Netflix just got poked recently by Michael Pachter at Wedbush Securities who said that investors should be wary as the company's costs will continue to climb, but he's failed to grasp their plan I think. DiSH just hooked a really big, 1,800-title fish and DirecTV wants to offer you Home Premieres, but who will top the video-on-demand list and be the cream of the crop?
For what it's worth, I'm still betting on Netflix because I think they have a plan in place and have been actively seeking to implement that plan for some time.
Netflix Plays Man in the Middle
Netflix has started working to acquire rights to content right from the creators, thereby side-stepping the broadcasters who have historically been in that spot. Now, Netflix owns rights to content that it can start licensing to others for airing in more traditional ways. If I were them, I would put in 90-day clauses that say they can't air less than 90-days after they initially show up on Netflix (turnabout is fair play).
Sure, they have only acquired one show at present. But the word is obviously out - Netflix is ready to buy quality content. If you've got it and you want to get it to the masses, you might be able to sell it right to them. If it proves popular, they might one day even sell licensing for 'first air' rights to some broadcaster.
Bonus: You can get Netflix anywhere as a subscriber, no special hardware required except for a connected device that includes game consoles, TVs, set-top boxes, PCs and mobile phones.
DirecTV Home Premieres
Meanwhile DirecTV just launched their Home Premiere service which seems to already be drawing some fire from the theater side of things.
Basically, they're making movies available on video-on-demand only 60 days after theater release with a premium price of $29.99. Where that price came from no one knows. How they expect it to compete, no one knows. How it will fare, oh, I know this one. FAIL!
Even though it's half the normal time from theater to video-on-demand, I don't see it picking up. Really, $30 to rent a film for two days is stupid expensive, not to mention, you've got to be a DirecTV subscriber already. Who would pay that when you could rent it on Blu-Ray for like $3-5.
Cinema owners are up in arms over it saying that it cuts into their profits. But really, who of you goes to the theater to see a film that's been out for two months already? Even then, if you did with a partner it would be far less than $30 as that would most likely put the film in the budget theaters anyway.
Directors hate the idea and have had a letter published stating so:
AN OPEN LETTER FROM THE CREATIVE COMMUNITY ON PROTECTING THE MOVIE-GOING EXPERIENCE
We are the artists and business professionals who help make the movie business great. We produce and direct movies. We work on the business deals that help get movies made. At the end of the day, we are also simply big movie fans.
Lately, there's been a lot of talk by leaders at some major studios and cable companies about early-to-the-home "premium video-on-demand." In this proposed distribution model, new movies can be shown in homes while these same films are still in their theatrical run.
In this scenario, those who own televisions with an HDMI input would be able to order a film through their cable system or an Internet provider as a digital rental. Terms and timing have yet to be made concrete, but there has been talk of windows of 60 days after theatrical release at a price of $30.
Currently, the average theatrical release window is over four months (132 days). The theatrical release window model has worked for years for everyone in the movie business. Current theatrical windows protect the exclusivity of new films showing in state-of-the-art theaters bolstered by the latest in digital projection, digital sound, and stadium seating.
As a crucial part of a business that last year grossed close to $32 billion in worldwide theatrical ticket sales, we in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry.
Major studios are struggling to replace the revenue lost by the declining value of DVD transactions. Low-cost rentals and subscriptions are undermining higher priced DVD sales and rentals. But the problem of declining revenue in home video will not be solved by importing into the theatrical window a distribution model that cannibalizes theatrical ticket sales.
Make no mistake: History has shown that price points cannot be maintained in the home video window. What sells for $30-a-viewing today could be blown out for $9.99 within a few years. If wiser heads do not prevail, the cannibalization of theatrical revenue in favor of a faulty, premature home video window could lead to the loss of hundreds of millions of dollars in annual revenue. Some theaters will close. The competition for those screens that remain will become that much more intense, foreclosing all but the most commercial movies from theatrical release. Specialty films whose success depends on platform releases that slowly build in awareness would be severely threatened under this new model. Careers that are built on the risks that can be taken with lower budget films may never have the chance to blossom under this cut-throat new model.
Further, releasing a pristine, digital copy of new movies early to the home will only increase the piracy problem—not solve it.
As leaders in the creative community, we ask for a seat at the table. We want to hear the studios' plans for how this new distribution model will affect the future of the industry that we love.
And until that happens, we ask that our studio partners do not rashly undermine the current – and successful – system of releasing films in a sequential distribution window that encourages movie lovers to see films in the optimum, and most profitable, exhibition arena: the movie theaters of America.
We encourage our colleagues in the creative community to join with us by calling or emailing NATO at 202-962-0054 or email@example.com.
Michael Bay, Kathryn Bigelow, James Cameron, Guillermo del Toro, Roland Emmerich, Antoine Fuqua, Todd Garner, Lawrence Gordon, Stephen Gyllenhaal, Gale Anne Hurd, Peter Jackson, Karyn Kusama, Jon Landau, Shawn Levy, Michael Mann, Bill Mechanic, Jamie Patricof, Todd Phillips, Brett Ratner, Robert Rodriguez, Adam Shankman, Gore Verbinski, Robert Zemeckis
I can't say that I disagree with them but then again, I can't say that 60-days is really all that short. Name a film recently that was still making great numbers after two months in the theater. I just perused the latest weekend's box office numbers and the top film that has been out for 8 weeks or more was ranked 21st, Rango at eight weeks exactly, 22nd was Gnomeo and Juliet which is in its 11th week. Neither made more than $375,000 for the weekend and both were in less than 600 theaters. In 24th was the Adjustment Bureau which is to be included in the plan. It's at eight weeks after release, pulled in $247,000 from 263 theaters.
Just Go With It the film that is kicking this all off, is in 27th spot week eleven and made $198,000.
Longest runs on the list, aside from IMAX films: The Salvation Poem (35 weeks, 59th place), The Wildest Dream (38, 80), The Cremaster Cycle (re-issued, 43, 83). Twenty films from 75th place or lower are in their first two months of theatrical release... the top 20 are all in their first seven weeks.
HBO on the DiSH
First they bought Blockbuster, now they nabbed a massive 1,800 title deal including....HBO and Cinemax. What's included? True Blood, Boardwalk Empire, you know, that stuff you really want to watch.
HBO's service has access to movies from four studios: Warner Bros., Twentieth Century Fox, Universal Pictures and DreamWorks and that is what DiSH Online is tapping into.
They're also pissed at Starz for their deal with Netflix and have been giving away eight of their channels for free. Liberty Media, who owns Starz, is considering legal action as they are unable to collect subscription revenue when the channels are being given away free.
Sounds like dirty pool to me.
DirecTV still has you buying hardware so they're certainly in third place, Netflix has over 20,000 titles and DiSH is coming up fast. Dish Online is separate from the hardware-based package, but really, it's Hulu-powered for TV and you have to have a DiSH account to watch films from certain channels. So, essentially, still locked into some hardware. I suppose you could get DiSH and never hook up hardware but minimum monthly packages are $29.99 and there's no statement that all premium content is online.
DirecTV is dumb, you have to pay monthly, then pay extra for DVR and even more for HD. On top of that, if you wanted content on multiple screens it's another fee. I would place them in fourth place with freely available broadcast digital TV beating them out because really, even DiSH is offering HD for free.
Finally, if HBO is going to offer an online-only streaming service, screw DiSH and DirecTV...I'd go for that alone probably and couple it with Netflix for films and Hulu for other TV. All you'd be missing is sports.
Now, I'm heading back to the States in three weeks. When I get there, I'm going to analyze everything available and put my own package together. When I do, if you're interested (drop some comments), I'll write up what I decide on and give you the run down of what, why and how much. I have a feeling both Hulu Plus and Netflix will be in that mix and probably something to get my sports.