Simultaneous release of film in Cinema and DVD will boost studio revenues – but optimal distribution strategy differs between countries
Film studios in the US can boost revenues by 16 if films are released simultaneously in cinemas, on rental DVD and through video-on-demand (VOD), a global study shows for the first time today.
Traditionally film studios have relied on the exclusive release of films in cinemas (generally for a period of between 4 and 6 months) as a way of maximising profits before releasing the film through other mediums such as DVD and VOD. This ground breaking study might have major implications for the sector as a whole.
The study, which will be published in the October issue of the prestigious Journal of Marketing[1], was conducted by academics at Bauhaus-University of Weimar (Germany), Cass Business School (London), and the Universities of Hamburg (Germany) and Missouri-Columbia (US). The research team investigated revenue generation across four channels: cinemas, DVD rental, retail DVD and video-on-demand (VOD). The research drew on samples of 1770 consumers in the US, Japan and Germany, who together comprise 56.4 of the world film market.
The academics used the results of the data sample to simulate changes to the distribution chain, and they find that in the US, film studios can increase their revenues by 16 if films are released simultaneously in cinemas, on rental DVD and VOD, with a three month window to DVD retail. Cinemas, however, could lose approximately 40 of their annual revenues.
By comparison, in Germany and Japan studios would need to release retail DVDs for retail three months after cinema distribution for optimum profit, as in the US. However, the structural difference between the US, Japan and Germany lies in the release of DVD rentals to a full year after cinema screening. Thus, studios would see a revenue increase of 14 in Germany and 12 in Japan. In these countries, cinemas would benefit from this adaptation by 6 and 15 respectively. While the UK is not studied specifically, it is assumed they will most closely reflect the US findings.
The lead researcher, Thorsten Hennig-Thurau, Professor of Marketing at Bauhaus University and Cass Business School says that the implications of collapsing distribution windows might transform the film industry: “Many cinemas would have to radically scale down their operations or close their businesses completely. Those that remain would probably look different from today’s cinemas, as they would have to provide consumers with reasons for preferring them to watching the same new film at home.”
Professor Hennig-Thurau also says that the transition to new distribution strategies would certainly not be a smooth ride: “Aiming to offer alternatives to costly battles and boycotts, we tried to seek optimal scenarios in which every market participant gains or at least does not lose revenues.” The research shows that such ‘win-win’ scenarios exist in the US and Germany, but not in Japan. In both countries, the win-win scenarios would require a release of retail DVD three months after the theatrical opening, with the rental DVD release following another three month later.