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Trends in Movie Distribution Windows:
The Impact of New Technologies on Existing Markets
1. Introduction
The purpose of this study is to examine how the changes in the movie distribution
technology influence the general film market and which distribution window succeeds
in finding its niche within the distribution stream.
Movie distribution first started in theaters before TV, VCR, and cable joined in during
the past half century. The advent of the digital technology meant changes in production,
distribution, and consumption of films. In addition to DVD, VOD services, and online
interactive video services, which are securing their share in the downstream distribution
channels, new video services aim at giving consumers the choice of time and place of
viewing. Digital services also allow viewers to enjoy high quality sound and picture
close to the level of theater viewing with the convenience being at home.
Technological leaps in the film industry have pushed up consumers’ annual spending on
movies..Accounting for inflation in 1946, an average US household spent annual $407
on movies. However, it fell with the introduction of television and video later on
(Adams Media Research, 2003).
Historically, new technologies have always been a threat to the existing players. Video,
when first came into the market, was feared by the major movie studios just as MP3 file
sharing is now being feared by the music industry. However, on the positive side, an
additional distribution channel often results in growth of the total market. The
introduction of DVD, online rental channels, VOD, and other interactive video services
will eventually expand the film industry. Then, how do the existing segments of the
downstream distribution windows adjust to the expanded market? Increase in the size of
the total industry means fiercer competition among the channels.
With the introduction of DVD, studios have been making twice the revenues from video
stream with the same number of films – which has reduced the downside risk for major
studios. In other words, additional windows add revenue streams for the original content.
Consumer spending on movies more than doubled from 1991, growing by 6% in 2003
to $43.7 billion (Adams Media Research, 2003c). This, however, does not necessarily
mean that the existing channels remained intact. In fact, a theater market declined by
1% in 2003 due to the growth of DVD and large-screen home theaters. Again, growth of
the total market may mean fiercer competition among players and reduced share for
each channel.
Films and television programs can be characterized by their unique distribution method.
Convention