Thursday, June 27, 2013

Sony and Disney VOD

     Sony and Disney recently announced that they will stream brand new movies, also known as Video On Demand (VOD), at the same time that they're released in theaters.  This will be happening in Asia, not the U.S., at least not yet.  Why Asia?  Well, piracy is rampant in Asia.  DVD sales are not very meaningful in that market segment because of piracy.  They're going to test drive a few films to see if they can generate a better profit than that of DVD sales.  Another reason why South Korea was chosen is because the largest cinema chain in South Korea just so happens to be the largest VOD serice there as well.

     Cinema chains outside of South Korea obviously do not want this to happen.  Successful VOD sales means less sales for cinemas themselves.  What will cinemas have to offer if they release VOD?  Currently, in order to see a brand new movie, you have to go to the theater.  However, if you can watch it on your couch, would you pay perhaps $50 to see it?   You can have your friends over and have a party if you want. 

     Sony and Disney have been around for a long time.  They know what they're doing.  This is a calculated risk.  Let's see if a) there is a demand for it and b) if it surpasses DVD sales.  They can use this experiment to see if this will be a service that they could implement in the U.S.  The U.S. market is different though.  Universal tried this last year, and the cinemas threatened to drop the film from their theaters.  Universal had too much to lose at that point, so they withdrew their plans to stream VOD while the movie was still in theaters

     At any rate, Sony and Disney may have a brilliant strategy.  The question is, can they execute their strategy?  Can they find a better overall profit with releasing to theater and VOD at the same time before releasing to DVD, instead of theater now, and releasing to DVD and VOD later?   According to this week's readings, their strategy should be simple and transparent to others in the organization.  If they can maintain those two criteria, then they'll improve their chances to execute their strategy.  Do you think they'll be able to do it?  There's no doubt that there will be a market in the U.S. for newly released movies to be streamed at home.  It all boils down to finding a way to make that service available without losing any money.

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