Studios, cable companies band together to promote video-on-demand

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The nation’s biggest cable operators and movie producers are teaming up on a $30-million promotional push for video-on-demand.

Long the ugly stepsister of the local video store, VOD is finally gaining momentum as the service becomes more broadly available and consumers grow more comfortable with the technology, which can be used to catch up on missed TV shows or watch music videos. The cable industry’s failure to better market VOD services beyond stuffing cable bills with advertisements has long been a sore subject for the studios.

The TV, print and online marketing blitz will tout the convenience of renting movies from the couch and the increasing availability of hit movies offered for rent on the same day as the DVD release. Over the last two years, there has been a seven-fold increase in day-and-date releases. Indeed, eight of the top 10 films of 2009 -- including ‘Bride Wars,’ ‘He’s Just Not That Into You’ and ‘Twilight’ -- were offered on cable VOD as soon as DVDs reached stores.

The 12-week campaign promoting VOD and rental offerings that include such recent movie releases as ‘Precious: Based on the Novel Push by Sapphire’ and ‘The Twilight Saga: New Moon’ started Tuesday with advertisements on Fox’s top-rated show, “American Idol.”

Motivating the push by cable companies and Hollywood are declines in the sales of DVDs, which are off almost 30% since their peak in 2004, and the problems being faced by Blockbuster, the ailing video rental chain.

Cable companies involved in the hype effort include Comcast Corp., Time Warner Cable and Cox Communications. Participating studios include Universal Pictures, Warner Bros., Sony Pictures and 20th Century Fox.

Studios saw a 63% increase in the number of consumers using VOD in the fourth quarter of 2009, compared with a year earlier, according to the Digital Entertainment Group. VOD, together with digital sales, accounted for about 10% of the $20 billion in home entertainment spending last year. ‘We’re seeing very robust growth in that category over the last year,’ said Thomas Gewecke, president of Warner Bros. digital distribution.

Warner Bros., which was the first to offer VOD rentals on the same day as the DVD release in 2008, will extend the rental period to 48 hours, up from 24.

Cable companies are similarly motivated to improve VOD to keep up with the competitive threat posed by Internet movie services such as Amazon, Apple, Netflix and Vudu, which provide on-demand video into the home.

Derek Harrar, general manager of Comcast’s video and entertainment services, said offering newly released movies has helped stoke rentals. The number of day-and-date releases has grown from nine films in 2007 to 60 in the first quarter of the year. And the popularity of VOD has grown exponentially too, with digital cable subscribers watching 350 million videos a month. ‘Studios wouldn’t be changing their distribution model in favor of shorter windows if it didn’t make sense for them from a revenue perspective,’ Harrar said. ‘You wouldn’t see nine studio partners and a bunch of cable companies spending $30 million on something that didn’t have any merit.’

Still, rentals accounted for less than 2% of the industry’s $53 billion in video revenue last year, according to analyst SNL Kagan. Cable VOD has been hamstrung by clunky technology that requires a consumer to wade through multiple screens of choices to find the movie they want to watch.

“They still haven’t figured out a really good interface to the consumer,” said SNL Kagan analyst Deana Myers. “That’s a big problem.”

The bigger concern for Hollywood is not whether a big marketing campaign will fuel movie rentals, but whether that would cut into DVD purchases.

‘The big issue is, will it cannibalize sales?’ said media analyst Tom Adams of Adams Media Research.

-- Dawn C. Chmielewski