Our take...
This is the latest in a long line of release strategies trialled by the Hollywood majors. All this experimentation with release windows is designed to maximise turnover across the value chain in an era of slowing growth for traditional platforms, notably home video. However, DVD rentailers have voiced concerns that VoD will erode their business, and studio revenues with it. Netflix is the exception, believing VoD will not compete directly with the DVD-by-post sector and is enthusiastic about the proliferation of content in VoD space in which it is now involved. Warner claims the Comcast trial resulted in only a two per cent decline in DVD rental transactions, and that DVD buy rates were actually up 10 per cent (although findings are disputed by some sources in the trial areas). This argument reflects that used by the studio—and backed up by Screen Digest research—prior to its decision to abolish the video rental window in Europe.
The studios are keen not to jeopardise the important retail DVD business, but there is less incentive for them to protect the rental sector which offers a far lower rate of return. According to Screen Digest analysis of the UK market, DVD rental offers studios a return of just 14 per cent per transaction. For DVD retail, net revenues rise to 36 per cent of the average price paid by the consumer but it is even higher for VoD. Our research suggests that content owners secure 50 per cent of every VoD transaction fee on average, with margins often more generous for the Hollywood majors.