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'Consumers ready to pay extra $3-$5 for hidef VOD/downloads'

A study of 2,000 US consumers conducted by management consultancy Oliver Wyman found that a price point between $7 and $9 is optimal for the next generation of video-on-demand and Internet movie rentals – high-definition movies released on the same day as DVDs. This premium over today’s $4 price for standard DVD or VOD movie rental would create substantial market growth by 2010.

Rollout of HD VOD and Internet movies on day-and-date of DVD release is a growth opportunity not only because consumers value them and will pay more, but also because this expanded availability will increase overall movie viewership.

The Oliver Wyman study found that that these enhanced offers would lead US consumers to watch and pay for an average of three more movies per year than they do today, creating a net annual increase in domestic consumer movie spending of more than $5 billion, from the current base of $50 billion.

Industry commentators note that Wyman may be overstating the growth of VOD. The consultants has previously forecast spendings of between €310 million and €500 million in France for VOD services by 2012. However, French analysts NPA Conseil, who back in December 2006 forecast a domestic market worth €340 million by 2011, have now revised their figures down to €180 million by 2012.

The Wyman study also tested the demand for Blu-ray discs, and this new format will drive 6% growth of packaged media by 2010, even as VOD/Internet distribution grows.

The Oliver Wyman study further found that DVD sales will be only marginally cannibalized by enhanced VOD and Internet offers at these prices. In fact, retailers could charge an additional $2 for DVDs that include a portable e-copy of the movie for use on other devices.

Mark Teitell, a partner in Oliver Wyman's Media & Entertainment practice, said: “This research reveals a clear opportunity for the industry to introduce new offerings that tap unmet consumer demand, while fitting well with existing movie distribution channels. Ultimately, the consumer will benefit the most – and be willing to pay for those benefits – from the additional choice and consumption options.”

For Internet movies, the Oliver Wyman study found that consumers prefer Internet rentals more than today’s Internet sales offers, as they don’t see digital ownership having comparable benefits to owning a DVD. However, if available, consumers will pay up to an additional $5 for advanced features that approximate DVD ownership: assurance that purchased movies will work on a wide variety of devices, the right to burn a DVD, and secure Internet-based storage to protect against loss of digital files.

This web-based study, conducted in Q4 2007 with 2,000 U.S. consumers, used advanced consumer research techniques to simulate actual buying decisions. The study focused on feature-length movies that consumers pay for (box office, DVD sales/rentals, pay-per-view and VOD, premium movie channels, and Internet sales/rentals).

Story filed 23.04.08

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