January 28, 2008

Refining the Business Model - 2 [8:11 am]

Direct-to-DVD Releases Shed Their Loser Label

Once a dumping ground for movies considered virtually unwatchable, the direct-to-DVD pipeline is becoming increasingly important to mainstream film franchises.

Hollywood’s new direct-to-DVD strategy rests on calculating a sequel’s chances at the multiplex. Three big-screen “American Pie” movies rained money on Universal, selling more than $750 million of tickets worldwide, according to Box Office Mojo. But Universal had a decision to make when it came to approving a fourth installment for a theatrical release. The third film, “American Wedding,” cost $55 million plus tens of millions more to market — far more than its predecessor. Yet its ticket sales were 28 percent lower.

In previous years, the studio would have either pulled the plug on the series or continued to serve up sequels in theaters to increasingly smaller audiences. Opting for diminished returns was typically the industry’s course — why leave money on the table? — which is how wince-inducing films like “Police Academy 6: City Under Siege” ended up at the multiplex.

But studios have realized that the power of the DVD market gives them another option. They drop everything but the franchise concepts and the titles, and hire cheaper acting talent. Add a marketing campaign of decent weight to increase the size of the audience that remains and — presto — more profit, pound for pound, than some big action flicks. Oh, and get rid of that pejorative-sounding direct-to-DVD term. Call it DVD Premiere.

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