DirecTV Partners With Movie Studios to Take on Theater Chains with Unimpressive Results

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DirecTV_First_Run_VOD_DirecTV_Logo.gifIn the last few days, DirecTV has faced serious scrutiny for entering into an agreement with Fox, Sony, Warner Bros, and Universal that would allow them to offer "premium Video on Demand" movie titles 60 days after release. What that means is that 60 days after a movie is released in theaters, DirecTV customers will have the opportunity to rent these titles for the price of $30 per rental with a three day window to watch the title. This would seem like a pretty good option if there weren't so many problems with it.

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The first problem is that the movie theater chains are not happy at all with this development, even given that this current model doesn't affect their business that greatly. Arguably 50 percent of box office revenue is made in the opening weekend, with attendance drop off causing theaters to remove films from their theaters long before the 60 day mark. So what exactly is the problem here? Move theater chains are worried about the precedent this sets. If they let this slide, what is to keep the studios from pushing up to the 30 day mark or even up to the same day of theatrical release? It is not a wholly ungrounded fear as there are films that have been released theatrically and on Video-on-Demand services simultaneously. However, these have always been lower budget films, the kind of films that can't justify wide release on 3,000 screens. In other words, films that don't threaten the business of theater chains.

This argument has climaxed to a point where theater chains are beginning to threaten boycotting films released by Fox, Sony, Warner Bros, and Universal, specifically Harry Potter and the Deathly Hallows Part 2, which is most likely going to be the biggest commercial success of 2011. It is for that very reason that this feels like an empty threat. However, boycotting is not the only way the theaters can challenge this.

A major problem is that this new service is not supported by all the movie studios. Disney and Paramount have decided not to get involved with DirecTV. This allows for the possibility of favoritism. For instance, if Universal and Paramount have movies opening on the same day, theater owners can promote the Paramount film more heavily and carry it on more screens to make a statement against the VOD service. This seems like a more likely route than actual boycotting. While the existence of the service has created a lot of potential problems, the service itself has plenty of its own.

Read about the other problems on Page 2.

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