VOD Dilemma For Movies

UPDATE: As of Oct 13th, Universal has canceled its plans to release the VOD version of the film three weeks after its theatrical debut (source: WSJ)

Universal tests Video-On-Demand for Tower Heist three weeks after its theatrical debut. A bold move for an industry that has long believed in the concept of windowing for incremental revenues and has been cautious about releasing movies on VOD too soon.

While smaller distribution companies such as Magnolia have employed similar strategy of releasing the movie on demand before the release and seen success, this will be a first for a major motion pictures company.

As viewing habits shift and behaviors change it is important to test new methods of distribution to reach the audiences at multiple touch points. The price tag for the Tower Heist VOD is $59.99, quite a hefty price considering box office tickets for two in NYC would be around $36 not including the confectionery.  Will the audience bite for convenience and immediacy? It is a difficult question to answer, after all this price would be a luxury for a household in these uncertain times.

But should this be successful then the studios may have the alternative to the loss of DVD sales. In my opinion, the movie with this price tag should have some additional features including watching it on mobile devices, the ability to socially consume it, perhaps get the chance to own it at a later date for a slightly lower price than those who don’t pay to watch it on-demand.

It is still to early to conclude and there is not enough data but as more studios test this can only get better. And while theater owners are worried of the lowered attendance and changing behavior, they would do well to recognize audience will flock to the theaters for the experience and that most of the business is within the first weekend. And if the movie is exceptional, the audiences who watch it on demand could in fact go to the theaters for a more engaging experience. The VOD then becomes a marketing driver. So content still is the king.