Market Watch

Warner Agrees New Distribution Terms with Lovefilm



Warner Bros. Entertainment has signed a revenue sharing deal with UK-based online video subscription operator LoveFilm under which Warner will provide movie content in the UK for LoveFilm's digital Player which is available to subscribers via the LoveFilm website and via Samsung and Sony connected devices. Warner's digital package covers 28 films per month with seven new titles to be added every week. Selected Warner new releases will also be available on LoveFilm's Player but on a pay-per-view basis with titles available on the day of retail release. Finally, all Warner new releases will henceforth only be available to LoveFilm subscribers on rental DVD and Blu-ray Disc (BD) 28 days after release.

Analysis
Move reflects Warner's deal with Netflix in the US which traded delayed access to new titles for greater physical copy depth at better wholesale prices and stronger digital content. Deal boasts LoveFilm's digital offer by adding stronger studio titles to a slate currently dominated by deep catalogue and smaller independent titles, a move that LoveFilm hopes will raise the profile of its digital offer at a time when it is looking to expand its Player to more connected devices. However, this digital push comes at a price for LoveFilm's core business of physical video disc rentals, already suffering from Universal's refusal to supply the online rentailer with new releases.

There are echoes of the US where Universal, Warner and Fox all now delay supply of new releases to kiosks and online video rental subscription services, while Paramount, Sony and Disney have all individually made deals with key rentailers and generally supply discs on a day-and-date basis. However, unlike in the US where Screen Digest data shows that rental still accounts for 17 percent of studio revenues from video, its UK shares are just 10 percent. As a result other studios may be less inclined to enter into lengthy discussions over new distribution terms for what is ultimately a very small part of their business.

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