Is DirecTV’s $30 movie rental test a flop of ‘Ishtar’-like proportions?


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If it was hardly a surprise to see that Derek Jeter finally made it to 3,000 hits over the weekend, having survived a tsunami of gloom ‘n’ doom stories about him being an aging 37-year-old shortstop, it was even less of a shock to see the news, via my colleague Ben Fritz, that DirecTV’s premium video on demand experiment looks like a big dud.

If there were an experiment that was doomed to fail, this was it. People are eager to embrace video on demand, but this plan, apparently dreamed up by a bunch of timid business affairs lawyers, asked consumers to shell out $30 to watch movies roughly 60 days after their release in theaters.


It turns out that consumers have balked at spending the $30, figuring that most of the available movies were hardly worth it and being savvy enough to know that if they waited another 50 or 60 days that they could easily rent the same movies for a couple of bucks. According to Fritz, executives at three of the four participating studios -- 20th Century Fox, Sony Pictures, Universal Pictures and Warner Bros. -- have privately acknowledged that ‘initial consumer response has been tepid.’

The studios blamed DirecTV, saying they were dissatisfied with the marketing effort made by the satellite service. But marketing, good or bad, is hardly the real issue here. The movies the studios made available, with the exception of the nice-sized hit ‘ Battle: Los Angeles,’ haven’t been worth $30, including such nonentities as ‘Your Highness,’ ‘Hall Pass,’ ‘Paul’ and ‘The Adjustment Bureau.’ And, oh yes, Adam Sandler’s ‘Just Go With It,’ which is perhaps the epitome of a throwaway piece of entertainment that will never, ever be worth $30.

The studios aren’t revealing any numbers, which is enough to make you wonder just how poorly things have gone. But I got an inkling when I had lunch the other day with a high-level executive from one of the studios. He said that the DirecTV deal was discussed at a recent meeting, where he overheard one colleague talking about the abysmal rental numbers for ‘Cedar Rapids,’ a recent release from Fox Searchlight that was included in the initial test.

During the course of throwing around numbers, an exec said ‘Cedar Rapids’ had done 500. ‘It made $500,000?’ another executive asked. No, the first executive explained, it had 500 rentals. Period. At $30 a pop, that means that the VOD test spawned $15,000 in income for ‘Cedar Rapid’s’ entire run, which is, to give you a comparable, what the movie might have made in a weekend run at one theater in any decent-sized market.

The lesson here? As long as Netflix is around the studios are never going to have any luck getting fans to spend three times what they pay for a regular theater ticket to see a movie 60 days after its release, even in the comfort of their own homes. Once you get past the initial theatrical run, the price of entertainment is heading down, not up. The DVD boom is over. We are fast becoming a nation of renters, not buyers.

-- Patrick Goldstein