The major studios are scrambling, trying to figure out how to make money from their movies now that DVD sales are dropping. Blockbuster is on the verge of disappearing, and Netflix is trying to transition to streaming services. One possible replacement is to boost the video on demand (VOD) part of the business. It has the convenience of a streaming service but produces fees similar to the DVD rental business.

Now some studios are looking at the premium VOD market as a way to get more money for movies before they are distributed on DVD. The reasoning appears to be that watching a currrent release on VOD in the comfort of your own home is benefit enough; you should still end up paying cinema prices for the experience.

A new report from The Diffusion Group (TDG) is a glass of ice water to the face for this strategy. They surveyed consumers to see what they would actually pay to watch a new movie on the same day as the theatrical release. (The studios are considering a 60-day delay from the theatrical release for their premium VOD, which presumably would be less desirable as same-day, and thus worth less.)

The results? Fewer than one in ten would pay an extra $20 to watch the new release. In contrast, more than 2 out of ten would be willing to pay an extra $5. TDG draws the conclusion that a $20 premium for a 60-day delay is not going to fly with consumers.

Now, I’ll admit that we’re not going to really know what will happen until these offerings get out of the lab and into the real world, but I suspect that the studios will make more money with an earlier VOD release at a smaller premium than a later release with a higher premium. Whether or not one of the studios will have the nerve to test this remains to be seen.

Posted by Alfred Poor, April 5, 2011 6:00 AM