Movie Markets in the UK Annex 11 to Pay TV Market Investigation Consultation
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Movie markets in the UK Annex 11 to pay TV market investigation consultation Publication date: 18 December 2007 Annex 11 pay TV market investigation consultation – movie markets in the UK Annex 11 1 Movie markets in the UK This annex contains an Ofcom-commissioned independent report produced by Screen Digest which provides an overview of the UK industry for television rights for movie content, including: • Types of rights bought and sold for distribution in the UK • Relationships between broadcasters and rights holders in the UK • The way rights have been sold in the UK 1 Movie Markets in the UK A report commissioned by OFCOM screendigest Movie Markets in the UK Movie Markets in the UK screendigest Published November 2007 A report commissioned by OFCOM Screen Digest Limited Lymehouse Studios 30/31 Lyme Street London NW1 0EE telephone +44/20 7424 2820 fax +44/20 7424 2838 e-mail [email protected] Author Vincent Létang (TV), Marie Bloomfi eld (DVD), Tim Westcott (TV), Charlotte Jones (Cinema), David MacQueen (Mobile) Editor Ben Keen, Vincent Létang Layout Leander Vanderbijl, Ben Hackshaw, Tom Humberstone All rights reserved. No part of this publication may be reproduced, transmitted, or stored in a retrieval system, in any form or by any means without the prior written permission of the publisher, nor be otherwise circulated in any form of cover or binding other than that in which is it published and without a similar condition (including this condition) being imposed on the subsequent publisher. Copyright © Screen Digest 2007 Printed by Screen Digest (A) 2 Tables and charts Movie Markets in the UK 1 Prints & Advertising costs 27 Film Prints: Transportation 27 Tables and charts 3 Piracy 28 3.3 Market data 28 Executive summary 7 Market Revenues 28 Overall market trends 7 3.4 Flow of Funds 29 Cinema 9 Buena Vista International (UK) Limited 30 DVD 9 Sony Pictures Releasing 30 TV-based VOD (walled-garden VOD) 10 Twentieth Century-Fox 30 Internet-based VOD 10 Warner Bros. 30 Premium TV 11 UIP 30 Free-to-air TV 11 Universal Pictures UK 31 Paramount Pictures UK 31 Overall market trends 13 Entertainment Film Distributors 31 2.1 Introduction: value chain structures and Distributor agreement with terminology 13 producer/rights holder 32 Focus on Hollywood ‘Studios’ 14 3.5 Principal theatrical exhibitors 32 2.2 Market size: consumer-level spending Odeon 33 (retail/rental revenues) 16 Cineworld 34 2.3 Market size: UK distribution revenues 18 Vue Entertainment 35 2.4 Market size: studio-level revenues 19 Showcase Cinemas 36 Empire Cinemas 36 Cinema 21 3.6 Market issues 37 3.1 Key fi ndings 21 Release windows 37 3.2 Market Overview, Exhibition and Concentration of Box Offi ce 37 Distribution 22 Looking forward - Digital Cinema 38 3.2.1 Cinema Exhibition 22 Digital Screen Network (DSN) 38 US Studios and history of ownership in DCI 38 UK exhibition sector 22 Digital cinema networks 39 Industry Regulation and Film Orders 24 Impact on content and distribution 39 3.2.2 Th eatrical Distribution in the UK 25 Th eatrical Releases 25 DVD markets 41 Business model of UK theatrical 4.1 Key fi ndings 41 distributors 25 4.2 Overall market data 41 Terms of business between cinema Enabled homes 41 exhibitors and theatrical distributors 25 Total DVD revenues (all business models) 41 UK fi lm releases by number of prints 27 Buy rates 42 www.screendigest.com 3 Movie Markets in the UK Retail environment 42 New release v. catalogue 62 Direct supply 42 Th e long tail 62 Wholesale supply 44 Release windows 63 Retailer types 45 4.9 Looking ahead 63 Offl ine 45 Audio-visual specialists 45 TV-based VOD 65 Supermarkets 45 5.1 Key fi ndings 65 Generalists 47 5.2 Introduction 65 Online 47 5.3 Market data and revenues 66 4.3 Offl ine DVD retail 47 5.3.1 Enabled VOD homes 66 Offl ine DVD retail revenues 47 5.3.2 Total TV VOD revenues 67 Cashfl ow chain and margins 48 5.3.3 Focus on movie VOD 68 Principal Providers 48 5.3.4 VOD consumption – buy rates 68 HMV 49 5.4 Cashfl ow chain and margins 69 Tesco 49 5.5 Principal providers 69 Woolworths 49 Virgin Media: Virgin Central 70 Virgin 50 BSkyB: Sky Box Offi ce 71 Asda 50 U>direct 71 Morrisons 50 Tiscali TV (formerly Homechoice) 72 Blockbuster 51 BT Vision 72 Sainsbury’s 51 FilmFlex and ODG 72 WH Smith 51 4.4 Online DVD retail 51 Internet VOD 75 Total online DVD retail revenues 51 6.1 Key fi ndings 75 Cashfl ow chain and margins 52 6.2 Overview 75 Principal Providers 52 6.3 Market data 77 Play 52 6.3.1 Enabled homes 77 Amazon 52 Downloading times 77 4.5 DVD Retail: Market-specifi c issues 53 6.3.2 Total Internet VOD revenues 78 New release v. catalogue 53 6.3.3 Internet VOD consumption— Th e long tail 53 buy rates 78 Release windows 54 6.4 Digital rental 78 4.6 Offl ine DVD rental 54 Total digital rental revenues 79 4.6.1 Rental environment 54 Cashfl ow chain and margins 79 Premium priced rental product 54 6.5 Digital retail (download-to-own) 80 Revenue sharing 55 Total digital retail revenues 80 Other video related revenues 56 Cashfl ow chain and margins 81 Sale of previously viewed titles 56 6.6 Principal Providers 81 Late fees 56 LoveFilm 83 Video trading 56 6.7 Market-specifi c issues 84 Non-video related revenues 56 New release v. catalogue 84 4.6.2 Offl ine DVD rental revenues 56 Th e long tail 84 4.6.3 Cashfl ow chain and margins 57 Release windows 85 4.6.4 Principal Providers 57 Looking ahead 86 Blockbuster 58 Choices 58 Premium Movie Channels 87 Global Video 58 7.1 Key fi ndings 87 4.7 Online DVD rental 59 7.2 Overview, general terms 87 4.7.1 Online DVD rental revenues 59 General terms with studios— 4.7.2 Cashfl ow chain and margins 59 Premium window 87 4.7.3 Online rental environment 60 Terms 88 Acquiring inventory 60 Windows and rights 88 Postage 61 Pricing 88 4.7.4 Principal Providers 61 7.3 Market revenues 89 LoveFilm 61 Subscribers and subscriber revenues 90 Blockbuster 62 Payments to movie rights-holders 90 4.8 DVD rental - Market-specifi c issues 62 Market shares 90 4 screendigest © 2007 Table of contents Cashfl ow in the value chain 91 9.6 Th e Long Tail 115 7.4 Principal provider: BSkyB 91 Cinema 115 Description of the off ering and pricing 91 DVD rental 116 Studios supplying BSkyB 92 DVD retail 116 7.5 Pay TV issues 93 Pay TV 117 Th e long tail: new releases vs catalogue VOD 118 revenues 93 9.7 Movie deals on television 118 2nd and 3rd pay TV windows 93 Premium window 118 Premium pay TV 118 Free-to-air TV 95 Window 118 8.1 Key fi ndings 95 Duration of deals 118 8.2 Overview, general terms 95 Number of showings 118 General terms with studios – Free-to-air ‘Most favoured nation’ 119 window 95 Pricing scheme 119 Terms 96 Basic pay TV 119 Windows and rights 96 Free-to-air window 120 Pricing 96 Duration of contract 120 8.3 Market data 97 Windows and showings 120 Output 97 Pricing 120 Total revenues 97 Studio revenues 98 Appendix 121 8.4 Principal providers 98 Methodology 121 BBC 98 General sources and credits 121 ITV 99 Cinema 121 Channel 4 99 DVD 121 Five 100 TV VOD 122 Other channels 100 Internet VOD 122 Television 123 Horizontal focuses 101 9.1 Release windows 101 ‘Th eatrical’ window 101 Video rental window 102 ‘Digital’ windows 103 ‘Second and third’ pay TV windows 103 Studio-direct-to-retail 103 9.2 Mobile movie market 104 Mobile OTA technology overview 104 Unicast 104 Broadcast 105 Hybrid technologies 106 Current OTA services 106 Sideloading 107 9.3 High Defi nition 107 Introduction 107 High defi nition video 108 Hardware (hi-def players) 108 Software (hi-def optical discs) 109 Impact of new formats on video retail 109 HD television 110 HDTV uptake 110 Movies on High Defi nition TV 111 9.4 Piracy 112 Introduction 112 Financial implications 112 Preventative measures 113 9.5 Consumer attitudes to movie products and services 113 www.screendigest.com 5 Movie Markets in the UK 6 screendigest © 2007 1 Executive summary Overall market trends the forecast period however, to reach £3,403m 1. Screen Digest has segmented the analysis in in 2010. four movie markets and ten sub-markets, or windows, according to the table below. ‘Free- 3. The DVD market is the largest of those to-view television’ addresses movies on both assessed in this report, by some margin. In free-to-air channels and basic cable/satellite 2006 it represented 56 per cent of all spending channels, which are sharing the same (£1,655m), with DVD retail (high street and rights window. online) alone representing the bulk of that total amount (£1,323m). This is in spite of a 2. At retail level, British consumers spent decline in the DVD market. Spending on the £3,595m on movie products and services format has fallen in recent years from a record in the UK in 2006, which is approximately high of nearly £1.8bn in 2004, due largely to three billion pounds (£3,060m) net of VAT.