VOD sales than on DVD rentals.
“The lift in the VOD business is something that’s significant to us, and from a margin perspective, it’s good for the company,” he said.
Mellet said VOD rentals also benefit the studio by cutting out some previously-viewed sales. Rental retailers often sell off extra copies of DVDs after they run their rental course, and Warner believes that those previously-viewed sales cut into new DVD sales, he said.
VOD buy rates varied by film, depending on box-office take and genre. Horror and comedy titles saw the biggest gains, with VOD buy rates up 62% and 58%, respectively, in the test markets, according to Warner. Films with box-office grosses of more than $100 million, which tend to sell better than they rent on DVD, showed relatively little improvement on VOD, Mellet said.
Beerfest, which Mellet said falls into the VOD “sweet spot,” showed some of the biggest gains for Warner. In test markets, VOD buy rates for the title were up 55%, DVD buy rates were up 32% and DVD rentals were up 30%.
Superman Returns, the first release in the test, saw more modest gains: VOD buys were up 15% on average, DVD buys were up 4% and DVD rentals were off 4%.
Mellet said VOD buy rates in test markets grew as consumers became more aware of the day-and-date releasing.
The studio plans to continue testing day-and-date releasing before coming to any final conclusions, Mellet said. In addition to the Comcast test, the same studios also began a similar test with Time Warner earlier this year.
Last year, Warner quietly debuted Duma and Kiss Kiss, Bang Bang on VOD nationwide the same day they were released on DVD.
If Warner and other studios decide to do away with the pay-per-view window, that could also benefit movie download services such as Movielink, Amazon and Wal-Mart, which all sell rental downloads. Rental downloads are considered VOD by studios and as such are currently available in the same PPV window that follows DVD.
Asked about the test results in recent earnings calls, execs from Disney and Viacom have said DVD sales were up in test markets, but they haven’t disclosed numbers.
VOD test results are expected to be one of the topics touched on by Warner Bros. chair and CEO Barry Meyer, Television Group president Bruce Rosenblum and Home Entertainment Group president Kevin Tsujihara during the Deutsche Bank Media & Telecom Conference June 4 in New York.
