Simultaneous DVD, on-demand video releases draw nearer

We've been proponents of changing up the movie release schedule for some time. Since time immemorial (i.e., since the invention of the VCR and launch of HBO), theaters have had first dibs on movies. Only after the films have cleared out of the budget, second-run movie houses would they be released on DVD (or videotape), video-on-demand, and then televised on pay-per-view or one of the premium movie channels, and finally end up on network TV.

The strategy worked well enough for a couple of decades, but as Hollywood is faced with declining theater attendance and DVD sales, it has been forced to cast about for ways to keep people paying to see its product. The Wall Street Journal is reporting (subscription only) that a handful of studios are near an agreement to pilot simultaneous DVD and video-on-releases. Disney, Warner Brothers, Universal Pictures, and Twentieth Century Fox are said to be closest to doing a test run during the first half of 2006.

Disney in particular has been a proponent of altering the release schedule. In August 2005, Disney CEO Robert Iger raised a lot of eyebrows when he said that time between cinema and DVD release needs to "compress." In 2003, it launched Moviebeam, a on-demand video service that required a dedicated set-top box, in a handful of test markets. Although Moviebeam is currently off the airwaves, Disney plans to reintroduce it at some point in the future.

Under one plan (DVDs on Demand) floated by Comcast, subscribers would be able to order get on-demand movie access by ordering a DVD through the cable provider. That's hardly revolutionary, as it would still require a DVD purchase to get the on-demand content.

A number of players have irons in the fire. Besides the movie studios, which face an increasingly fickle movie-going public, there are the cable providers and DVD retailers. Closing the window between video-on-demand and DVD releases could be a big winner for cable TV companies, which would see additional revenues in the form of movie sales or rentals. On the other hand, big box retailers like Best Buy, Target, and Wal-Mart stand to lose sales if consumers can get the latest DVD releases without ever leaving the house.

Target and other retailers already have cause for concern when it comes to DVD sales. After years of steady growth, DVD sales have actually declined in recent years as movie fans have filled out their personal film libraries and have become more discriminating about what they buy. Over the past few years, the window between theatrical release and DVD release has shrunk in an attempt to spur DVD sales, but the decline continues.

Studios would appear willing to let retailers twist in the wind–as they would love to forego the expense of manufacturing and packaging DVDs in favor of video-on-demand–if not for one small factor: piracy. The fear is that once a movie is downloaded or streamed to a device with storage capability (e.g., a DVR or PC), it will shortly thereafter appear on Usenet and file-trading networks. Despite calls for a unified DRM standard, such a solution is nowhere in sight. Naturally, the industry faces the same issue with physical media, although they are hoping the next-gen optical formats put an end to that. The motion picture industry also fears that consumers will keep pay-per-view movies indefinitely, leading to further losses in DVD sales.

Of course, legislation is in the works that would put severe limits on timeshifting and would allow consumers to keep recordings indefinitely only at the whim of the studios would make video-on-demand much easier to swallow. Regardless of what happens with the "analog hole" legislation (and I'm hoping all of you have been in touch with your congressional representatives over this issue), the compressed release window is going to happen sooner or later. As Iger said last August, "the rules in terms of consumption have changed dramatically." It's high time the industry recognized this and did something other than lobbying for anti-Fair-Use legislation and suing people.