Highway

Perspectives

Getting customers to buy premium video on demand may not be so scary

Around one-fifth of US consumers are willing to pay for PVoD

In August 2018, Row8, an online movies-on-demand platform, launched a new service targeting US consumers. The service aims to accelerate consumer access to exclusive premieres of foreign titles in the US market shortly after their release.¹ Although focused on foreign movies, Row8 highlights an emerging trend: delivering movies to the home market within a few weeks of their theatrical releases—a service commonly known as premium video on demand (PVoD).

Studies show there is a demand for watching the latest movies through PVoD services.3 Deloitte’s Digital media trends survey revealed that about 25 percent of MilleXZials are willing to pay a premium (up to $40) to watch a movie on their device or at home shortly after it appears in a movie theater (17 days), but before it’s available for streaming, purchase, or download.4

In addition, theatrical collection trends show that some genres could be more suited to a premium video on demand (VOD) format than others. Our analysis shows that movies collect the bulk of their revenue during the first few weeks. This phenomenon, however, varies by genre, with horror, thriller, and action movies generating more than 90 percent of their total lifetime gross within 28 days of release. Horror movies in particular, collected 43 percent of their lifetime gross in the first week itself.

For thriller and action, this figure was around 40 percent. However, the average in-theater window (exclusive window between a theater release and home video release) for these genres is 47 days;5 this leaves a gap of about 20 days.6 Some studios might want to increase capitalization during this period and enhance the return on their marketing dollars. In fact, there is a precedent for horror movies. In 2015, a major studio signed a deal with theaters for an early home video release of two of its horror flicks.7

“Luxury and full-service film exhibitors’ data shows that many movie fans value premium experiences away from home, which bodes well for the prospects of premium video-on-demand at home,” notes John Footen, managing director, Deloitte Consulting LLP Core Business Operations and Systems Engineering practices for Technology, Media & Telecommunications.

Given consumers’ interest and the theatrical collection trends, what’s the roadblock to launching PVoD services? Not surprisingly, it’s typically theater owners. Facing a gradual decline in movie attendance, with the exception of a few blockbusters during the summer and holiday seasons,8 many theater owners believe PVoD might worsen their situation.9

On the other hand, for many studios, revenue from home entertainment has shrunk significantly as digital alternatives from new video-streaming players disrupt the market.10 Many studios believe that the exclusive in-theater window (typically 45–90 days) is too long. As a result, many studios favor making home video available shortly (three to four weeks) after their expensive movie-launch campaigns.11

Can studios and theaters come together to tap the PVoD opportunity?

Perhaps they can. Studios may consider charging a premium for this service and offer to share revenues with theaters for a limited period. Such a model would likely create incremental revenue streams in the long term for both parties. This could make it a win-win situation, thus helping end theaters’ resistance. Moreover, it could help fulfill the emerging consumer demand.

Where to start? Perhaps with a horror flick!

This charticle authored by Shashank Srivastava on October 31, 2018.

Endnotes

Erik Gruenwedel, “New In-Home Theatrical VOD Service Launches,” Media Play News, August 1, 2018.
Deloitte, Digital media trends survey, 12th Edition, March 2018.
Can Premium On-Demand Video Save Hollywood?,” Forbes, September 22, 2017
Deloitte, Digital media trends survey, 12th Edition, March 2018
Deloitte analysis is based on NATO statistics.
“Average in-theater window” represents the exclusive window between a theater release and home video format release (DVD/VHS/streaming).
Methodology used for calculation: The average window is calculated based on National Association of Theatre Owners (NATO) “video release window stats” reported for movies released between January 2017 and September 2017 for six major studios.
Victor Luckerson, “Movies Are About to Start Coming Out On DVD Way Earlier,” Time, July 9, 2015.
Anousha Sakoui “Hollywood Had a Terrible 2017,” Bloomberg, January 2018.
9 Ibid
10 Ricardo Lopez, “Disc Sales Decline Deepens in Annual Home Entertainment Spending Report,” Variety, January 9, 2018.
11 Brent Lang, “The Reckoning: Why the Movie Business Is in Big Trouble,” Variety, March 27, 2017.

Site-within-site Navigation. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Fullwidth SCC. Do not delete! This box/component contains JavaScript that is needed on this page. This message will not be visible when page is activated.

Did you find this useful?

Related topics