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This topic comprises 3 pages: 1 2 3
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Author
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Topic: Suggestion made to studios: Higher film rentals?!
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Mike Blakesley
Film God
Posts: 12767
From: Forsyth, Montana
Registered: Jun 99
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posted 03-01-2011 03:08 PM
I got this from NATO. I have no idea what "BTIG" is or who "Richard Greenfield" is but I sure hope the crap he suggests at the end doesn't come to pass....but it certainly could, because exhibition has no way to fight back.
BTIG
Dear Hollywood Execs: The Time Has Come To Force Film Rentals North of 60% - Ignore Exhibitor Threats
Posted on Mon, Feb 28th, 2011 at 7:40 am
by Richard Greenfield
When you watch the annual Oscar celebration, it’s easy to forget that the movie industry is struggling. 2010 was expected to be a great year helped by Avatar filling up theaters early in the year and a strong summer/holiday slate - yet attendance ended the year down 5%. Now, nearly two months through 2011, movie theater attendance is not just down sharply year-over-year (20%-plus), it is actually the worst start for ticket sales in the past decade - 12% below the prior low during the first-two months of the year (which occurred in 2007). While we expect a recovery in tickets sales to begin in May as a strong summer movie release slate kicks in, the industry will have a large hole to dig out of during the second half of the year.
Even if 2011 movie theater admissions recover, enabling domestic box office revenues to grow year-over-year, we increasingly believe movie theater admissions will continue a secular decline (combination of rapidly escalating ticket prices, significant step-up in piracy as televisions become web-enabled directly or via third-party devices, an explosion of ways to access movies in high quality from TVs to tablets and the onset of early-release/premium-priced VOD/iVOD 6-8 weeks after a movie is released in a theater). 3D pricing has helped mask the underlying downward trend in attendance looking back over the past few years (annual tickets sales between 2001-2005 averaged over 1.5 mm, whereas they are sub 1.4 mm over the past five years). Given the sheer number of high profile 3D films in 2011 (with a total of 35 3D features planned), we doubt 3D pricing will be a material benefit to year-over-year comparisons after 2011.
Studios are already suffering from shifting consumer home entertainment behavior, with consumers returning to rental vs. buying content (click here for 1/11 blog post), a trend which results in substantially lowers profits for the studios. If you then layer in a secular decline in movie theater admissions with a lessening tailwind from 3D pricing, studios simply need to find ways to make more money:
* VOD Windows Collapsed. What was once a 60-day VOD window and most recently a 30-day window has essentially collapsed to zero (see our 8/19/10 blog post, click here). Even Disney, which had been a holdout, plans to release every single movie in 2011 on VOD day-and-date with its DVD release. While Wal-Mart and retailers were not thrilled at enabling such a convenient form of rental the day a movie comes out on DVD, too many lower margin forms of rental have emerged. If consumers really only want to rent again (vs. buy), studios need to maximize rental profits, which is exactly what day-and-date VOD enables.
* Early Release/Premium-Priced VOD Coming. The four month window between when a movie is released in the theater and when it hits DVD (and now VOD/iVOD) is simply too long, particularly in the face of escalating piracy and the explosion of cheap/convenient rental options when a DVD comes out. In turn, the studios are now focused on creating a premium-priced VOD window 6-8 weeks after theatrical release (most likely 8 weeks post-theatrical at around $25). While exhibitors were 100% focused on preventing this development a year ago (click here for our 2/11 blog), the studios are pushing forward with plans to launch the new window by mid-year 2011.
* Push Back Netflix/Redbox. Fox, Universal and Warner Bros. have all windowed (28 days) Netflix and Redbox, with the impact on Redbox increasingly apparent. The goal being to “protect” the sell-thru business and advantage higher-margin forms of rental. Now Disney is raising prices on both Netflix and Redbox unless the accept an even longer 45-window with Warner Bros. talking about the need to extend the window beyond 28 days as well.
* Rental Split Needs to Move Higher - The Time Has Come. When the topic of film rentals comes up everyone simply says well its around 50% because it has always been around 50% (our 1995 RGC model showed a 49.9% film rental expense). We simply do not buy this argument anymore. The film business is fundamentally changing with an explosion of competition for a consumer’s media attention/spending combined with the pressure on profits mentioned above. At the same time exhibitors are talking up increased capital return thru dividends and the benefits of 3D, which they have invested very little capital in (relative to the studios via DCIP as well as RLD and other 3D technology companies), they do not even pay for the disposable eyewear used by their patrons to view 3D. We believe studios should force film rentals north of 60%. Exhibitors will hate the idea, they will complain, threaten to stop showing trailers for movies, etc..but at the end of the day theaters will acquiesce - they have no choice. Theaters will still exist, they will simply be less profitable (and probably have to pay smaller dividends).
The best time to start shifting splits is as the release schedule is congested and exciting to consumers - meaning lots of big films that exhibitors have to show. In turn, we believe the studios should work on pushing rentals higher as we head into summer 2011.
Retailers hated the idea of day-and-date VOD, theaters and retailers do not like the idea of early release VOD, and Redbox went to court to fight the studios from windowing them, but at the end of the day, studios need to maximize profitability for themselves and not worry so much about their so-called “partners.” While they need a healthy exhibition industry, why not “suck” cash away from exhibitors - force them to delever (vs. paying “fat” dividends) and give up on 25% EBITDA margins. With a $10 bn-plus domestic box office, a 10% move in rentals would generate $1 bn of incremental revenues for studios collectively.
The studios create the content - exhibitors have nothing if they do not have studio content. In turn, studios one-by-one need to start pushing splits higher. With the film business changing industry norms can no longer be relied upon - everyone needs to start thinking differently.
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Bobby Henderson
"Ask me about Trajan."
Posts: 10973
From: Lawton, OK, USA
Registered: Apr 2001
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posted 03-01-2011 04:31 PM
Richard Greenfield must be looking at this situation purely from the bean-counter share-holder point of view.
In case Greenfield hasn't been keeping up on current events, movie theater profit margins are pretty damned slim already. Did he forget about all those major chains that went in and out of bankruptcy a few years ago? It wasn't all just spending too much money on new stadium seated theaters that caused that mess.
Raising rental rates to 60% will force theater operators to dramatically increase prices on concessions, prices that are already ridiculous. Higher prices will force more customers to do without the popcorn, candy and soft drinks and merely pay to see the movie.
Major movie theater chains haven't done as good a job as they should be doing with maintaining auditoriums, particularly the sound systems. That sort of thing is deferred so the theater can take care of more pressing concerns, like repairing a broken air conditioning system. Cutting into theater profits further is going to do more harm to the quality of the movie going experience.
If Greenfield says actual attendance numbers are declining he really needs to look at WHY those numbers are falling instead of raising film rental prices on theaters and manipulating home video release windows.
I can cite numerous reasons why numbers aren't good right now.
1. The economy is still in the toilet. A lot of people just can't afford to go to the theater as much. Damned gasoline prices have been shooting up and up for weeks.
2. Hollywood's average quality of movie product has grown more shitty (more sequels, more remakes, more movies based on TV series, more super hero movies -basically anything "safe" that will please stock holder types). The whole piracy angle is stupid. If Hollywood was making a better product they would be making more money.
3. The movie going experience isn't as fun anymore. Disruptive audience members are the main blame there. Various other factors can improve the experience. But theater operators will not be able to do this without being able to spend more money on improvements and being able to hire more staff members and security people to keep disruptive audience members in line.
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Joe Elliott
Master Film Handler
Posts: 497
From: Port Orange, Fl USA
Registered: Oct 2006
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posted 03-01-2011 08:50 PM
Here is another article on this guys report:
The bean counter speaks
quote:
Analyst: Theaters Should Pay More for Movies
28 Feb, 2011 By: Erik Gruenwedel
Facing a 20% decline in theatrical attendance, 12% drop box office revenue (through February) and declining packaged media sales, studios are being urged to raise the per-title rental fee charged to theatrical operators.
Analyst Richard Greenfield with BTIG Research in New York says Hollywood should up the fee to 60% of ticket sales from 50%, which he said would generate an additional $1 billion in revenue industry-wide when factoring in the $10 billion box office in 2010.
Specifically, Greenfield argues studios should take a page from their own home entertainment playbook. He said rolling out day-and-date availability of transactional video-on-demand with packaged media, creation of premium VOD six to eight weeks after a title’s theatrical launch, and 28-day windows for Netflix and rental kiosks (i.e. Redbox) all were met with initial resistance but are now either becoming the norm or already well-established.
“Even Disney, which had been a holdout, plans to release every single movie in 2011 on VOD day-and-date with its DVD release,” Greenfield wrote in a post. “While Wal-mart and [other] retailers were not thrilled at enabling such a convenient form of rental the day a movie comes out on DVD, too many lower margin forms of rental have emerged.”
Indeed, Disney appears to be a game-changer in distribution policy after it made waves last year placing then No. 1 box office release Alice in Wonderland weeks early into the retail pipeline. Recently, Disney raised its disc wholesale price to rental channels, offering discounted rates only six weeks (not 28 days) after street date.
Time Warner CEO Jeff Bewkes has publicly hinted at raising the four-week release window for its new releases earmarked for kiosks and Netflix (disc only).
Greenfield said studios should start raising exhibition rental fees entering the summer as release slates expand. He said expected theatrical pushback, including the threat to not show trailers will be a non-issue. With theaters more dependent upon new content than studios are reliant on current theatrical windows, the former has little leverage.
“With the film business changing, industry norms can no longer be relied upon — everyone needs to start thinking differently,” Greenfield wrote. “Studios need to maximize profitability for themselves and not worry so much about their so-called ‘partners.’”
Which if you look here, they just actually started this Research division on March 1st of last year.
BTIG launches Equity Research
quote:
BTIG Launches Equity Research Group
The research group will focus on the media, cable, satellite, and telecom industries and assist institutional clients in making strategic investment decisions.
Tags: BTIG, equity, research,
By Melanie Rodier March 01, 2010
BTIG, a broker-dealer specializing in institutional trading and related brokerage services, announced the next stage of its strategic growth plan with the launch of its fundamental equity research group. To lead its new research effort, BTIG has hired industry veterans Richard Greenfield and Walter Piecyk.
The expansion into research will further broaden BTIG's product offering and complements the firm's existing lines of business, according to a release.
Related Resources
* World Wealth Report 2010
* Structured Products in Wealth Management
* Riding the Next Wave: Keys to High Performance in an Expanding Global Wealth Management Market
The research group will focus on the media, cable, satellite, and telecom industries. BTIG's research will provide an independent, objective and thought provoking point of view to assist institutional clients in making strategic investment decisions, it said.
Greenfield and Piecyk previously worked at Pali Capital, where they launched and built a successful research department. Together they bring more than 30 years of experience to BTIG.
"Clients want insightful data points and differentiated analysis to support their investment process," Oliver Wiener, head of global resources at BTIG, stated.
"Rich and Walt both have strong reputations as top analysts in their respective sectors. They are exceptional additions to the firm and will be instrumental in the continued development and growth of BTIG."
Greenfield was previously a managing director, media analyst, covering media and cable/satellite industries at Pali Capital. Prior to Pali, he spent four years at Fulcrum Global Partners as a media analyst.
Greenfield started his career at Goldman Sachs & Co., where he spent eight years covering entertainment, cable system and leisure industries. Greenfield was named a top stock picker in both the 2007 Wall Street Journal Best on the Street and 2007 Financial Times/Starmine surveys, and was cited as top boutique analyst in 2007 by Institutional Investor magazine. He has a Bachelor of Arts in History from Brandeis University. Piecyk was previously a managing director, telecoms analyst, covering telecom service provider and communication equipment industries at Pali Capital. Prior to Pali, he spent four years at Fulcrum Global Partners as a wireless services and equipment analyst. Piecyk has also held positions at PaineWebber Inc., where he covered the wireless services and communications equipment industries, and Nextel Communications in corporate development and corporate finance.
Piecyk was named a top stock picker in the Wall Street Journal Best on the Street survey in 2007. He earned a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania.
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