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Summary:

A new PricewaterhouseCoopers study casts serious doubt on consumer willingness to pay for movies on digital platforms. Warning: Film-industy…

8mm movie film
photo: lanuiop

A new PricewaterhouseCoopers study casts serious doubt on consumer willingness to pay for movies on digital platforms. Warning: Film-industy executives interested in reading further may want to first increase dosage of any anti-depressants they might be taking.

If, as recent comments made on media-conglomerate earnings calls would suggest, studios are gearing up to charge consumers $20-25 to watch movies in their homes two months or so after theatrical release, the new revenue stream known as premium VOD is headed for quite a bumpy ride.

The PwC study, which surveyed 202 adults last September who engaged in piracy, found that while 76 percent of respondents said “they are somewhat willing to pay a nominal fee if the content can be accessed closer to its release date,” consumers said they were willing to pay no more than $3 to download a movie and less than $1 for a TV program.

Note that’s “download,” which means to own, not the premium-VOD rental model. And it gets worse because even if the pricing was remotely comparable, two months is too long a wait: 83 percent of those willing to pay want the content within one month or less.

While things look bleak, let’s rain on a few more parades. If the industry thinks whatever it is doing now is discouraging pirates, it may be time to rethink that: 81 percent responded that are at least somewhat likely to use pirate websites over the next six months.

And those ad-supported sites like Hulu that were supposed to give pirates a legal alternative? Most (70 percent) of those who pirate also acquire free content legally from ad-supported websites. Which leads PwC analysts to conclude: “The growing number of ad-supported websites is contributing to increased piracy. Such sites may be causing confusion as to what is pirated content and what is legitimate, free content.”

Now let’s take some sting out of these numbers: Note that PwC only spoke to those engaged in piracy, not the general population. Extrapolating conclusions from this survey as to what the overall public might do is a big stretch because the attitudes and behaviors of acknowledged pirates may be completely different than that of non-pirates. What’s more, there may be more than enough non-pirates out there to build a sustainable market for fairly priced long-form video content.

PwC analysts make a number of recommendations on making radical changes to existing digital business models, but why? Unless there’s demographic evidence that pirates either outnumber non-pirates, or that both of these market segments harbor the same attitudes toward consumption (just different behaviors), altering pricing plans is pointless.

Let’s leave this on a heartwarming note. The study found that most said they do not pirate “in an effort to detract from studio profits.”

So don’t feel bad about those consumers who are destroying your livelihood. Turns out it’s nothing personal.

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  1. Andrew: just a follow up on the figures you provide in your article (which I reference in my blog):

    Q: You say the studios like to charge $20-25 to watch movies in their homes. Is it a monthly charge? A kind of flat fee? If that’s the case the business model would still work, as long as users of the VOD service are heavy users and upload >8 movies per month.

  2. In my experience with http://videolla.com visitor to buyer conversion rate is within 1-2% even for not so great videos if price is below $3-5

    That can be about 5x better (up to 5-7%) if you have targeted visitors in communities potentially interested in specific content.

  3. Pwc? This research was conducted by Mallard, Float, Wood, Wate and Witch.

  4. The data sited from the PwC study does not support your conclusion that “Premium VOD” is dead. They survey 202 “people” who are currently pirating movies online is not representative of the general population. It requires more technical sophistication to download a film illicitly than to download a song. It also requires more patience — while songs take seconds to download, movies can take the better part of an hour.

    Another trend favoring the growth of legal movie download services, that music did not have, is that with film, high definition matters, and matters a lot. HD and 3D require more bits, and thus much bigger files, which together increase the elaspsed time needed to download, and favor the quality control that goes with a licensed service, as opposed to random pirates. Music did not have this advantage. Young consumers did not care so much about sonic quality — because the crappy headsets on most iPods were so poor that you can’t hear the difference anyway. Music files actually got much smaller with compression in the age of piracy, and that was a catalyst for the old Napster. Movie Studios benefit from the increasing demand for better and better resolution.

    There is a large population of movie consumers who now order VOD in their homes, and expect high quality video, and are willing to pay for that video now. Indeed, the major reason that digital revenues are not higher for studios, is the relatively small number of library titles that are currently offered on VOD — only about 7 percent of major films made are available at any given moment on VOD, and the rest were offered digital revenues would be much higher. Premium VOD will increase digital revenues more.

  5. @Joe Mohen
    re: “It requires more technical sophistication to download a film illicitly than to download a song.”
    Really? Have you ever bothered to read PirateBay’s instructions? (http://thepiratebay.org/help) So you’re trying to tell us that this 3 step install & 3 step download process is radically different from BearShare or any number of other Torrent-esque solutions in use today?

    re: “It also requires more patience — while songs take seconds to download, movies can take the better part of an hour.”
    Clearly you don’t know anyone that actually does this. Here’s a glimpse at reality: Most individuals just leave the software running overnight & content is stolen in batches of 5-10 movies every night. No one looks for instant gratification: They pull down everything they want and watch it at their leisure.

    re: “Another trend favoring the growth of legal movie download services, that music did not have, is that with film, high definition matters, and matters a lot. HD and 3D require more bits, and thus much bigger files”
    This is the funniest line in your comment because you apparently seriously believe that people opt to download HD & 3D. If you’d bothered to back up your claims with science, you’d know that most downloads are of SD… which is just fine. The only thing 3D’s done is prevent handicam theatre piracy. The only thing HD’s done is given pirates the opportunity to download a “really good copy” of a movie THAT THEY ALREADY SAW IN SD that they wouldn’t mind burning to a Blu Ray disc in a better resolution.

    re: “There is a large population of movie consumers who now order VOD in their homes, and expect high quality video, and are willing to pay for that video now. ”
    And there’s a population of users MUCH LARGER THAN THAT who can’t afford the atrocious prices demanded for movies that they can just as easily “ask their friend” to get for them.

    You seem to like to use comparisons to the downfall of the music industry so here’s an exercise for you: No one knew how to download music earlier on. But as it became cooler and cooler to know how to get free music in schools & even in the workplace. And as bandwidth grew greater and greater, more people learned how to use Kazaa and it became “in” to download “free” music. As storage capacities grew on players, people’s thirst to fill their media players with music grew as well. With capacity no longer an issue with 32GB music players, monster indiscriminant batch downloads of music were the norm.

    Now take this story and replace the word MUSIC with the word MOVIES and you’ve got yourself a glimpse at the future 5 years from now. You’d think the media companies would have learned from the piracy of VHS tapes during the 80’s when movies cost $80/tape. If honest people aren’t given what they perceive to be reasonable terms for the purchase of IP, they’ll turn a blind eye & crank up uTorrent & only the most virtuous or the most affluent will adhere to the ‘studio’s rules’.

  6. elvenrunelord Monday, March 7, 2011

    I’m one of those honest people that goes out of their way to determine if a online streaming site is legal or not and I only go to the legal ones.

    However with that said I am getting tired of the bullcrap these people come up with.

    We the citizens are ready for a reasonably priced one stop site than covers all stations and all content past, present, and future when it becomes available.

    A reasonable price for a service that offered such content in full HD would be in my opinion about $25 a month. And I would even be willing to pay for such service if it committed me to a yearly contract.

    Would not bother me if they charge extra for real time sports coverage either. I understand those hogs think they are worth more than the rest of us and deserve to live better lives…….dripping sarcasm….watch your step.

    Under this system I would be willing to watch sponsor type ads before and after the content, but I want to view my content without the ever present ads about crap I have NO interest in. Oh and by the way, I’m not interested in giving you my personal information for free so you can send me targeted ads either!

    Sponsor ads started the tv age and I think we should go back to that method. Would get a lot of the crappy commercials off tv that are basically worthless.

  7. fastgirlfilms Tuesday, March 8, 2011

    Actually, with cyber-lockers (like Megavideo) it requires absolutely NO effort to watch (stream) a movie online for free. The pirate model is alive and well, motivated by websites that earn income by driving traffic to their pages (for advertising) or via subscription (faster downloads).

    The “consumer” doesn’t have to have any technical know-how save for being able to enter search terms in Google (unfortunately).

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