Friday, December 2, 2016

The shrinking window: Studios weigh shorter times
between movies in theaters and movies at home

IT’S BEEN a bane of the moviegoer’s existence for years: the long, long wait between when a popular film can be seen first-run in a neighborhood multiplex and when it’s available for home consumption. A digital-savvy public accustomed to (more or less) instant gratification may be getting closer to being, well, gratified a lot closer to immediately.

Bloomberg and TheWrap separately reported on Monday that some of the major film studios and exhibitor chains are nearing agreement on shortening the window between first-run-only exhibition and viewing in the privacy of the theater you pay for: your own home — possibly to as little as two weeks.

Citing studio executives with knowledge of events, Bloomberg reported Thursday that if the stars align on the various proposals, films will be priced between $25 and $50 for home viewers, a fat increase over the cost of movie tickets or the cost of VOD, or video-on-demand.

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One interesting break with the past is the apparent willingness of at least one studio to go it alone on changing the movie-release orthodoxy, whether the theater chains want to or not. Warner Bros. CEO Kevin Tsujihara said as much on Tuesday at the Credit Suisse Technology, Media & Telecom Conference in Scottsdale, Ariz.

“We’re working with them to try and create a new window,” Tsujihara said at the conference, as reported in TheWrap. “But regardless of whether it happens or not – whether we are able to reach that agreement with them, we have to offer consumers more choices earlier.”

A spokesman for Universal Pictures told TheWrap that that studio is “having discussions with exhibitors about shortening the release window.” And Bloomberg reported that early in November, Cinemark “held preliminary talks with various studios about a premium video-on-demand window, without disclosing details.”

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IF THEY build it, will they come? Still to be seen is whether consumers would be willing to shell out a hefty premium for bragging rights to seeing a minty-fresh film just out of first-run status without going to the theater or waiting for that movie to show up on Netflix, Hulu or DirectTV.

$25 — a high enough price for two tickets to see anything once — is at the low end of the estimate range; charging much more than that would make it harder for cash-conscious American consumers to justify. And while it’s perfectly palatable in expensive coastal cities like New York, San Francisco or Los Angeles, that price may not play well in the heartland. Let alone any price above that.

Ironically enough, the talk of shrinking the first-run window comes in a year of record growth for theatrical movie releases. Tsujihara estimated that the domestic box-office revenue would reach $11 billion by the end of the year, thanks partly to successes like “Doctor Strange” and “Star Wars: The Force Awakens.”

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Accelerated home-viewing releases wouldn’t be the death knell for theatrical movie releases; the in-theater experience is still a powerful economic draw. FBR & Company estimates that theatrical exhibition still accounts for 44 percent of feature-film revenue. But the handwriting for theatrical movie exhibition has been on the wall for a long time.

First, the release window’s been naturally shrinking for a while anyway. Bloomberg reports: “Chains including Cinemark used to enjoy as much as six months of exclusive rights to new releases. In recent years, that has shrunk to about 90 days, according to the National Association of Theatre Owners. And by the third quarter of 2016, some new movies were available for online purchase two months and 26 days after their cinematic release.”

Second, static home-video sales are forcing a change in the old business model. DVD sales, for example, reportedly dropped by 12 percent last year, according to Digital Entertainment Group, an industry research org.

Third, newer strategies such as day-and-date (with films being released in theaters and via streaming on the same day) have loudly announced the future, even if exhibitors choose to ignore them. In October 2015, the movie industry’s collective hair caught fire over Netflix’s day-and-date release of “Beasts of No Nation.” Some theater chains went so far as to boycott the film altogether.

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DEFENSIVE CROUCHES like that may not do any good for much longer. Netflix, having already shifted the terms of engagement, is doing it again. On Thursday, eMarketer reported on changes Netflix made in its mobile app that let subscribers download videos and watch them offline, when and where it’s convenient for them. This is more than cord-cutting, it’s ’net-cutting; Netflix’s move means you don’t even need the Internet for timely video entertainment. Amazon Prime Video and You Tube Red also offer similar services.

Despite the advancing technology of the movies themselves, the legacy entertainment-industrial complex — the old union of studios and exhibitors — has been relying on a business model that’s more than 100 years old. That’s ending by degrees, and fast.

We’re at a point of détente between that long-established business model and the modern world of consumers, the people the movie business depend on. But that won’t last. Détente is another way of saying “reduction of tension” — a peaceful stalemate. Sooner or later, the tide of battle shifts to a winner and a loser. Sooner or later, with consumers’ money going into the registers that keep that business alive ... guess who wins?

Image credits: Warner Bros., Universal and Netflix logos: Their respective companies or parent companies. Feature-film revenue share: FBR & Co. via Bloomberg. OTT video service users chart: eMarketer.

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