OPINION: High-def hurry

Last week, as I was reporting the story on the studios’ plans for an early, high-def video-on-demand window, as spelled out in a petition to the Federal Communications Commission for a waiver of certain set-box regulations, the few studio executives who would talk about the issue at all—and then only on background—did their best to wave me off the story.

It was just the Motion Picture Assn. of America, which filed the petition, being proactive, I was told. Any such moves were far, far down the road. Nothing to see here, move along.

To which I have two words: expedited review.

That’s what the MPAA was asking for in its petition—a quick decision—which sounds to me an awful lot like a petitioner in a hurry.

It’s also a really bad idea to make the sort of explicit promises to a federal regulator as the MPAA makes in the petition and then not deliver, especially when you’re asking the commissioners to give your request special attention. It’s unlikely this will be the last time the studios have business before the FCC, and blowing their credibility on this one isn’t going to help them in the future.

Since it’s fair to assume the MPAA understands all that, it’s probably fair to assume that the petition is a little bit more than merely a proactive exercise.

As the petition itself reminds the commission, the original order banning the use of selective-output controls (SOC) on set-top boxes stipulated that SOC “might have future applications that could potentially be advantageous to consumers, such as facilitating new business models, and [the commission] will consider waivers, petitions and other proposals to use [SOC] is this regard.”

In other words: You told us to come back when we had something concrete, and here we are.

The ultimate timing of any move to adopt an early VOD window, of course, is not entirely within the studios’ control. The FCC doesn’t have to grant expedited review, and even after reviewing the petition, it could still say no.

But there are certainly forces pushing the studios in that direction.

The studios spent an average of $35.9 million to market each film they released last year, according to MPAA statistics, most of it in the weeks leading up to the theatrical release. After that, spending falls sharply, especially if the movie tanks.

That’s a lot of front-loaded marketing against, essentially, a single revenue stream: theatrical. But there’s almost certainly a bigger potential audience out there that is exposed to the marketing but doesn’t manage to make it to the theater before the movie disappears from screens.

Giving those people the option to watch it in their living rooms while their interest is at its peak—and to pay a premium for the privilege—would be an effective way to leverage the money the studios are spending on marketing anyway to create a second revenue stream.

Theater owners would no doubt squawk, at least initially. But the studios that have looked at the problem have research that strongly suggests the two audience segments are distinct enough that the strategy would not be cannibalistic.

DVD retailers also are likely to be unhappy. But DVD sales are declining anyway. And if the high-def VOD window ended with the theatrical window, or shortly thereafter, there’s no reason it should affect DVD and Blu-ray Disc sales any differently from theatrical ticket sales. It might even work to promote Blu-ray sales—especially if people who ordered the VOD were offered a discount on a Blu-ray copy of the movie when released.

If the studios really are not thinking seriously about creating a new revenue stream through an early VOD window, then they’re not doing their jobs.


Get more of Paul Sweeting's analysis here.