M+E Daily

For Some Movies, ‘Second Pay Window’ Can Come Years After Theatrical Release. Implications for Streaming Business?

by Terence Keegan

Time was subscribers to Netflix’s discs-by-mail service faced a “very long wait” for popular titles. Now, in the age of streaming subscription services, that wait is measured in months, if not years — despite the instant-access convenience of the technology.

Following Wednesday’s announcement by Amazon’s Lovefilm that it had secured “second pay window” rights to Universal movies in the UK, we asked analysts about the evolving nature of pay-TV windows, both in the U.S. and abroad.

Windows for video-on-demand and pay-TV services “can absolutely vary” with the advent of subscription streaming, according to Michael Pachter, managing director of equity research for Wedbush Securities. But Pachter tells M&E Daily that while all services “want content as soon as they can,” it’s hard to say how critical first-run rights to content are to the market success of Netflix, Lovefilm, or other streaming services.

Netflix, for one, maintains that its subscribers value breadth-and-depth over first-run access — at least when it comes to DVDs by mail in the U.S. Speaking at a Nomura investor conference in New York on Wednesday, Ted Sarandos, Netflix’s chief content officer, said that “stay[ing] out of the path of the first 28 days of VOD transactions or DVD sales….supports the overall creation of content” (via Home Media Magazine). (The more content that’s created, the broader catalog Netflix will have to license/offer.)

In Netflix’s disc rental business, the 28-day window remains relatively settled, apart from the company’s 56-day window for Warner titles. But among movies available via streaming services from Netflix and other companies, windows run considerably longer.

Richard Broughton, senior principal analyst and head of broadband at IHS Screen Digest in London, illustrates how UK pay-TV windows typically are structured with the example of Universal film “Green Zone.” The movie — among those that Lovefilm offers its streaming subscribers as of May 2012 — was released in UK cinemas more than two years ago, in March 2010, according to Screen Digest. It then saw a pay-per-view release via the Sky Box Office in July 2010, followed by availability to subscribers of the Sky Movies service beginning in late January, 2011.

“So Lovefilm customers,” Broughton tells M&E Daily, “are likely to have to wait a reasonable amount of time from a film’s debut on Sky Movies before gaining access. With blackout periods taken into account, Sky looks to have the films for roughly 14 months.” Screen Digest’s estimated length of the Sky window is in line with the recent findings of the UK’s Competition Commission on movie windowing structures in the country, Broughton adds.

To be sure, windowing strategies are in flux in every segment of movie and video distribution, from theatrical to streaming. For content owners, the value of “new release” content in any window is one issue. But the instant-access nature of streaming services — not to mention the obvious technological feasibility of day-and-date theatrical and digital movie debuts — gives rise to a more complicated question: when does a “new release” program cease to be “new” in today’s marketplace?

As far as Lovefilm and Universal’s movie deal goes, “Lovefilm is getting hold of the films potentially over a year later than Sky, which will diminish the appeal of the catalogue,” Broughton says. “It’s hard to quantify in monetary terms, but the effect is present.”