A new company named Prima Cinema, Inc. is creating a service that will bring movies to homes the same day that they arrive in theaters.
Customers will be charged a one-time fee of about $20,000 which will give clients a digital-delivery system. Each film will cost an additional $500. Best Buy and General Electric's Universal Pictures support the idea and have given the start-up $5 million in backing. The company plans to start delivering movies to customers as soon as a year from now. Prima has plans to install its systems in 250,000 homes within five years.
The high price tag for the service has received mixed reactions in Hollywood. The main concern is that only a small number of clients will be able to afford the service. Executives wonder if it will be possible to build a market beyond a few thousand users. Others exec's look at this high price as a way to create an exclusive, super-premium niche market without cutting into existing sources of revenue.
Chairman of Universal Pictures, Adam Fogelson stated,
"While this is a niche market, there is a chance for significant upside. And precisely because it is a niche market, that upside should come without harming any of our existing partners or revenue streams."
Jason Pang, founder of Prima made a similar statement,
"We're not here to replace anything. We are trying to create new revenue streams for studios and new viewing opportunities for moviegoers."
The windows that films are released to the public to maximize profits continues to be an issue of debate. Traditionally the release schedule is as follows: a movie hits theaters first, followed several months later by DVDs, video-on-demand, subscription-cable channels, and so on.
This system has been catching a lot of flack lately because of DVD sales which continue to decline. Consumers have grown accustomed to films being released sooner and we are in the digital age with increased piracy concerns.
Another area of interest is in the creation of "premium" video-on-demand window that would offer consumers the chance to watch a movie a month or two after it arrives in theaters for about $30.
According to media-tracking firm IHS Screen Digest, DVD sales are down about 20% in 2010 from 2009, to $7.8 billion. DVD spending is also down 43% from its 2006 peak of $13.7 billion. While DVDs are down, video-on-demand services have increased 17% since 2009, to $1.4 billion, according to IHS.
Prima has met with all six major studios as well as several of the smaller, independent ones about licensing their films. Prima anticipates that several of them will sign on when the company launches its service in late 2011.
As can be expected, theater owners are not happy about anything else eating into their profits. The president of the National Association of Theatre Owners John Fithian said that the service offered by Prima "makes very little sense as it risks millions to make pennies."
By exposing movies to the possibility of piracy early on, Mr. Fithian says, "There is no such thing as a secure distribution to the home." He adds, "This proposal will give pirates a pristine digital copy early, resulting in millions of lost revenue to piracy, while at the same time selling a very limited number of units. Only billionaires can afford $500 per movie."
Time Warner Inc., is planning to test an early-release program next year with a new film. The program will cost roughly $20 to $30 to watch digital copies of movies within a month or two of their release in theaters.
Sony Pictures did a similar program for owners of the Bravia TV. They offered its 2008 Will Smith film Hancock and its animated 2009 Cloudy with a Chance of Meatballs before the films were out on DVD.
Not all studios are supportive of a program like this. Viacom Inc. Chief Executive Philippe Dauman said Monday that his company isn't one of the conglomerates considering a new premium video-on-demand service. "We want to satisfy our theater distributors," said Mr. Dauman on Monday, also at the UBS investor conference. Viacom owns Paramount Pictures, but is controlled by Sumner Redstone's closely held National Amusements Inc., which also owns a movie-theater business.
What are your thoughts of a premium video-on demand service. The price tag of $20,000 is out of my price range and I don't think I would pay even $30 to watch stuff at home. I am fine with instant Netflix and I especially love seeing movies on the big screen.
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