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What is interesting is that SVoD providers are going beyond what SMoD providers have ever done: they are entering the content production ...

What is interesting is that SVoD providers are going beyond what SMoD providers have ever done: they are entering the content production sphere, in order to enrich their catalogues and offerings; to expand their networks of, and reach to, high-powered executives, producers and movie-stars as well as to assert their newly-acquired status and clout. Online streaming video services such as Netflix and Hulu will make more money per year than the US movie box office by 2017, according to a new report release by PwC. The report projects that streaming services will be the biggest contributor to the American filmed entertainment industry in four years, as the revenue generated by TV and subscription video on-demand providers reaches almost $14 billion, $1.6 billion more than the amount earned from the traditional cinema box office. Therefore, SVoD providers have, and will keep on having, a lot of disposable cash to invest. How to better invest this available income than in producing high-quality video content, to enrich one's catalogue and products offering? The main area streaming services will have an impact on the traditional box office, the PwC report says, is in release dates. At the moment, most movies are given months in theaters before they slowly make their way to streaming services. PwC says the strength of companies such as Netflix is expected to put pressure on the industry to make this transition faster, offering filmed entertainment to consumers earlier. More importantly, SVoD providers keep on expanding their content inventories. Netflix already has USD 7.1 billion in existing obligations for original and licensed content, and it recently contracted for an original Spanish-language series; a new series from Mitch Hurwitz (the creator of much-loved Arrested Development); a third season of House of Cards and a final season of AMC's The Killing. Indeed, the economic returns of House of Cards, the test case, were as successful as the critical reviews. Netflix's new strategy fortified its existing revenue model-acquiring and retaining subscribers-and even opened up new revenue streams such as content licensing or even a branded channel with traditional distributors. Netflix spent roughly USD 100 million to produce the first season of House of Cards plus additional marketing investments, including advertising buys for primetime TV spots and high-profile billboards. If House of Cards brought in half a million new Netflix subscribers, with the same average life span as current subscribers (an estimated 25 months), the show would have just about broken even in two years. The real test was the lifetime value of these new customers. What if many or most turned out to be opportunistic viewers who ended up canceling their subscriptions a few months after watching House of Cards? Then the breakeven opportunity looked vastly different. For example, if the average customer life span was closer to four months, then Netflix would have needed more than three million new subscribers for the project to breakeven-essentially, a 43 percent increase over its current average acquisition rate. Needless to say, this debate is now closed and, in addition to its string of series, very successful Netflix has brokered many recent theatrical deals - it plans to release the sequel to Ang Lee's Crouching Tiger, Hidden Dragon day-and-date online and in Inmax theatres, and has struck an exclusive four-picture deal with Adam Sandler - which have supposedly enraged many in the business. Speaking at a keynote in Cannes's MIPCOM in November 2014, Netflix chief content officer Ted Sarandos insisted that the company was only looking to modernize a theatrical distribution model that "is pretty antiquated for the on-demand audiences we are looking to serve". Netflix, he said, is not looking to kill windowing but rather to "restore choice and options" for viewers by moving to day-and-date releases. Not only that, but Sarandos said Netflix would be expanding into more niche genres, including the financing of documentaries and art-house films. Hence, the marketing stunt with teaming up with mega movie star Leonardo di Caprio on the release of documentary Virunga focusing on the fight against poaching endangered gorillas in the Democratic Republic of Congo. The documentary was released simultaneously on Netflix and in theaters in New York and Los Angeles on 7 November 2014. Amazon Prime's tally in content creation and production is also impressive, most notably thanks to its decision to engage Woody Allen to write and direct a series for its SVoD services in January 2015 and its competitive force in TV by landing two Golden Globe trophies for best comedy for its critically praised Transparent and actor for series star Jeffrey Tambor also in January 2015.

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