$9 to rent an HD movie on demand?
Posted
May 16 2008, 01:56 PM
by
Kim Peterson
People will pay between $7 and $9 to rent HD movies-on-demand that come out the same day as DVDs, according to consulting firm Oliver Wyman. Right now, movies generally hit DVD first before releasing on-demand. Changing that formula would lead consumers to pay for three more movies a year, the firm said, adding $5 billion to the $50 billion spent on movies annually in the U.S.
Even a $7 rental seems too pricey to me, unless you're talking about some jaw-droppingly amazing movie that absolutely must be watched in high-definition. Despite its slightly outrageous numbers, the report touches on a fact that movie studios have clued into for a while now: video-on-demand is smoking hot, and doesn't deserve its second-tier status.
Time Warner figured that out, and this year is putting all its films on video-on-demand the same day they come out on DVD. The margins from on-demand movies hits 60% to 70%, execs said, compared with 20% to 30% for DVD rentals. "It's very good for the film companies," CEO Jeff Bewkes said during the company's Q1 earnings call.
Comcast's video-on-demand offerings used to be as pathetic as the 99-cent VHS bin at the video store. But its library now stands at 10,000 titles, with an increasing number of movies available the same day as the DVD release. The service gets about 250 million views a month.
So where are the VOD investment opportunities? The list of companies making plays in this business is long, and includes telecom carriers, cable companies and equipment vendors. Motorola and Cisco are deeply invested in the equipment piece of the puzzle. The six largest cable operators have joined forces to make it easier to advertise through VOD. Netflix, Amazon, Blockbuster, TiVo and Apple have introduced or are developing on-demand services.
A third of U.S. homes can access on-demand video, and analysts are making big-money projections for the future of the business. The global VOD market will hit $11.4 billion by 2011, according to the Informa research firm. And though North America will have 27% of the total subscribers, it will contribute 46% of the overall revenue.
