×

DTV Launches Premium VOD: Theaters Ready for a Showdown

It's been a long time in coming, but now, the very first premium video-on-demand is here.

That means that just two and a half months after a film opens in theaters, before it's even available on DVD, you'll be able to watch it from the comfort of your living room couch for a mere thirty bucks, the cost of two tickets, plus a couple of sodas and popcorn.

family watching tv
family watching tv

As I predicted several weeks ago, DirecTV is leading the way with a long-anticipated service called "Home Premiere."

The satellite TV provider is starting off slow, with a 48-hour rental of Sony's "Just Go With It" for $29.99. The film opened two and a half months ago and was still in several hundred theaters last weekend. DirecTV customers will have access to the movie for two weeks before it's replaced by another title, also 60-70 days past its theatrical release date.

While Sony is the first studio to take the plunge, DirecTV has movies from other studios waiting in the wings. It's planning to roll out Universal's 'The Adjustment Bureau,' Fox Searchlight's 'Cedar Rapids,' and 'Hall Pass' from Warner Brothers . That lineup of studios speaks to the broad interest across Hollywood in this new distribution window.

If executed properly, "Home Premiere" and similar premium VOD options on other satellite and cable carriers could provide a key new revenue stream for the studios. The high price point would snag a whole new audience—movie fans looking for convenience—who are too impatient for a DVD release.

Executives at a number of studios have told me on background that they're confident they can execute this new plan in a way that does *not* cannibalize their ticket sales. They'll be strategic about which movies they pick—ones that have already started to tire in theaters— and when they release them.

And the studios and DirecTV stress the level of content protection—this will be very tough to pirate. And each copy is watermarked, so if a copy does get out, it'll be easy to see who pirated it.

But no surprise, theater chains are concerned that this will eat into their business. Today the National Association of Theater Owners published a letter, signed by 23 major directors and producers, big names like James Cameron, Michael Bay, Robert Zemeckis and Michael Mann.

They argue that this threatens to take down the entire industry. The risk is that the promise of early video on demand release will discourage people from making the trip to the theater once a film is past the excitement of opening weekend.

NATO's open letter to the entertainment industry: "As a crucial part of a business that last year grossed close to $32 billion in worldwide theatrical ticket sales, we in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry."

The billion dollar question studios and theater chains will be watching, as DirecTV launches its test, is whether this snags an entirely new audience, or steals from an old one.

Questions? Comments? MediaMoney@cnbc.com