HOME ENTERTAINMENT Video on demand blames studios for slow business

Cable companies want movies sooner for video-on-demand services.
LOS ANGELES TIMES
With video on demand, the cable TV industry thought it had a blockbuster service that paid off for everybody but the local video store.
The new technology gave consumers the ability to start, pause, replay and fast-forward movies without having to run back and forth to Blockbuster. And it promised to generate more money for cable operators and movie studios than pay-per-view services, which have attracted a tiny audience.
Despite the upsides, however, video-on-demand services are off to a slow start. Although some in the cable industry say Hollywood is hamstringing them, studio executives say cable operators have only themselves to blame.
Held too long
The main complaint from the cable side is that the studios withhold movies until long after they've been released on DVD and videotape. The average lag time is about seven weeks, with delays often running as long as three months.
To video-on-demand advocates, the waiting period smacks of the entertainment industry obstructing new technology, just as it did initially with videocassette recorders.
The ultimate vision for video on demand is to give movie fans access to any movie whenever and wherever they want to watch it. Although technology can fulfill much of that promise today, the major studios have tucked all the on-demand services into the same slot as pay-per-view.
That means the services have to wait for films until well after they have appeared in theaters and discount cinemas, on airlines, in hotels and finally in video stores.
This late "window" for video-on-demand movies is "the single biggest contributing factor" holding back growth of the business, said Kip Simonson, vice president of sales and marketing at Charter Communications Inc.
Online piracy
Noting the growing threat of online piracy, video-on-demand proponents say the studios need to be more aggressive in making their wares available on demand, whether through cable, the Internet or other digital technologies.
Otherwise, they say, people are more likely to turn to bootlegged movies online, just as they have with music.
Studio executives and analysts say ineffective promotion by the cable operators is hurting the new services more than the movie release date. And though the studios stand to make more money from video on demand than they do from video store rentals, they're worried about what might happen to a much bigger cash cow: DVD and VHS sales.
Typically, on-demand services give 60 percent of their rental fees to the studios, while the video stores pay less than 50 percent.
But to the studios, video on demand is just one piece of a large puzzle.
DVD sales
Larry Gerbrandt, chief operating officer for research firm Kagan World Media, said "there's no way [cable] video-on-demand services can compete" with the profit margin on DVD sales.
"Until somebody can come up with research that absolutely says there's no impact on DVD sales, that's going to be the first concern," Gerbrandt said.
"Nobody has hard data on that," said one high-ranking studio executive who asked not to be named. "Obviously, we're all quite concerned about it."
In addition to the cable operators' services, companies such as Movielink of Santa Monica, Calif., and CinemaNow Inc. of Marina del Rey, Calif., offer on-demand movies through the Internet, though the picture quality isn't as good as a DVD and moving a video from computer to TV can be a challenge. Walt Disney Co.'s experimental Moviebeam service uses television airwaves to load movies wirelessly into a set-top box, giving viewers dozens of on-demand titles from which to choose.
While the studios quietly study how video on demand might affect video sales, the cable industry's leading supplier of video-on-demand programming, In Demand of New York, is publicly touting its research on the effect of release dates.
Customers act fast
The company, which is owned by three of the top cable operators, looked at 100 movies from 2003 that reached video-on-demand services 30 to 90 days after they were released on DVD and VHS. On average, titles delayed less than 45 days attracted 50 percent more on-demand viewings than those delayed more than 45 days.
Sergei Kuharsky, head of marketing for In Demand, said the vast majority of people who rent movies do so within 30 days of their release on disc or tape, when 80 percent to 90 percent of the home-video revenue is generated. Video-on-demand services don't receive the average movie until 52 days after the video stores get it, Kuharsky said.