Hollywood could gain from release changes

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Film studios could boost their revenues up to 16 per cent if they released titles simultaneously in cinemas, to DVD rental chains and via video-on-demand, according to a new study.

Falling box office takings and a slowdown in the lucrative DVD market have prompted some studios to consider changes to the traditional four to six-month “window” in which new films are available exclusively in cinemas.

The idea has been fiercely resisted by cinema chains but a study of 1,800 consumers in three countries found that it could transform the economics of film studios and DVD retailers.

“We talked to some of the studios and I think something is going to change,” said Thorsten Hennig-Thurau, professor of marketing at Bauhaus University and Cass Business School, and the lead researcher on the study.

The research, to be published in the Journal of Marketing in October, found that the optimum choice for studios in the US market, producing a 16.2 per cent revenue lift, would be to release films simultaneously through cinemas, DVD rental chains and video-on-demand platforms.

By then starting to sell DVDs after just three months, retailers could see revenues jump by almost half, reversing the format’s declining attractiveness as a driver of traffic for big groups in the US such as Wal-Mart.

This scenario could be “devastating” for cinema chains, which would lose 40 per cent of their revenues, admitted Prof Hennig-Thurau. Cinemas have protested against attempts to change the status quo. A simultaneous release for Stephen Soderbergh’s Bubble led to box office revenues of just $200,000, and Fox’s decision to release Night at the Museum on DVD just 13 weeks after its cinematic release saw the film pulled from four chains in the UK and Germany.

However, the study’s simulation of hundreds of different possible windows found a compromise that could protect US cinema revenues while generating more than 7 per cent gains for studios, a 4.5 per cent boost for rental chains and 11 per cent growth for DVD retailers.

The “win-win” scenario would give cinemas three months’ exclusivity for each film before its release to DVD retailers, followed by another three months before it was available in DVD rental stores and on video-on-demand.

The study covered three of the world’s five largest markets, accounting for more than half of the industry’s revenues. In both Germany and Japan, studios could make double-digit percentage gains by releasing films to DVD retailers after three months and for rental and video-on-demand after a year. This would also boost takings of cinemas and DVD retailers but would lead to falls in DVD rental revenues.

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