Universal blinks in showdown over Tower Heist’s VOD release strategy

In the biggest showdown so far between movie theaters and studios over speedy video-on-demand (VOD) releases, the studio blinked. Some of the nation’s biggest theater chains had threatened to boycott Universal Pictures’ upcoming film Tower Heist because of the studio’s plan to release the movie on VOD three weeks after the theatrical release. Typically, there is a 90-day window between a theater release and a VOD release.  

Universal has a Nov. 4th movie theater release scheduled for the unfortunately-named comedy starring Eddie Murphy and Ben Stiller. Under the now-scrapped plan, the movie would have been available to Comcast subscribers in selected markets – Atlanta and Portland, Oregon – for $59.99 three weeks later. (It is worth noting that Comcast acquired a controlling interest in Universal earlier this year.) 

Today Universal released a statement saying it still intended to pursue premium VOD opportunities, but would delay its experiment in response to requests from theater owners.  

Cinemark, the third largest US theater chain with 5,000 screens, had threatened to boycott the film unless Universal changed its VOD plans. The chain was backed up by National Amusements, owner of 950 screens, and a number of independent theater chains. The theater chains say preserving the theatrical window is key to the industry’s continued profitability. (The movie theater industry generates about $12 billion a year, compared to $60 billion for the motion picture production and distribution industry, according to First Research.)

The battle over the length of the theatrical window has been brewing for some time. Earlier this year, four studios including Universal struck a deal with DIRECTV to bring selected movies to VOD 60 days after their theater debut for the rental price of $30. Studios want the best of both worlds, a healthy box office followed by a high-priced VOD release then a lower priced VOD option.

Will movie studios choose a bigger movie event for the next test case? Maybe a predicted blockbuster that movie theaters couldn’t take a gamble on boycotting and that consumers would be excited enough to fork over $60 to rent?

Right now, VOD watchers pay a reasonable rate ($5 to $7) to enjoy the convenience of watching a movie at home. Will consumers be moved to pay close to ten times as much for the privilege of watching a flick sooner in the comfort of their homes? It’s true that in the gloomy economy, more people are entertaining at home to cut costs. In order for the $60 VOD to look like a deal, however, you’d have to sway a half dozen friends to pay admission to your living room. To me, it seems like Universal priced the rental too high to make a lot of sense to most movie fans. Perhaps it can rethink the price point when it launches the premium VOD at a later date.

Regardless of the experiment’s delay, the lines have been drawn for an ongoing battle between studios and theaters so pop some popcorn and enjoy the show.

Linnea Kirgan

Linnea Kirgan is an industry editor for First Research/Hoover's, covering retail and consumer topics. Follow her on Twitter.

Read more articles by Linnea Kirgan.

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