Size really does matter for DirecTv Inc. as it prepares for
its holiday pay-per-view marketing push.
The direct-broadcast satellite service is expected to pay a
whopping 22 percent upfront guarantee to Sony Pictures to offer the $123 million
box-office title Godzilla nearly 30 days before cable operators.
The upfront-guarantee offer dwarfs traditional single-digit
early window guarantees offered by studios, and it could set a precedent for future early
window deals, studio executives said.
Representatives from Sony and DirecTv said it's too
early to discuss the deal, but sources close to the situation said DirecTv will use the
28-day early window -- which begins in late November or early December -- as a holiday
promotion to push dish sales.
Despite the film's sell-through video status, and its
disappointing results at the box office relative to its production costs, Godzilla's
action story line would play well on PPV, where films of that type have historically done
relatively well.
But guaranteeing a 20 percent buy-rate almost ensures a
loss for DirecTv, PPV-industry executives said. Most major box-office titles with
reasonable 30-day windows have difficulty reaching double-digit buy-rate numbers,
according to operators, with the average falling somewhere between 3 percent and 7
percent.
And while studio executives said DirecTv often reaches
double-digit buy-rates for movies, it would be hard-pressed to match the 22 percent mark.
But DirecTv has shown that it will use PPV events or movies
as loss-leaders to generate sales and to reward its PPV customers. After paying more than
$1 million for the rights, the DBS service took a hit last year by offering a Rolling
Stones concert free-of-charge while operators sold the same event via PPV.
While DirecTv seems willing to ante up for an early Godzilla
window, most of the cable industry is expected to pass on the offer. Viewer's
Choice said it will not take Sony up on the early window, instead debuting the movie in
January -- two months after its home-video release.
"It's not economically viable to do the early
window guarantee for Godzilla," said Michael Klein, vice president of
programming for Viewer's Choice.
"As much as I would like to offer Godzilla during
the holiday season, there's no way that I can justify paying that much of a
guarantee," one PPV executive said.
But Sony's offer could become more the norm than the
exception in the future. Several studio executives -- trying to find additional revenue
sources for their movie product -- said they're considering following Sony's
lead and offering early PPV windows with upfront double-digit buy-rate guarantees.
Thus far, only Warner Bros. has consistently offered early
PPV windows for its titles, but its guarantee levels have typically fallen between 3
percent and 6 percent for windows 23 days to 30 days before the release dates for other
cable operators.
"We are definitely looking at getting an upfront
guarantee for our titles," one studio executive said. "Those that want the
earlier window can pay the guarantee."
But since most cable operators can't meet those
levels, DBS could be the beneficiary of the early window, further increasing its PPV
advantage over cable. DirecTv, which programs 40 to 50 PPV channels, already doubles cable
operators' movie buy-rates.
