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Topic: Studios Push for $50 Early Home Movie Rentals, But Negotiations Are Complex
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Frank Cox
Film God
Posts: 2234
From: Melville Saskatchewan Canada
Registered: Apr 2011
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posted 02-24-2017 03:53 PM
Studios Push for $50 Early Home Movie Rentals, But Negotiations Are Complex
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At least five of the major studios are pushing plans to get movies into homes earlier, but theater chains and studios are still far apart from agreeing on how it would happen.
Warner Bros. and Universal have been the most aggressive in pursuing an arrangement that would see certain movies receive a premium video-on-demand release within weeks of their theatrical premieres, but now other studios are joining the discussions. Twentieth Century Fox has also begun to talk early releases with theater owners, while Sony is having its own separate talks with exhibitors and is trying to devise its own plan.
Paramount, which previously did a pilot program with AMC and a few other exhibitors to release “Scouts Guide to the Zombie Apocalypse” and “Paranormal Activity: The Ghost Dimension” on digital platforms early, has continued to seek a similar strategy. Though different studios are exploring different scenarios, the plan that has gathered the most steam would involve offering up movies for $50 a rental some 17 days after their theatrical opening. Those rentals would be available for 48 hours.
The latest round of discussions began roughly 18 months ago. To get a sense of how these negotiations are progressing, Variety interviewed six studio and exhibition executives, all of whom spoke on the condition of anonymity.
Studios are looking to sign up two or three major exhibition chains, and believe they have the best shot at convincing AMC to come on board. They are also bullish on the prospects for Cineplex, the Canadian theater chain, joining the ranks. Cinemark is seen as the least likely to agree to shake up traditional distribution patterns. There is a growing sense among major studio executives that consumers have grown tired of waiting to see movies in the home, and that they are turning to illegal downloads of films in greater numbers. As Warner Bros. CEO Kevin Tsujihara told analysts this month, “It’s about giving consumers what they want. If we don’t give it to them, they’re going to go to pirated versions.”
Filmmakers have signaled a willingness to be flexible about how their films are seen. Martin Scorsese is finalizing a deal with Netflix for his next film, “The Irishman,” and directors like Steven Spielberg and J.J. Abrams endorsed the Screening Room, a controversial proposal that would have offered new movies in the home on the same day they opened theatrically.
It’s not just that the rise of streaming services has made the theatrical experience seem anachronistic for a generation of moviegoers. Studios are under financial pressure from a collapsing home entertainment business and are looking for ways to prop up sales and rentals. The DVD business had stabilized after constricting severely, but executives grew alarmed when sales began to slide dramatically again last summer. Some retailers, such as Sam’s Club, are flirting with no longer selling DVDs and Blu-rays.
At one point, some studio executives had hoped to have a deal with theater operators wrapped up by the time the exhibition industry gathers in Las Vegas starting March 27 for CinemaCon, its annual trade show. However, the complexity of shrinking release windows, industry jargon for the amount of time between a film’s theatrical debut and its launch in the home, has proved vexing, with no pact in sight. Some studio executives privately insist that they always intended to take a slower and more deliberate approach.
Studios had hoped to entice theater owners by cutting them in on a percentage of the digital revenues, offering them up as much as 20% of the profits. Despite the potential revenues, exhibitors are worried that they could be opening a Pandora’s Box, making it more attractive for customers to skip the cinema entirely and wait for films to be made available for a higher price in their home. They want assurances that the plan could be renegotiated on the fly if there is evidence it is cannibalizing the business.
Screening Room is seen as a possible third-party platform for the movies in the premium on-demand platform, but the deals would not be exclusive. The company, which is backed by Sean Parker and Prem Akkaraju, has proprietary technology that guards against piracy. In recent months, the company has quietly formed alliances with theater owners around the world. Parker is best known for his roles in companies such as Napster, Facebook, and Spotify. Akkaraju was previously a partner at the electronic music company SFX Entertainment and was a partner at InterMedia Partners.
Currently, there is a roughly three-month gap between when a major studio movie opens theatrically and when it is made available for sale or rental. As a concession for allowing films to be made available for premium on-demand rentals, theater owners want studios to agree to keep the traditional window in place, so consumers wouldn’t be able to rent or buy movies at the regular price for approximately 90 days. Exhibitors want studios to agree to keep the three month window standard for between 10 to 20 years.
Those aren’t the only issues that are proving difficult to negotiate. Exhibitors are pushing for more transparency in how studios will collect and disburse digital revenues. Because a third party will be renting these films, they want more assurances that they will receive their fair share of the profits.
There are also differing positions on what types of movies will be made available for rental. Some studios want to limit the films that are made available on premium on-demand platforms to mid-budget dramas and comedies. They are not interested in releasing the Spider-Man films of the world within weeks of their debut. There are other studios that are taking more of a package approach, mixing in big tentpole films with smaller pictures.
Some executives would like to see the window shortened even further, even pushing for a simultaneous release of movies. In their discussions, Universal and Warner Bros. have advocated having more of a fixed time between a film’s debut in theaters and launch on premium on-demand, whereas Fox and Paramount have looked for a more flexible approach. Under the second scenario, they would like the release date to be triggered by a film’s theater count — when it stops being widely shown, it would premiere on-demand.
As they are pushing to make films available earlier and at a higher price, studios are also trying to figure out what those changes will mean for television and streaming licensing pacts. These may have to be renegotiated if a premium on-demand model is instituted.
Then there are regulatory hurdles. Anti-trust laws prohibit the studios from working in coordination with each other. Their negotiations must be done on a company-by-company basis, a frustration given that most executives would like an industry-wide solution to a problem they feel is facing their collective business.
Universal, Paramount, Fox, Warner Bros., and Sony declined to comment.
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Steve Guttag
We forgot the crackers Gromit!!!
Posts: 12814
From: Annapolis, MD
Registered: Dec 1999
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posted 03-07-2017 07:17 AM
But isn't $8 or $10 or $20 to watch it in a theatre versus $50 at home. Because that always presumes a zero cost to do the theatre event and a single person. A trip to the theatre with a companion or family is MUCH more than $50, typically once all of the travel, food, tickets, baby sitter...etc are added up. And $50 at home, as one adds in people becomes $25/person to $16.75/person to $12.50/person. You are now in a similar price category for a typical family without the travel hassle and much cheaper, if not better food options.
This option discourages theatre attendance, including lucrative birthday parties ($50 for a party of kids beats schlepping them to the theatre for much more).
It is also stupid in that it merely cuts off one revenue stream without adding one. They'll STILL get the home market after the theatre market is done with the title.
I put it to Hollywood. As an experiment, take an "A-list" title and promote it as only in theatres (which they have done but with a wink that in 90-days it will be in the home) AND that it will not be issued for the home for over a year and see what that does for boxoffice and track how its eventual cable and disc sales do afterwards. I predict it creates two, much healthier, markets. People are more apt to want to see something that they like if they haven't seen it for a year or more.
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Bobby Henderson
"Ask me about Trajan."
Posts: 10973
From: Lawton, OK, USA
Registered: Apr 2001
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posted 03-07-2017 09:48 AM
I've looked at the math on it up and down. The $50 TV movie rental concept just doesn't make any sense.
My girlfriend and I watched two movies at the new Carmike location in Lawton this past Saturday afternoon. She wanted to see The Shack and I wanted to watch Logan. We bought 4 tickets, including 2 for the IMAX-branded house showing Logan. We also shared an extra large drink and filled her Carmike annual popcorn bucket twice. I probably won't eat popcorn again for awhile, ugh. All of that came out to nearly $50. It would have been a few dollars more had we bought tickets at evening prices.
The $50 home viewing thing only works if a group or 4 or maybe more people are watching the movie. If someone invited me to their house to watch a new movie release in their living room on a TV screen and then perhaps asked, "can you throw in $10 or so for the movie," I would probably decline and just go see the movie at the theater if I was that interested in watching the movie during its theatrical run.
Movies aren't live events, like a high profile boxing match or UFC mixed martial arts event. That's a big problem with trying to sell that kind of content in what amounts to a premium PPV program. Viewers always have the option to see a movie whenever it fits their schedule. They have to adjust their schedule to see a live sports event. The fact the event is live makes it a lot easier to get a big group of people together in the same living room or sports bar. People have house parties, socialize, drink beer and pig out watching those events. They make a lot of noise.
It would be like herding cats to get a group of people together to just watch a freaking Hollywood movie on a TV screen. Good luck trying to keep the group of people quiet. In any house party situation whatever is playing on the TV screen routinely becomes background material for all the jaw-jacking taking place.
It would be ridiculously wasteful for just 1 or 2 people to pay $50 to watch a movie at home. The vast majority of customers would just be watching the movie on a TV screen in a living room, with or without surround sound. I couldn't imagine paying $50 to watch a movie with TV speaker sound. Screw that.
I could imagine this premium home movie viewing concept appealing to a large family gathering, a birthday party or some other occasion bringing a bunch of kids together under the same roof. But there are only so many family movies being released. There are even fewer that are must-see during theatrical release. It's just as easy for families to wait for a movie to come out on Blu-ray and buy a copy of that, or just rent one. Hell, young kids don't have a problem with loading the same old animated movie and watching it over and over again 100+ times. In the end there really isn't much pressure for adults in that situation to blow $50 on a premium TV movie rental. The kids probably won't even concentrate on it half the time anyway. They'll be running all over house playing, digging around in the kitchen or bolting outside.
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Mike Blakesley
Film God
Posts: 12767
From: Forsyth, Montana
Registered: Jun 99
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posted 03-07-2017 11:58 AM
Young kids don't even have a problem with downloading a movie illegally and watching it while it's still in theaters, for free. A friend of mine told me his daughter was at one of the neighbors' houses and they were watching Moana, which hadn't played here yet. So my friend asked the dad how they got that movie, and he said "Oh, I just turned the kids loose on the computer and they found it somewhere." He didn't think anything of it at all.
quote: Steve Guttag
A trip to the theatre with a companion or family is MUCH more than $50, typically once all of the travel, food, tickets, baby sitter...etc are added up. And $50 at home, as one adds in people becomes $25/person to $16.75/person to $12.50/person. You are now in a similar price category for a typical family without the travel hassle and much cheaper, if not better food options.
Well, if you're going to calculate all the ancillary costs for the theatre trip, you need to do the same for the home viewing. That means the cost of the food, the cost of your TV and sound system, and a few bucks for heating, cooling, and wear-and-tear on your house, etc. etc. Those items are all included in what you spend going to the theater. And add in the fact that if other people are coming to watch, THEY have most of the same expenses associated with the theatre -- sitter, gas, travel hassle, and maybe they'll bring their own food too.
In the final analysis though, like Bobby says, it really doesn't compare as an experience. It's apples and oranges. It's an out-of-house event vs. a living room party.
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