Kate Bulkley, Media Analyst.

Digital windows are opening

By Kate Bulkley

Broadcast News

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For Broadcast October 13, 2011

TV is waking up to the value of subscription VoD, says Kate Bulkley.

This month’s Mipcom market in Cannes had its usual sprinkling of stardust, from Kiefer Sutherland promoting a new Fox show called Touch to Eddie Izzard, who is playing Long John Silver in a new version of Treasure Island.

But one of the hottest topics on the Croisette – other than the unseasonably warm temperatures – was the hotting up of subscription VoD (S-VoD) as a new and growing way to make money from your programmes.

The interest in S-VoD – typically called the second pay window after subscription services such as HBO or Sky – has been fired by the success of Netflix in the US.

The DVD-by-post and online streaming service is now going international, and other contenders such as Lovefilm, owned by Amazon, are jumping into the ring. This is waking up the more traditional pay-TV platforms and the studios to the appeal of digital subscriptions, and so the competition for these rights is heating up. A Miramax senior salesman told me in Cannes: “S-VoD is the hot right at the market.”

Certainly, with TV in its sights, Netflix had a noisy Mipcom, led by its content supremo Ted Sarandos tying up US rights for BBC and Syfy US series Being Human and securing the premiere rights to Lilyhammer, a new comedy drama starring Steven Van Zant of The Sopranos.

Netflix’s embarrassing about-face earlier this week on splitting its postal and streaming business services into two separate subscriptions doesn’t undermine the fact that it is a force to be reckoned with – its success has caused a backlash at Hollywood studios Sony and Disney, which are worried that the service will eat at their margins and upset their relationship with pay-TV platforms.

So if the rumours are true and Netflix launches in the UK in the first quarter of next year, what can we expect to happen to our TV sales market?

Clearly, increased competition and the pushing out of the S-VoD window means more money for producers and content rights holders.

By some estimates, the UK S-VoD window will grow from around £50m at retail today to £200m over the next two years, with Netflix and Lovefilm duking it out with traditional TV to lengthen the S-VoD window and make their services stand out.

There will also likely be increasing innovation from companies such as Blinkbox, the new digital arm of Tesco’s huge physical DVD sales business. Blinkbox will increasingly compete for rights and share with iTunes and Sky in the DVD distribution window for the digital version of DVDs, or transactional VoD (T-Vod).

The sale of physical DVDs is still where the lion’s share of the money is made by studios and other rights holders, with industry estimates putting the value of this distribution window for TV product in the UK at £2.5bn.

But physical DVD sales are declining while T-VoD is growing, albeit not as fast as S-VoD. So if you are selling your shows, don’t dismiss the digital windows.

Digital is set to grow even faster as all the players carve out their businesses.

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