Lovefilm inks 2nd pay window rights deal for NBC Universal films

By
Richard Broughton

May 31, 2012

Lovefilm has inked an exclusive deal for UK digital subscription rights to Universal Pictures titles in the second subscription pay TV window. The multi-year arrangement permits Lovefilm to show films on an exclusive basis following their run on Sky Movies. The deal follows the signing of similar agreements by Amazon-backed Lovefilm with Sony and Warner. The digital rights package is accompanied by a DVD and Blu-ray Disc deal, which will allow Lovefilm to rent out NBC Universal titles on physical discs two months after their retail release.

The deal coincides with the launch of HD streaming by Lovefilm, allowing PC and Mac users to watch 1080p or 720p videos, and those with connected Samsung and LG TVs or Xbox 360 consoles to watch 720p videos. Lovefilm has stated that a 4Mb/s broadband connection is required for 720p video and 12Mb/s for 1080p.

The NBC Universal deal confirms Lovefilm's intention to create an additional standard window in the UK movie market. Historically, the windowing structure saw the window for free-to-air broadcast distribution of movies follow Sky's subscription window (although there have been isolated instances of single studios adopting different practices); however for the three Hollywood studios with which Lovefilm now has deals, the situation has evolved to two consecutive subscription windows, with the FTA window pushed further back.

Lovefilm is now increasingly well positioned in the UK online streaming market - its exclusive first window deal with Studio Canal and its second window deals with Sony, Warner and now NBC Universal leave the company with arguably the strongest UK subscription movie offer after Sky Movies. Netflix, by contrast, has exclusive first subscription window deals with MGM, Lionsgate and Miramax.

The new deal lends some support to the UK Competition Commission's finding (covered in our commentary 'Competition Commission reverses its Sky Movies view') that there is now sufficient competition in the UK subscription movie sector to avoid having to employ remedies such as wholesale must-offer requirements to market leader Sky. Consumer surveys of new Netflix and Lovefilm customers commissioned by the CC revealed that (over a three month period) of the 65 per cent of new Netflix and Lovefilm subscribers who started their new subscription while also a Sky, Virgin or BT Vision customer, two per cent said this was a factor in their decision to drop their pay TV service. If these rates were broadly representative of Netflix and Lovefilm subscribers through Q1 2012, this implies that roughly one in ten of the circa 0.4m subscribers dropping their pay TV subscription during the quarter would have done so as a consequence of their new Netflix or Lovefilm service.

However, Lovefilm is almost certainly bolstering its offer not only to fend off new entrant Netflix, but also prepare itself for Sky's impending Now TV service launch, which is likely to alter the competitive situation still further. The Competition Commission's view is that the Now TV launch will increase market competition; however, the danger remains that Now TV's content offer and pricing will be sufficient to prevent rivals gaining scale significant enough to allow them to compete with Sky for first window movie rights from the Big six Hollywood studios - although for the Commission, providing consumers are getting a fair deal, this may not be a significant issue.

Tags:

Countries: UK
Companies: Lovefilm NBC Universal BSkyB Netflix