Are the studios stiffing the FCC on early VOD?

VOD Considering all the trouble the MPAA went to to get selectable output control through the FCC  — a two-year effort spanning two FCC chairs — the studios don’t seem in any hurry to actually make good on the promises the MPAA made to the commission regarding the early VOD release of movies to justify the SOC waiver.

Since securing the waiver in May, no studio has stepped forward to offer a movie in the new window. The closest any has come was the recent, vague indication by Time Warner chairman Jeff Bewkes that Warner Bros. will make a decision regarding early VOD release sometime in the second quarter of 2011, a full year after the waiver was granted. Others in Hollywood seem to be in even less of a hurry.

Earlier this month, Peter Levinsohn, president of new media digital distribution for Fox, called the new window “the slowest product rollout [he’s] ever seen.” According to Levinsohn, the studios as a group are still wrestling with “the complexities” of trying to carve out a new release window between theatrical and Blu-ray without cannibalizing either.

“You don’t want to go far up against theatrical and impact that business,” the Fox exec told paidContent. “It’s not about day and date [release] and seeing how we disrupt. It’s about going after a segment that isn’t going [to theaters]. We’re trying to be accretive, not cannibalistic.”

DreamWorks Studios CEO Stacey Snider seems even less enthusiastic. Speaking at the Future of Film Summit last week, Snider noted that some studios (she’s looking at you Universal) see more upside from an early VOD window than do others because the it would add value to cable subscriptions. Those studios without corporate connections to pay-TV providers, however, fear letting other companies establish the industry business practices regarding the new window without their input.

“The pressure is on to figure out [premium] VOD even if you wish it was something that didn’t happen,” she said.

Trouble is, the MPAA made some pretty explicit representations to the FCC regarding the studios’ intentions in order to secure the SOC waiver.

The FCC originally banned the use of SOC by cable and satellite providers in 2003, fearing it could be used to block legitimate consumer recording to TV content permitted under the Supreme Court’s Betamax precedent. It said at the time, however, that it would consider granting waivers on a case-by-base basis if petitioners could demonstrate SOC was necessary to enable genuinely new business models that benefited consumers.

In its 2008 petition for a waiver, the MPAA claimed the studios had exactly such new business models in mind but could only implement them if they could use SOC to block unencrypted analog recording of such “high value content.”

Specifically, the Petitioners are interested in exploring opportunities to provide consumers with the ability to order recently released theatrical, high definition movies directly through their MVPD (the “Services”). These new Services are exactly the type of  ”new business models” that the Commission contemplated when it adopted the encoding rules.

The new Services would without question be in the public interest. They would expand consumer choice by dramatically improving the timeliness and quality of home movie viewing for most MVPD subscribers. Further, by making this compelling content available to MVPD subscribers with newer HDTV receivers, offering ofthe Services can help further the digital transition by providing a significant incentive for consumers to purchase HDTVs.

At the time, many public interest groups objected to giving the studios control over the functionality of consumers’ devices, arguing that the studios’ proposed business plan wasn’t really all that new and in any case could easily be implemented without the use of SOC:

As petitioner, the MPAA bears the burden of proof and must demonstrate that the waiver is warranted. Yet, over the past year, the MPAA has failed to provide a reason as to why the limited interests of its six member movie studios should be allowed to outweigh the interests of those consumers that will be forced to replace over 20 million television sets and countless other devices in order to view content that their current equipment is capable of displaying. Furthermore, granting the waiver effectively would allow MPAA member companies to control the types of connections and features offered to all U.S. consumers, forcing consumer electronics designers and manufacturers to agree to almost any consumer-unfriendly conditions just to display SOC content.

The crux of the MPAA’s case was that early release VOD movies would be coming forthwith if the waiver were granted. The waiver was granted but we’re still waiting for movies in the new window.

The studios had better get on with it before they make a liar of the MPAA.