How Movie Studios Exploit Video on Demand Services

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How Movie Studios Exploit Video on Demand Services

This system works for cinema distribution and was exported for home entertainment, where it affects our business. For a video on demand (VOD) operator to distribute any given catalogue, it must pay “Minimum Guarantees (MG’s)” to the studio. This allows one to exploit the catalogue. Mind you, you don’t get to choose what you pay for. That would be too simple.

Output deals are the norm and in essence they mean you need to take every licensed film as part of a single deal. If you want the latest blockbuster, you must also take the latest winner of the Golden Raspberry awards, and take our word for it, there are some pretty unworthy films in there. These Minimum Guarantees are quoted in millions of dollars per deal, and as a result VOD services like ourselves have to operate on very small profit margins.

On top of MG’s, distributors must also agree to pay revenue shares. Should the sales top the Minimum Guarantee on a given year the rev share kicks in. Revenue shares are usually in the studio’s favor (between 70% and 50% depending on whether we’re speaking of recent releases or old ones).

If a given platform manages to recoup its costs it must also share its future revenue with the Rights Holder, while providing the majority of the value chain involved in a streaming service: Storage, streaming costs, platform development, DRM licenses and geoblocking tools.

That last part is something I thought you’d be interested in. Surely modern, open tech mitigates a huge amount of those costs, putting aside DRM licenses that obviously don’t work.

Yeah the whole thing – bundling, charging for non-costs, mandating stupidity – demonstrates the leverage ‘Rights Holders’ have. Much like music Rights Holders still charging for record breakage on digital, the unprofitability of on-demand music services, all the while convincing artists that services and fans are the problem.

All those costs go away for libre productions, but so does consumer demand. The Rights Holders are strongly incented to manufacture demand for and preferably addiction to the titles they control. That’s why I particularly see the need to figure out peer production of cultural relevance, thus compete with them directly on marketing and distribution of premium and libre video. :slight_smile: