The VOD Debate

Starting today [April 21], customers of the satellite TV service DirecTV can watch the Adam Sandler-Jennifer Aniston rom-com Just Go With It [pictured]. While this may sound innocuous enough, the reality couldn’t be more different. The film opened in theatres 70 days ago — versus the average theatrical window that currently runs at four months and 12 days.

Rewind a couple of weeks to Caesars Palace in Las Vegas. It’s the end of March and the industry’s first CinemaCon – ShoWest in all but name and now run by the National Association Of Theatre Owners (NATO) – is coming to a close.

The four-day affair has been pretty much just that – a love-in between the studios and their partners in exhibition. But on the final day of the event a leak gets out that four studios will supply films for premium VoD.

The atmosphere changes. This is the last thing anyone in Las Vegas wants to hear. NATO head John Fithian told me before the convention that premium VoD would be off the official agenda and indeed during his press conference with Chris Dodd, the new head of the MPAA, Fithian dismissed a question on the subject.

Nobody wanted to spoil the party by talking about the one thing that threatens to rupture an already flawed and finely balanced relationship between studios and exhibition. But ever since it emerged that Warner Bros, Sony, Fox and Universal will explore premium VoD, things have grown tense.

Warner Bros has been an advocate of the platform ever since Time Warner head Jeff Bewkes declared earlier this year that he envisioned making studio content available by the second quarter. So far Disney, which got into a fight with exhibitors last year over moving the windows on Alice In Wonderland, has not aligned itself with premium VoD. Ditto Paramount, which has expressed concerns over piracy.

The premium VoD plan basically entails studios offering select content 60 days after theatrical launch. The studios, concerned over the slow-down in the DVD business, sniff a potential new revenue window before their product comes out on DVD.

The exhibitors counter that premium VoD interferes with their traditional slot. Those four months and 12 days, give or take a few weeks, are the time when theatre owners pull in the crowds and sell lots of popcorn. To shorten that window, they say, is to jeopardise the key revenue stream in their business models.

So far there’s been a lot of sabre-rattling but no action from the theatres. Their options might range from pulling theatrical trailers by offending studios to renegotiating the revenue split. Or they might choose not to carry the film. A 23-strong group of prominent filmmakers including James Cameron, Peter Jackson, Michael Bay and Guillermo del Toro were part of an anti-premium VoD protest yesterday (full story here) that voiced its disapproval in an open letter to the industry.

Which brings us back to Just Go With It. The rom-com has amassed $102.3m and counting in North America. Nobody, including DirecTV top brass, knows how much it might make from the new platform or if people will choose to wait and pay much less to rent it on DVD in a few weeks.

But the satellite service is ready to give its so-called Home Premiere platform a try. For $29.99 the 6m customers who own the HD DVR required to access premium VoD will get the film for 48 hours. That’s roughly one-third of the service’s subscriber base.

According to the LA Times, the studios will receive anywhere from $21-$24 per transaction. Next up in the DirecTV experiment will be Warner Bros with Hall Pass, Universal with The Adjustment Bureau and Fox Searchlight with Cedar Rapids. Theatre owners – both in the US and around the world – will be watching closely.