APEX Insight: Whether you attribute the bring-your-own-device trend, in-flight connectivity or streaming services as the catalyst for the steady revolution of in-flight entertainment, collectively, disruptive digital distribution models are rattling Hollywood’s high-stakes value chain – especially when it comes to early-window content. In this roundtable, key stakeholders from Air Canada, Cinesky Pictures, digEcor and Inflight Dublin, weigh in on how things are changing.
Early-window content has long been one of the hottest tickets for airline flyers. But with in-flight connectivity, on-the-ground on-demand streaming, the rise of new content and shrinking windows, is that changing?
Betsy Hamlin, owner and founding member of Cinesky Pictures, still sees a strong demand for new-release films. “Passengers get onto the plane with the expectation of watching the latest movies. It’s a valued part of the experience,” she says. Anton Vidgen, Air Canada’s creative director, agrees: “Unquestionably, early-window content remains a key offering for airline passengers. I think there will always be an interest in it.”
David Withers, chief executive officer of digEcor, an integrated in-flight entertainment (IFE) and cabin hardware provider, echoes Hamlin and Vidgen, but also points to the rising popularity of other forms of content. According to Withers, “Early-window content is still of value to the passenger; however, we are seeing as high a demand for more content choice, whether that means more short features, TV box sets and even non-traditional content.” At this year’s APEX MultiMedia Market conference in Amsterdam, the association’s IFE-buyer conference, several new vendors showcased an array of short-format options for airlines to select from.
In a poll of attendees at the conference, 50 percent said they view early-window content as a “very important” part of an airline’s offering, while 23 percent said it “brings the most value.” Dominic Green, executive vice-president of content service provider Inflight Dublin, Americas, thinks the numbers may be gradually dropping. “My guess is that the perceived importance of early-window content has probably gone down because there’s so much more to see, plus the fact that release windows are a lot closer together than they used to be,” he says. “It used to be that an early-window movie stayed fresh for a few months. Now you can find most new movies available via home on-demand systems really soon after airline availability.”
“Release windows are a lot closer together than they used to be.” – Dominic Green, Inflight Dublin
By the time a movie reaches the home window, in most cases it’s already accrued more than 70 percent of the total revenues it will earn, which makes piracy a massive threat. To mitigate this risk and to compensate for declining revenues, studios have been closing the gaps, and windows are shrinking. In 1997, it took approximately eight months and 12 days after theatrical release for a film like Titanic to be released for consumer purchase on DVD. Now, according to figures from the National Association of Theatre Owners (NATO), the average time it takes a film to fly from silver screen to DVD is three months and 26 days.
Securing Streams of Revenue
The proliferation of personal electronic devices used for IFE has put new pressures on early-window content. Major Hollywood studios now allow airlines to distribute new releases on preloaded, airline-supplied tablets, but the streaming-to-passenger-device dam has yet to be broken. “We can’t risk our movies being pirated in flight. It’s a tiny market that enjoys the best window, and anything negative would damage the market completely,” explains Hamlin.
In addition to security, adding another medium to the once linear chain of windows muddies the stream of revenue. “Security is always a concern with any high-value content, but this isn’t really exclusive to streaming,” Green says. “I think the challenges are more about controlling how and when the content is distributed and how to maintain revenue through the new platforms.”
Hamlin adds, “Most companies involved want to carve out windows that create a revenue stream big enough to allow for profitability, and also generate revenues to fund the next tranche of movies.”
“Consumers have a tendency toward newer forms of content.” – Anton Vidgen, Air Canada
For Vidgen, as airlines are partners with the content creators, they are sensitive to the commercial interests of the studios. “We need to make sure that we can protect the commercial interests of these content creators, which basically means ensuring that we have strong security protocols and that they’re getting their money at the end of the day so that they can keep on creating compelling content,” he says. “That said, we really should be working together to make sure that content can have as wide an audience as possible. Generally speaking, that’s what content creators want and that’s what content distributors want.”
The Appeal of Newness
Until early-window content is available to stream to devices, airlines have leveraged connectivity to bring in fresh content and deliver a sense of newness. “Of course, through connectivity you can offer a very wide variety of diversionary or informational content, be it traditional AVOD-style content or much fresher content, such as the news or sports highlights, or even live TV,” Vidgen says. “Whether it’s early-window content, sports highlights, news information or the latest episode from a series they’re watching, generally speaking, I would say that consumers have a tendency toward newer forms of content.”
Green also points to a growing demand for live, or hot, TV content. “High-quality live content can become a consistent part of the offering, with the availability to deliver time-sensitive content, such as sports, event by event. We could also deliver brand-new episodes of TV right after they broadcast – that’s a pretty good wow factor,” he says.
“We can’t risk our movies being pirated in flight. It’s a tiny market that enjoys the best window.” – Besty Hamlin, Cinesky Pictures
While live TV and the rise of TV series are rounding out IFE repertoires, most agree that they’re contributing to the insatiable hunger of choice and quantity without threatening early-window content’s reign as the most coveted content. “It is becoming widely accepted that passengers want lots of choice, and building ever-increasing libraries isn’t cost-effective for airlines,” Withers says. According to figures from CNN, airlines can spend upward of $20 million a year on licensing IFE content, in some cases doling out more than $90,000 to license a show or movie for just a few months. According to Withers, passenger consumption is leading spend-per-flight to hit a ceiling.
“I would expect that the next step for studios is the need to change their business models for how to charge for content,” Withers adds. “Those that are not open to negotiations for revenue-share models or the ‘all you can eat’ libraries of content for a set fee will feel the pressure.”
Now Streaming New Releases
Vidgen doesn’t doubt that the dam that’s keeping new releases from streaming to devices will eventually burst. “I believe it’s a question of when, not a question of if.” And when it does become available? “We’d jump at it right away for sure. It’s something that our customers regularly ask for, and we’d be very, very keen on offering early-window streaming content. But certainly, I imagine, we wouldn’t be the only ones,” he says.
With growing access to more and more content, Vidgen suggests that curation and personalization may become more important. “Airlines, of course, are brands, and we want to have a meaningful relationship with our customers. In enhancing that brand relationship, part of it is curating, suggesting and proposing content that we think would be of interest to them and that they might not be exposed to if they have a free-for-all service like Netflix or the Internet,” he says.
“I do very much believe that airlines should retain a role as creative custodians of their content, but I also think that certainly we want to make sure that consumers are allowed to make their own choices,” Vidgen adds. “If we, as an airline, don’t have a compelling content offering, well then consumers should be free to take their iPhones elsewhere and view whatever other content they may wish. I think it’s a healthy form of content competition.”
“The next step for studios is to change their business models for how to charge for content,” – David Withers, digEcor
Green also notes that on-demand access to more content will add value to rarer programming. “It’s relatively easy to pick the new movies, so it makes the job of the person who finds the hidden gems, indie titles, regional movies and diverse TV selections all the more important,” he says.
But as bandwidth increases and streaming takes off in the in-flight arena, will studios become early-window content providers only? “I think there is a value to being able to work with a studio to source a range of content – movies and TV, early- and late-window – but it comes down to what money is on the table,” Green observes. “Say Netflix wants to come along and take over all of the late-window content. If the fee offered by Netflix is more than the studio currently gets from IFE sales of that content, are they going to just hand it over? It’s a possibility… Money talks!”
Hamlin agrees: “Money could be a driver here, and certainly Netflix and Amazon have deep pockets right now, but traditionally, Hollywood has always looked at the long-term and tried to ensure all markets coexist.”
This story was originally published as “Windows of Opportunity” in the June/July issue of APEX Experience magazine.