Posted on Wednesday, December 8th, 2010 by David Chen
Home digital delivery systems have been the talk of the town recently. Time Warner recently announced that it will be launching a premium VOD next summer, allowing consumers to view movies at home while they are still out in theaters (probably a month or two after initial release). The cost of this service was supposed to be roughly $20-30 per film, more than a movie ticket but a fair premium to pay for getting a first-run movie beamed to your living room.
Now, a new service launching in 2011 aims to put movies into your home the same day that they’re released in theaters. The only catch? The digital-delivery system costs $20,000. Don’t worry though, that’s only a one-time fee. The fee per film is just a measly $500 on top of the $20,000. So is there a market for ultra-rich cinephiles?
The WSJ has the news about the service, which is dubbed Prima Cinema. Prima has already been chatting up Hollywood studios for approval, who are a little bit (shall we say) ambivalent about Prima’s business plan. Prima hopes to officially launch in late 2011, and wants to be in 250,000 homes within five years.
But there are a lot of potential problems with Prima’s strategy. Charging $20,000 isn’t necessarily a dealbreaker, because whether or not we like it, there will always be a market for the rich. But by limiting the market to only that demographic, you’re opening yourself up for other sorts of risk. According to John Fithian, president of National Association of Theater Owners (who admittedly has his own horse in this race):
[Prima’s plan] makes very little sense as it risks millions to make pennies…There is no such thing as a secure distribution to the home…This proposal will give pirates a pristine digital copy early, resulting in millions of lost revenue to piracy, while at the same time selling a very limited number of units. Only billionaires can afford $500 per movie.
It will be very difficult to get buy-in from all the different studios, some of which are closely tied with movie theater companies who are loathe to see anything take away business from movie theaters. With the market so limited and the risks and startup costs fairly high, I’m betting that Prima, as a company, won’t make it to launch (or if it does, that it won’t last too long afterwards). What say you guys?