Would you pay $25 to rent a movie?
Since the advent of the VCR, the basic formulas has been the same: release the movie into theaters, and then after a period of time release to directly to consumers, whether it’s a premium cable channel, VCR tape, DVD, or streaming service. Of course, what has changed has been the decrease in the period of time between theatrical release and the direct to consumer offer. Studios are about to test to see if they can make it not only shorter, but immediate:
Theater chains have long resisted the idea of letting studios release movies direct to consumers any sooner than 90 days after the films arrive in the cinemaplex, but reality is starting to set in.In 2016, DVD sales fell nearly 10 percent to $5.49 billion, according to the Digital Entertainment Group, but the overall home-entertainment industry grew 1.4 percent, thanks to streaming and digital sales. Studios get a higher profit margin from digital sales and would rather make their films available sooner rather than letting them linger in theaters for weeks making diminishing returns. A shorter window could also help save on advertising spending, eliminating the need for a separate campaign for home rentals. One answer is charging viewers a higher fee for a chance to see a movie at home just a few weeks after its theatrical release — what’s called a premium on-demand window. Among the major studios, Universal Pictures, Warner Bros. and 20th Century Fox have been the most publicly vocal about this approach. Executives have floated rental prices from $25 to $50, according to people familiar with the matter.
Source: Coming Soon to a TV Near You: Hollywood’s Latest Blockbusters – Bloomberg
On the face of it, $25 might seem staggering; however, when compared to the cost of a family of 4 to go to the movies topping $50 even before the concession stand, it seems like a good deal. The obvious thematic headwind coming out of this development is the negative impact on the movie theaters. The other thematic headwind to consider is mall owners who are banking on the movie theater as being the new “anchor store” of the mall as retailers such as JC Penney (JCP), Macy’s (M) and Nordstroms(JWN) continue to struggle.
