Ancillary market

Ancillary markets are non-theatrical markets for feature films, like home video, television, Pay Per View, VOD, Internet streaming, airlines and others.

Before television, studios played their films in theaters exclusively. However, in 1950 many studios began to sell all their pre-1948 features to television syndicators. The television syndicators then would use these films to fill in their programming schedules. Back in the 1960s, the first domestic ancillary market for feature films was created. NBC was the first to practice the market on September 23, 1961 by programming "NBC Saturday Night at the Movies." After such success, ABC became the second network ever to program a series of prime time features in 1962. One of the other networks, CBS, followed and added a prime time feature program in 1965.

Today, feature films opens in motion picture theaters to establish its box-office value. After that is established, it is then released to ancillary markets in a particular order as follows:

The sequence is to maximize the full economic potential of each market.

Home video recorders were made public when Sony introduced the half-inch Betamax cassette in 1975. Following Betamax, the company JVC introduced the Video Home System (VHS). Marketed by RCA and manufactured by Matsushita, VHS soon became known as the video-cassette recorders (VCRs). VCRs, which gave the consumer the option of recording programs from television, were a new form of competition in the demanding consumer market. VCRs revenue contributed to the development of the ancillary market of video and DVD. By the 1980s, five million households owned VCRs. Major studios had not yet adapted to the new video technologies that were being developed for consumers. There were no anticipations of new markets or other opportunities to expand until an entrepreneur, Andre Blay, opened Hollywood film companies’ eyes. Blay wanted the license to transfer and sell their films on tape. After he succeeded and his approach was beneficial, film companies all around became a part of the video distribution. The film companies could not deny the fact that this new distribution would lead to a new revenue stream.

As the VHS market saturated, multiple media executives and manufacturers liked the idea of utilizing other home video technologies. In 1993, the film industry upgraded their technology with the creation of several new formats including the DVD, or digital video disc. Many manufacturers such as the Japanese (Hitachi, JVC, Matsushita, Mitsubishi, Pioneer, Sony and Toshiba) and the European (Philips and Thomson) collaborated to facilitate development of the DVD Forum. In March 1997, the US launch of the DVD systems went smoothly due to Hollywood's solidarity. Manufacturers and film studios decided to avoid making the same mistake of the VHS format battles and agreed upon a universal standard of cooperation. When first introduced in 1997, DVDs sold at the low price of $20, for which they offered high-quality image and extra special features. Consumers liked the advantages of the DVDs and soon surpassed VHS sales.

...
Wikipedia