Market Watch

Summit Tests On-Demand Window Ahead of Packaged Media Release

June 03, 2011

Laura Aguilera Laura Aguilera Senior Research Analyst, Service Providers & Platforms
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Summit Home Entertainment has announced it will make sci-fi thriller Source Code available on US digital and on-demand platforms 18 days ahead of its US packaged media release. The film will be made available for iVOD (internet video-on-demand) and EST (electronic-sell-thru) through digital platforms, as well as PPV (pay-per-view) and VOD (video-on-demand) on the on-demand services of pay-TV operators on July 8. Though on-demand rental and purchase prices will vary by provider, the studio will bow the DVD at $26.99 and Blu-ray at $30.49 on July 26.

Summit has traditionally released its films for VOD and EST day-and-date with physical discs. This particular case will test the demand for viewing a bigger-budgeted film digitally prior to the release of physical discs, but will not shorten the industry average window between a film's theatrical release and its home entertainment debut. Summit does not participate in the premium VOD efforts -- the controversial 'early-VOD' window under which operators are permitted to provide a movie from select studios for $29.99 eight weeks after their theatrical launch.
Source Code has generated over $111m in global box office since its April 1 theatrical release - more than half of which ($57.8m) was generated in international markets.

As a starting point, Summit's moved should be applauded from an anti-piracy perspective. Summit's The Hurt Locker and the studio's Twilight franchise have been some of the most heavily digitally pirated films of the past few years. Across the industry, the physical media supply-chain has been one of particular concern for fueling the illegal availability of pristine digital DVD and BD rips, as disc creation and distribution often begins weeks in advance of a title's street date, or in some cases official releases hit foreign markets - such as Region 5 territories - months ahead of the US date. This means illegal rips from often just a single stray copy can hit torrent sites several months ahead of a movie's home video and digital street date. Summit's own Twilight Saga: Eclipse for example was available as a DVD-rip torrent in August 2010, way ahead of its US home video street date in December 2010. Given the close proximity of the DVD-rip to the EST and VOD product (many rips now come in 720p with 5.1 surround sound) this is of particular concern for building meaningful digital strategies. Though 18 days may not be enough to stem piracy on high value franchises like Twilight, mid-performing movies such as Source Code could benefit from the move as making digital and on-demand available over secure platforms such as Comcast's VOD service and iTunes will stem some of the supply-chain leakage issues.

Away from the piracy question, there is also the challenge of a declining packaged media market, and an on-demand model that is not growing quickly enough to make up the shortfall in the long term. While EST of new release movies has now almost matured in the US on its current model. IHS Screen Digest predicts that the entire US EST business for movies will only grow by approximately $20m in 2011, off the back of a cooling Q4 2010, and a flat Q1 2011. This is in contrast to a US packaged media retail market for movies that is predicted to decline by $609M in 2011 (despite a great deal of value being bundled into the physical product). Though there are a whole host of issues around title availability, convenience, pricing, distribution model and file storage to contend with for EST, earlier availability of titles on digital platforms head of packaged is likely to modestly improve the fortunes of digital purchasing. The earlier window is also likely to also advance the fortunes of iVOD, which has seen significant boost off the back of growth in connected devices - with Apple's iTunes ecosystem of devices and Microsoft's Zune Video Marketplace leading the way. iTunes US is expected to register paid iVOD movies transactions equal to approximately half of the Comcast paid VOD platform in 2011, on course to becoming the biggest generator of on-demand revenues for movies in the next three years.

It should be noted however that as technologies continue to disrupt the traditional model for home entertainment distribution, one-size will increasingly not fit all. In many respects, studios are still trying to figure out the magic formula for the home release of a movie given the multiple routes to the customer, with the end result that uniform windowing and pricing across the value chain may well become yesterday's model. Arguably, as witnessed by each studio adopting a unique digital strategy by supporting different platforms and release windows, as well as the different attitudes towards platforms such as Netflix and even Redbox, Hollywood's home entertainment future distribution is going to become fragmented across all windows, not just on-demand, taking into account genre, performance and title characteristics. 

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