First-Run Movies: Coming Soon to a Home Near You -- for $20,000
Complaining about the price of a movie ticket these days? Try shelling out $20,000 for a Prima Cinema system and service and another $500 to watch a first-run movie on it.
Prima, according to a Wall Street Journal report, is gearing up to offer its digital service to high-end customers by the end of 2011. And while many consumers may dream of watching a new movie in their homes the same day it hits the theaters, Prima's price point is likely to leave that curtain drawn, says Michael Inouye, an industry analyst with ABI Research.
"This system would be for high net-worth individuals who don't have to think about paying this much for a system," Inouye says. Inouye doesn't have an official average cost for home-entertainment systems, but he notes that the typical consumer probably spends more like $500 to a few thousand dollars for a home system.
A Spur for Quicker Releases?
Despite the huge Prima price tag, however, average consumers won't be totally left out of the picture. They stand to benefit in a roundabout way, says Keith Nissen, a principal analyst with In-Stat.
Prima's system and service, which depends on the participation of the major movie studios, is poised to mark the first time that the release of a movie for the home market would coincide with its release in theaters. Prima has already met with the top studios and several smaller ones about licensing agreements. Prima just may spur the movie industry to accelerate its efforts to narrow the six- to nine-month gap between a movie's theater release and its availability on DVD or via online rental.
Time Warner (TWX), for one, may begin testing an early-release program in the new year, which would charge consumers up to $30 to view a digital copy of a movie within two months of its theater release, the Journal notes. And Sony Pictures (SNE) has offered two movies in the past two years that were released to Bravia TV subscribers before they were issued on DVD, the report notes.
Cash Cows Going Hungry
For the studios, the sooner they offer their movies online, the sooner they can pull in greater profits, Nissen says. Studios typically receive 40% to 50% of the profits from theater sales, but it jumps to 70% when those movies are reused for DVD. And the profit margin grows even more when the movies go to pay-per-view programs or online rentals, Nissen says.
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But two cash cows are growing lean for the industry. The number of people headed to theaters has been on the decline, and DVD retail sales have been dropping roughly $1 billion a year over the past four or five years, dipping to under $17 billion today, Nissen points out. The carnage is evident as bricks-and-mortar video-rental chains like Movie Gallery (MVGRQ) to Blockbuster filed for Chapter 11 bankruptcy.
"Ultimately, the theatrical release window will shrink to two months from six to nine months," Nissen says. "The industry has begun experimenting, and that will likely continue for the next two years. But I expect we'll see some permanent shifts in release windows in the next five to 10 years."
And as the curtain drops on the traditional release windows, Nissen says, consumers who are itching to see the latest flick but don't want to pay rising ticket prices stand to benefit -- if they can afford a suitable in-home system, that is.
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