The Delivery System Is Evolving

On Tuesday, Times Warner announced plans to premiere movie producer Adam Shapiro's new horror film, Incubus, in a new format: direct to download.

The film stars Tara Reid as a medical student who runs afoul of a deranged killer. It was filmed in Romania with a budget of five million dollars. Beginning on Halloween, Time Warner is going to sell the movie on its site for teens, AOL Red, for $7.99 (rentals available for $3.49 for five days with no burning to a DVD). AOL will have an exclusive for one month before the DVDs go on sale.

According to a story in the Los Angeles Times, "Shapiro and his partner decided to go direct to download after they were unable to find an attractive deal for theatrical release."

A senior VP at AOL was blunt about Time Warner's motives in doing the direct-to-download release of Incubus. AOL wants to promote its Red site, which will be relaunched as an open Internet site (b-red.com) starting October 17. At present, AOL Red is part of AOL's subscription service and attracts about four million teens a month.

This is not the first direct-to-download release. Google Video premiered the independent film Waterborne earlier this year. The movie only sold three hundred copies at $3.99 per download. The director of Waterborne, Ben Rekhi, complained that Google didn't provide the promotion it had promised for the film and that Google's video service was difficult to use.

Google refused to comment on Waterborne or Rekhi's complaints beyond saying "it believes that Google Video is an effective way for video creators to distribute and promote their films and shows."

I've blogged extensively about Mark Cuban's experiments with "simultaneous release," another speculative venture into service delivery systems. In January, 2006, Cuban released the Steven Soderbergh film Bubble in his Landmark Theatres, on his cable station and on DVD at approximately the same time (the DVD was released on the following Tuesday, the traditional DVD release date). According to Wired News, Bubble did just $70,664 at the box office during its opening weekend, with an anemic $2,208 per-screen average.

Soderbergh and Cuban have an agreement through which they plan five more films which will be given the simultaneous release treatment.

Cuban encountered a lot of resistance to his idea. Leading the pack were theatre owners who see simultaneous release as a huge threat to their box office profits. However, there was strong resistance from another quarter as well.

Hollywood has established an artificial delay that slows the release of first-run films onto cable television. Called the "video window," it ensures a 45-day delay between the date the film's DVD is released for sale and the date the film is made available for pay-for-view cable television. The delay before the film is made available for subscription cable (like HBO) is four months from the date the DVD is released.

In an October article in Slate magazine, Edward Jay Epstein claimed the video window was forced on Hollywood by Wal-Mart, which did not want any competition for its DVD sales. Since Wal-Mart provides studios with more than one third of their DVD revenue, no one has wanted to challenge Wal-Mart (see my blog on The Cuban Revolution 10/30/05).

I reported last Saturday that Wal-Mart "appears to be preparing an online movie download service to compete with the services just announced by Apple Computer Inc. and Amazon.com, Inc." (Investrend).

If Wal-Mart, the largest retailer of DVDs, is prepared to shift their business to online downloads, it's just a matter of time before the entire film industry moves in this direction.

Can books and the publishing industry be far behind?