M+E Daily

Sell Movie Downloads First, Rent Via Redbox Last, Says Analyst

“We understand what a consumer wants” in home entertainment access, writes Pali Research analyst Richard Greenfield. “We just see no reason why the studios should enable that behavior.”

In a post to Pali’s equity research blog (registration required), Greenfield makes a case against day-and-date availability in home entertainment. Convenient as it may be for consumers, it poses too great a threat to studio profits.

Greenfield argues for a reordering of the home entertainment release window, sequenced as follows:

• Electronic sell-through: Digital sales of downloads via iTunes and Amazon. Pali also looks for physical retailers, such as Wal-Mart, to enter the electronic sell-through market.

• Physical sell-through of DVDs and Blu-ray discs.

• Video-on-demand via cable/satellite/telco, as well as streaming electronic rentals via online sites.

• Physical “a la carte” rental via chains such as Blockbuster.

• Physical rental via subscription services such as Netflix and Blockbuster onDemand.

• Physical rental via Redbox and other kiosks.

The concept, Greenfield writes, would be “to protect DVD sales from the growing convenience of rental and to sequence a movie’s release within home entertainment by the level of profitability to the studio.”

The analyst does not discuss studios’ conventional four-month window between a film’s theatrical debut and DVD release. Even this window is not necessarily regarded as sacrosanct. Paramount, for example, is bringing the DVD of its G.I. Joe film to market Nov. 3, roughly three months after its Aug. 7 theatrical bow.

Such a home entertainment model would strike certain parties as unfair, he concedes. What’s more, companies such as Redbox could make an end-run around studios, stuffing kiosks with store-bought discs.

Settling on a sequence is one thing; agreeing on a length of time quite another. Presuming each tier had one week’s exclusivity over the next, “new” titles wouldn’t hit Redbox kiosks until five weeks after their electronic sell-through release.

Pali’s ideal schedule would conform with the 28 days that Warner wants in between DVD sell-through and Redbox rentals. But that is conditioned upon Warner prevailing against Redbox in court.

Legal battles and renegotiations of longstanding business terms are only some of the obstacles on the road to a reordered home entertainment window. Studios’ toughest job may come in persuading consumers to come along.