Estoril 2010 1

VOD in the English Context

Excitement over VOD

•Rise of VOD/EST and death of Video

•Reality – Not delivered what was “promised”

•Functionality, teething problems, consumer scepticism, resistance of sales agents

•Majors vs independent/art house labels

Estoril 2010 2

Introduction

VOD in the English Context

Ideal

•Choose our own business models

Reality

•Business model is platform led – take it or leave it attitude,

•Two types of models

1. Two tier pricing system

Different pricing for Current Film and Library titles

No advance

50/50 share of revenue per transaction

Encoding costs sometimes the platform pays these

Estoril 2010 3

Business Models

VOD in the English Context

2. Advance system

Advance paid for a group of recent and library titles

Recoupment from licensor’s share of revenue (typically 40% to 50%)

Usually both transactional and subscription

Encoding costs paid by platform

Similarities

• Level playing field

• Difficulty in getting titles on the sites

Premium Model

• Premium pricing for day and date VOD release with theatrical

• Title by title basis

Estoril 2010 4

Business Models

VOD in the English Context

Curzon Cinemas site• Operational in next few weeks• Will host all of Artificial Films catalogue over time• Day and date for theatrical and VOD on a title by title basis (VOD at premium

rate)• Lower pricing tier during normal VOD window• Transactional VOD only at the moment; may move to include subscription• Open to other distributor’s art house, independent and foreign language titles• Available in the United Kingdom

–

Estoril 2010 5

New Curzon Site

VOD in the English Context

FilmFlex• Joint venture between Sony & Disney • Transactional VOD• Platform producing the best results for AE• Cable (limited to 500 films) and internetiTunes• Relatively new for AE• Internet based• Transactional & subscription VOD and ESTLove Film• Transactional & Subscription VOD• Internet basedBT Vision• Transactional VOD• Internet basedSky• Transactional VOD via Satellite

–

Estoril 2010 6

UK VODPlatforms

VOD in the English Context

Disappointing results• FilmFlex only platform generating significant income• Restrictions on what titles can be exploitedTrends• Small increase from year to year• Average VOD return is about 2 to 6 percent of theatrical box office• Platforms becoming easier to access by consumers• However platforms becoming congested so restricting titles they are taking on

with predominance of studio titles; some platforms simply refusing to deal with new licensors as they do not have the capacityAnomalies • The letter “A”

–

Estoril 2010 7

Trends

VOD in the English Context

Sales Agents• Some still refusing to grant VOD rights• Need grant of all VOD rights including Free VOD (even if exploitation is frozen) on an exclusive basis so can meet the conflicting demands of the various platforms• Back catalogue clearance and clarification of VOD rights

– Generic clearance language– Not high priority with a lot of sales agents

Platform Access• Relatively new for AE• Internet based• Transactional & subscription VOD and EST

Competition between VOD and Pay TV• Pay TV demands

–

Estoril 2010 8

Obstacles &Problems

VOD in the English Context

Aggregators• Fusion• Access to platformsSpecialist Sites• New Curzon site• Past experience (Auteurs and MK2 VOD site)

Estoril 2010 9

Opportunities

VOD in the English Context

iTunes• Challenge to the market• Ease of access and familiarity Increased revenue• Gradual inroads into the DVD • Revenue increases not as dramatic as expected

Estoril 2010 10

Outlook

VOD in the English Context

Strictly Speaking there are no regulation of the various windows in the United Kingdom

•Cinema chains such as the Odeon, Cineplex, Vue have through their Cinema Association have agreed that they will only release films for which the Video exploitation will be delayed at least by 4 months from the theatrical

•Pay-TV will insist that there be no VOD and EST two months prior to and during its Pay TV window so limits VOD and EST exploitation to a 5 month window.

The momentum for change:

•Has come from the distributors themselves, mainly the independent and smaller distributors,

•To maximize the revenue from as fast as possible from as many media as possible,

•Shorten the delay for television exploitation, so that money can come in faster.

Estoril 2010 11

Legal context

VOD in the UK context

Estoril 2010 12

WindowsDelay for a first exploitation Distribution Channel

No holdback unless against another territory

Theatrical exploitation

4 months or no holdback if not being released by a chain

Video distribution

6 months - being reduced to 4 months (d &d for certain titles)

Video on Demand

6 months – being reduced to 4 months (d &d for certain titles)

Pay per view

12 months Pay TV

27 months (reduced to 12 to 18 months if no Pay Television sale)

Free TV