Warner Bros to Make Consumers Wait, Expect a Backlash…
Apparently, Warner Bros. is in the process of making it even harder for consumers to rent DVDs of their movies soon after release to DVD.
Expected at CES next week, Warner Brothers will be announcing a new deal with Netflix, Blockbuster, and Redbox extending their 28 day wait on new titles to 56 days after they go on sale at retail.
The current 28 day window has done little to boost actual DVD and Blu-ray sales, and we’re not sure the 56 days will help either. It will also impact streaming services and especially watching movies on alternate devices such as tablets and smartphones, which is growing in popularity.
Netflix has always had a leg up on others and was able to seal key streaming contracts with major studios, but Redbox is a pure Kiosk play, and stands to be hurt the most, especially if other studios follow suit.
This follows reports that HBO is pulling its content out of Netflix distribution, a clear sign of not giving consumers what they want, where they want it. As HBO Go becomes more popular, especially on PCs, tablets and smartphones, it’s clear that HBO is trying to pull consumers back into its own walled garden. Disney’s deal with Comcast this week also is a sign of the continued attack on online distribution platforms.
Netflix has been the whipping boy of Wall Street this past year when it raise prices considerably, and tried to split its DVD rental service from its streaming service. The later move was cancelled. Losing more than 10% of its subscribers its stock price was pummeled. But while it was persecuted on Wall Street, in the press and on message boards, few understood the price pressure studios were putting on it. Amazon became the new studio darling rolling out Amazon Prime and the Kindle Fire, while Netflix was singled out as its subscriber base eclipsed that of Comcast’s. We believe it’s only time until Amazon is looked at in the same light.
American’s insatiable appetite for video, and now video on PCs, tablets, and smartphones is growing; Ipsos Vantis’ concept tests of these platforms as attractive video consumption devices shows that. As these devices become more influential in video consumption, studios and certain brands are jockeying for position to own that experience ? Apple with iTunes and soon its iTV products within its own walled garden, Amazon through its comprehensive marketplace approach, Netflix through its subscription base despite some fallout, and studios looking to compete with the online services and tech brands head on.
In fact at Netflix’s earnings release this week their metrics make them the 15th most watched network in the U.S. with 20 million streaming subscribers watching more than 2 billion hours of movies and TV shows in the Q4 2011 alone. Yes, Netflix is a force to be reckoned with, as far as the studios are concerned because they impact both domestic and international DVD sales. But so does Apple and Amazon.
Our recent Ipsos Vantis Innovation Index survey shows that consumer spending on video kiosk rentals is not abating in 2012. Just over 8% of consumers polled indicated they would increase their rental spending in 2012, while 6% would increase their spending on streaming video services. Purchase intentions for tablets, smartphones, and PCs, which are now popular video platforms was decent at 18%, 18%, and 17% respectively making these the key consumer electronics products consumers will be purchasing in 2012.
Consumer Spending Intentions in 2012
- Streaming Video Services 6% to increase their spending
- Video Kiosk Rentals 8% to increase their spending
Source: Ipsos Vantis Innovation Index Q4 2011
Top 3 Consumer Electronics Products to Be Purchased in 2012
- HDTVs 19%
- Tablets 18%
- Smartphones 18%
- PCs (including iMac) 17%
- eBook Readers 11%
Source: Ipsos Vantis Innovation Index Q4 2011
As movie attendance falls to a 16 year low and Americans show a lack of interest in 3D movies, 3D DVD titles, and 3D TVs, is no surprise that the studios are attacking back at the technology brands that are changing the way video is consumed. Time Warner is puting taking a leadership position on the cloud-based UltraViolet solution, to control physical and electronic distribution and viewing. Ultraviolet also scored very well in our recent Vantis Files review of it with a Market Success Score of 169.
But Q4 sales of DVD and Blu-Ray titles were disappointing, so studios are going after the rental business.
We don’t think Americans are going to be influenced into going back into stores and buying DVDs and building libraries again. In fact this may result in a backlash of increased piracy if consumers start to feel controlled by the large media studios. Those under 40 are emerging as generations who are content on renting rather than owning. The industry data speaks for itself. Waiting another eight weeks (instead of four) is pretty trivial given that most Hollywood titles have a 4-6 month gap between theatrical release and DVD release.
Times have changed. With the rise of the online brands and Apple in this space, Hollywood can no longer expect the same level of profit they once did on DVD sales, especially as the consumer’s desire for renting and watching video content on any device, anywhere remains insatiable, and reinforced by the likes of ITV and technology brands such as Apple, Hulu Plus, and Netflix.