DIRECTV's $30 VOD: What the Media Isn't Telling You

News Analysis
Correction:
Robert Mercer, a DIRECTV spokesman, tells TVPredictions.com Monday afternoon that Home Premiere movies will not require a Broadband connection; the movie will be 'pushed' to the subscriber's HD DVR and can be ordered via DIRECTV's 'DIRECTV Cinema' channel 1100. This means that six million of DIRECTV's 19 million subscribers can order 'Home Premiere' films, not 1.1 million as stated in our original story below.

While the Home Premiere films are offered in DIRECTV's "DIRECTV Cinema,' which includes movies that normally require a Net connection to download, the 'Home Premiere' films come with a Play now feature, which eliminates the need for the Net connection.

We regret any confusion over our original report.

DIRECTV's $30 VOD: What the Media Isn't Telling You

By Swanni

Washington, D.C. (April 24, 2011) -- DIRECTV last Thursday kicked off its 'Home Premiere' VOD service that charges $29.95 per viewing of movies made available 60 days after their theatrical release.

The launch has generated extensive media coverage, with most stories emphasizing predictions from theater owners and Hollywood directors that the service could ultimately destroy the movie theater.

But what the media isn't telling you in these stories -- in fact, no newspaper or web site has reported this fact until now -- is that DIRECTV's 'Home Premiere' is available to only about six percent of the satcaster's audience. That's right, six percent.

DIRECTV has decided to only offer the Home Premiere films -- the first one is Adam Sandler's Just Go For It -- on its DIRECTV Cinema VOD service, which requires an HD DVR connected to a Broadband Internet network to order.

(Home Premiere is not available on DIRECTV's PPV lineup, which can be accessed by the satcaster's entire 19 million subscriber base.)

And by DIRECTV's own admission, only about six percent of DIRECTV's 19 million subscribers have HD DVRs connected to a Broadband network. This means that only about 1.1 million DIRECTV subscribers are set up to order Home Premiere.

DIRECTV's decision to limit Home Premiere films to such a small audience is telling. So are the satcaster's remarks last week that it

may lower the $30 price and offer movies sooner than 60 days after their theatrical release if buy rates are low.

“We’re testing a price point and testing a window in the early days of this product, and we’ll see how it takes,” Derek Chang, DIRECTV's's chief of content strategy and development, told Bloomberg News. "Down the road, if the window gets tweaked and changed, I think we all cross that bridge when we get to it.”

It's almost as if DIRECTV and the studios are purposely setting up Home Premiere to fail in the early days.

Why would it do this?

To have an excuse to lower the $30 price and offer movies sooner than 60 days after their theatrical release, just as DIRECTV suggests it might want to do.

The 'Home Premiere' concept has been floated for months as studios explore ways to generate new revenue to counter declining sales of DVDs. They desperately want this to work, but they realize that they will have to win the public relations battle against the theater owners who say it could hurt their attendance if people know they can watch a movie at home just 60 days after its theatrical release. Normally, studios wait at least three months before offering theatrical films to home video.

In 3-6 months or so, if DIRECTV is able to reveal that its buy rates for Home Premiere are extremely low -- and it should have no trouble doing that with only six percent of its subscriber base able to order -- it will be easier to sell the concept of a $20 VOD movie shown 30 days after the theatrical release. Or, perhaps, a $20 VOD movie shown the same day as the theatrical release.

The media seems extremely interested in covering DIRECTV's Home Premiere service. But it needs to look more closely at how the service is being implemented before publishing future articles.

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Phillip Swann is president and publisher of TVPredictions.com. He has been quoted in dozens of publications and broadcast outlets, including CNN, Fox News, Inside Edition, The New York Times, The Washington Post, The Chicago Tribune, The Financial Times, The Associated Press and The Hollywood Reporter. He can be reached at swann@tvpredictions.com or at 703-505-3064.

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