DECEMBER 28, 2009, 6:19 A.M. ET

Studios Make Bigger Push for Digital Sales

By SARAH MCBRIDE
Wall Street Journal

http://online.wsj.com/article/SB10001424052748703521904574614671253849410.html?mod=WSJ_newsreel_technology


The Showtime cable-television network has begun selling episodes of its 
hit series "Weeds" online, weeks ahead of the DVD release.

The tactic, by "Weeds" producer Lions Gate Entertainment Corp., is the 
part of a more aggressive effort Hollywood is taking to boost online 
sales of digital movies.

Studios have become bolder in how they push their shows and movies over 
digital channels. Earlier this month, Sony Corp.'s Sony Pictures started 
making online rentals of its hit movie "Cloudy With a Chance of 
Meatballs" available for owners of some Sony TVs and other devices, well 
before the film's Jan. 5 release on DVD.

A Sony spokesman declined to say how many consumers were taking the offer.

For years, studios have been betting that online distribution of movies 
and TV shows would turn into a robust business. Instead, they barely 
budged. A few years ago, Walt Disney Co. began pushing out its movies 
online at the same time that the DVDs became available. Many others have 
followed suit.

Online movie sales will bring in just $237.7 million to studios this 
year, calculates Tom Adams, president of Adams Media Research. That 
compares with the more than $10 billion that will go to studios from 
sales of DVDs and Blu-ray discs.

Meanwhile, DVD sales, traditionally one of Hollywood's biggest money 
makers, have fallen off a cliff.

Consumers had plenty of reasons not to embrace online movies. Internet 
speeds in many homes weren't fast enough, and most people still prefer 
to watch movies on TVs rather than computers.

Studios have had some success with video on demand, which allows 
consumers with digital cable to order up a movie using their cable 
set-top box. Video-on-demand sales totaled $1.27 billion this year, but 
that falls short of early expectations. In 2002, for example, some 
consultants were predicting the business would reach $2.8 billion by 2006.

Many studios have begun throwing in a free digital copy with the 
purchase of Blu-ray discs. Typically, the digital copy comes on a 
separate disc that consumers can copy onto their computers, or is 
available at a Web site where consumers download a copy after entering a 
code.

Thomas Gewecke, president of digital distribution at Time Warner Inc.'s 
Warner Bros., says consumers redeemed about 20% of free digital copies 
of "The Dark Knight" that came with the Blu-ray disc last year, a record 
for the studio. This year, "The Hangover" is one of the studio's 
most-watched online titles.

"The real issue with digital is there hasn't been an obvious reason to 
use it," because most consumers want to watch downloaded movies on their 
TVs, says Kevin Lewis, senior vice president for digital entertainment 
at Blockbuster Inc.

That is why he and other online movie purveyors are looking for a boost 
from new Internet-connected TVs, digital recorders and DVD players that 
will be hitting stores. Many connect wirelessly and come with buttons 
that connect consumers directly to movie sources such as Blockbuster.com 
and Netflix.com.

"Now the big hope is connectivity to the TV set will unlock the market 
in a big way," says Mr. Adams. According to research firm NPD Group, 
about 8% of all flat-panel TVs sold in the U.S. this year came ready to 
connect to the Internet, up from 3% last year.

Some studios are looking to connected devices that already are in 
millions of homes: gaming consoles like Sony's PlayStation 3 and 
Microsoft Corp.'s Xbox 360.

"There is a growing opportunity for [digital sales] with devices 
connected directly to the TV, like PlayStation and Xbox, especially as 
the demo of those products broaden beyond the core male gamer," says 
Aubrey Freeborn, senior vice president for VOD and electronic movie 
sales at News Corp.'s Twentieth Century Fox, which sells movies on 
PlayStations and TV shows on both services. News Corp. also owns The 
Wall Street Journal.

-- 
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923  Fax: 713-743-3927
Mail: antunes at uh dot edu

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