NAB The studios participating in the Home Premiere premium VOD launch are apparently undeterred by the threats of boycotts and other forms of retaliation by theater owners. According to Daily Variety, DirecTV will formally 
announce plans this week to begin offering movies to the home 60 days after their theatrical debut at $30 for a 48-hour rental. The first four titles available in the new window will be Sony’s “Just Go With It,” Fox’s “Cedar Rapids,” Warner Bros.’ “Hall Pass” and Universal’s “The Adjustment Bureau.”
While DirecTV will offer the movies nationwide, Comcast, Vudu and perhaps other cable MSOs will make them available in selected cities.
For all the angst the new short window and the blow-back from exhibitors have caused, I don’t believe it will actually have much impact. Sixty days is still too long, in my view, to generate significant business at $30 a pop.
To command a premium price — the only reason to do this — I think the studios will need to go to a 30-day window, perhaps forty-five days at the most. Since the exhibitors were going howl in any case, I also think the studios should simply bite the bullet and start at 30 days — again, if they’re going to do it at all. I fear that a 60-day window will only bring the studios grief without really moving the needle on the revenue side.
The studios do need to start somewhere, though. Having worked the FCC for the better part of two years to secure a waiver of the selectable output control rules to close the analog hole on STBs in exchange for offering movies at home in the new window, it would be very poor form for them not to follow through on their end of it now (as should have been obvious to the exhibitors last year when the waiver was granted).
As it turns out, however, selectable output control may only be the start of the studios’ DRM demands around the premium VOD window. At the National Association of Broadcasters show in Las Vegas last week, Cryptography Research Inc., the company that developed (and later sold) what became the BD-plus DRM system for Blu-ray, was talking up CryptoFirewall, its hardware-based security “core” currently being implemented on a long list of CE and set-top-box SoC chips.
CRI describes CryptoFirewall as “a self-contained hardware security core designed to protect cryptographic keys and computations in a chip from attack even if surrounding components are compromised.”
According to the CRI folks at NAB, CryptoFirewall-enabled chips will begin appearing in STBs this fall. Much of the impetus for their deployment, it seems, is coming from the studios, who are pressing service providers to adopt the new security measures with the promise that more premium VOD content will be forthcoming.
Pay-TV providers are, of course, eager for that content. But swapping out boxes to get the new security enhancements into subscribers’ homes is very expensive because it involves both new equipment and many truck rolls to install the new boxes.
If I had to guess, I would say the studios are probably strongly suggesting to the service providers (if not quite explicitly promising) that they’re prepared to move the new VOD window up to 30 or 45 days for those providers that deploy the new security-enhanced boxes.
I don’t begrudge the studios their security, per se. I thought the selectable output waiver was a reasonable ask. But as I noted above, I think the studios need to be at 30 days now if the premium VOD window is really to be…well, premium. If they’re waiting for still-stronger DRM before going there they’d be making the same mistake they have made repeatedly (see Physical Media, High-Definition Rollout): letting their obsession with piracy dictate the business strategy.
ADDENDUM: Daily Variety is out today with a long interview with Warner Bros. Pictures Group president Jeff Robinov and Home Entertainment Group president Kevin Tsujihara. According to the execs, the studio’s research says that enough consumers will be willing to pay $30 at 60 days to make the new window successful:
“We gave ourselves the flexibility on the occasions when they do play out longer to not include them in the service,” Tsujihara said. “But we also did some market research on what consumers were willing to pay at what periods of time. And consumers came out very bullish on willing to pay a premium at 60 days.”
On the other hand, they also have some weird theory about wanting some people to balk at the $30 price:
The duo noted that part of the appeal of a $30 premium window lies in enhancing the value of new release theatricals in the public’s eye — in the face of increasingly widespread distribution of pics via cheaper subscription service Netflix and discount kiosk operator Redbox. Having some consumers balk at a steep $30 fee for some individuals was the point; Tsujihara asserted that the higher pricetag for pics would only help enhance the value of the product in theaters for some moviegoers…
“If you look at the things we think have devalued movies — and our company has been pretty upfront about this — we think that services like Netflix and dollar rentals like Redbox devalue from a consumer’s perspective the value of the movie,” [Tsujihara said]. “Re-establishing premium content at a premium price helps not only the prior window in theatrical but also ancillary markets afterwards.”
That sounds more like a rationalization than a strategy.
Further reading:
Dear Hollywood: Harsh Response to Exhibitors Warranted (reg. req.)