Exhibition chains won a major battle here in 2011 when they forced Universal to back off its plan to offer the Ben Stiller-Eddie Murphy caper comedy Tower Heist on VOD just three weeks after it opened in theaters. But studios remain infatuated with premium VOD — competing with exhibition companies by renting new movies even before they’ve completed their theatrical runs: Theaters in South Korea had Django Unchained for just three weeks before Sony began to rent it online and on cable in April, the Wall Street Journal reports today. And Disney made Wreck-It Ralph available five weeks after its December theatrical debut, following Brave which was up for rental four weeks after it opened in September. Hollywood execs say that theaters typically collect the lion’s share of revenues from a film in just a few weeks, and premium VOD gives studios the opportunity to take advantage of the marketing effort they make to open the movie — while also helping to to make up for some of the revenues they’ve lost as DVD sales decline. “I know that if we don’t experiment we’ll have a business problem that will affect all of us,” Universal Pictures‘ Adam Fogelson told exhibition execs at ther CinemaCon confab in April. “We have to find a way to claw back some of that revenue.” Carmike Cinemas’ David Passman countered that exhibitors just get “one bite at the apple” and “if just …
The controversial proposal is still alive — but will have to be part of a much bigger effort to restructure the studio-theater relationship — reps from both camps said at a CinemaCon panel this morning. “I don’t know what the answer is,” Universal Pictures Adam Fogelson says. But with studios losing billions from declining DVD sales “I know that if we don’t experiment we’ll have a business problem that will affect all of us….We have to find a way to claw back some of that revenue.” Exhibition companies vigorously oppose studio efforts to present movies to home viewers while they’re still playing at theaters. But Fogelson says their fear that a high-priced VOD offering will cannibalize ticket buyers is misguided. For example, when his corporate cousins at NBC showed Olympic programming on multiple platforms it helped the main money-maker: the prime time network broadcasts. He also noted that Disney’s re-release of The Lion King in 3D was successful in theaters even though the home video discs were out a week later. “There are people who love movies and love going to the movie theaters, but people with children or a certain professional life (who can’t go) want to be part of the dialog of movies when the movie is most relevant…We can probably find a price point and delivery method to bring these people in without disincentivizing them from going to the …
UPDATE, 6:40 AM: CEO Alan Stock made his comment in a conference call with analysts who asked what he’d do if Sony continues with its plan to stop paying for 3D glasses — leaving it to exhibitors to manage the expense. ”We think the way the glasses model works in the U.S. is a great way to work it,” he said. He added that there’s still a lot of time to negotiate before next summer, when Sony wants the change to take place. “I’m pretty confident we can work out a solution,” Stock says. “If we can’t, we’ll have to head in a different direction.” Regarding Universal’s plan, which it canceled, to show Tower Heist on cable VOD just three weeks after opening in theaters, Stock says the studio “thought they had something the exhibitors would comply with.” After Cinemark threatened to boycott the film, “there hasn’t been any further discussion of that particular test, or anything else they’re working on.”
Theater owners seem resigned to the fact that Universal will run a premium video-on-demand test of its upcoming film Tower Heist – but are determined to push back the date, now scheduled for just three weeks after November, 4 when it opens in theaters. Negotiations continue as exhibition companies link arms: Three small regional theater chains have joined Cinemark in refusing to book Brett Ratner’s caper movie starring Eddie Murphy and Ben Stiller if Universal proceeds with plans to offer it for $59.99 three weeks after the debut to roughly half a million cable homes in Atlanta and Portland, Ore. California-based Regency Theatres, Galaxy Theatres and Detroit-based Emagine Theatres as well as some small exhibitors representing some 50 screens around the country have also refused to book the movie, the LA Times reported. Exhibition companies feel that they already swallowed a bitter pill earlier this year when four studios announced a deal with satellite broadcaster DirecTV to make some movies available via VOD for $29.99 — but 60 days after their theatrical debut. Theater owners wanted to draw the line at 90 days. Anything less, they feared, would encourage many ticket buyers to wait and watch hit films in the comfort of their living rooms.
Movie theaters face a lot of problems but competition from premium VOD probably won’t be one of them, Moody’s Investors Service says in an industry report today. The debt rating company says that studios probably will continue to wait more than four months before offering new films to cable and satellite VOD “because it is in their economic interest to do so.” For example, they depend on theaters to show trailers for the studio’s upcoming films. Also, any decline in box office sales could affect the whole value chain including home video sales and pay TV deals. Theater owners will find little else to cheer in the report. It says that the movie business is “mature and business risks are increasing” as consumers spend more time playing video games and surfing the Web. And 3D “isn’t a cure, although some 3D features will continue to draw crowds at premium prices.” The bottom line: “movie theater owners might need to rethink their longstanding complacency with high debt levels and shareholder-friendly policies to maintain their debt ratings.”
The money is flowing again into Big Media. Just about every media CEO who recently spoke to Wall Street analysts about this year’s 1st Quarter earnings said that ad sales are up and consumers are spending. “Viacom has never been stronger financially,” CEO Philippe Dauman crowed. At Disney, where net profits fell slightly, CEO Bob Iger expressed he was “confident in the trends we’re seeing across our segments”. So will these companies do more hiring and give out raises? Don’t be naive. Dauman, for one, told investors that he’s “watching for head count creep” while the company returns $1.9 billion to shareholders over the first 9 months of its fiscal year. Most Big Media companies are buying back their stock, making publicly held shares more valuable. CBS doubled its quarterly dividend to shareholders and Viacom plans to follow suit.
Here are some of the other major themes from this earnings season:
TV Advertising: Network executives were predictably upbeat about what will happen in their upfront ad sales negotiations in coming weeks. Disney CEO Bob Iger predicted the market will be “strong”. NBCUniversal chief Steve Burke upped that to “very strong”. And News Corp COO Chase Carey claimed it’ll be “truly strong”. Their pronouncements made CBS chief Les Moonves sound refreshingly bold when he projected “solid double-digit increases” in ad sales for his broadcast network. Executives cited the price increases they’ve seen in scatter sales as the economy has improved and auto, technology, telecom, …
Time Warner Jeff Bewkes comes across as the media world’s most laid-back CEO. But he asked a lot this morning when he told movie theater owners to cool their jets about Premium VOD. “There’s been too much excitement about this,” Bewkes said at a panel discussion sponsored by investment firm Jefferies & Co. “Our interests are aligned.” That will come as a surprise to the National Association of Theater Owners and its members who loathe PVOD as much as the Tea Party hates taxes. Exhibitors say many would-be ticket buyers will wait to watch films at home as studios including Warner Bros begin to offer 8-week-old releases on cable and satellite VOD services for about $30 a showing. Bewkes says theater owners are wrong: “I’m saying (box office revenue) doesn’t go down.” Everyone will suffer, he says, if the studios can’t provide an alternative to pirates who sell bootlegged copies of recent movies to people who don’t want to wait for the official home video release. Other panel members — none of them exhibitors — supported Bewkes. CBS chief Les Moonves said that although theater owners are scared, “you have to change a bit.” And Sony Corporation of America CFO Robert Wiesenthal said that “everybody is experimenting and being aggressive,” even though studios should recognize that theaters are “the foundation of the economic value chain for a feature film.”
UPDATE, 3:15 PM: Add NewsCorp COO Chase Carey to the list of executives of studio owners who characterize Premium VOD as merely a test that shouldn’t hurt theater owners. In a quarterly earnings conference call with analysts and reporters, Carey said that Fox and other studios are beginning to offer 8-week-old movies to cable and satellite VOD because they had little choice: Services such as Netflix and Redbox are renting DVDs for as little as $1 a night ”and that doesn’t work,” Carey says. “We have to build appropriate values and windows into our business.” Fox is “in the very early stages (of the P-VOD trials) with one small film.” He doesn’t want it to affect exhibition chains because they “set the pace for the film industry.” Still, he hedged when asked whether Fox would let exhibition companies see how well P-VOD movies perform — something that the National Association of Theater Owners says it wants. Carey says he “doesn’t know what request has been made,” although he adds that it’s “important for everyone to understand what’s going on.”
The National Association of Theatre Owners today asked the Hollywood studios involved in DirecTV’s Premium VOD trial to release sales figures for the movies that have appeared since the service’s launch April 21. The films offered to DirecTV customers so far — at a price of $29.99 and a windows-shortening eight weeks after their theatrical release — are Sony’s Just Go With It, Fox’s Cedar Rapids and Warner Bros’ Hall Pass (Universal’s The Adjustment Bureau is set for release this week). “What’s an experiment without data?” NATO president and CEO John Fithian asked. “Every weekend — usually before the weekend is over — the performance of movies at the U.S. box office is reported around the world. Studio executives are working the phones, touting the stellar box office for hit movies and explaining the underperformance of the flops. When it comes to premium VOD — crickets.”
Crickets have been the standard sound from the studios and their corporate parents when asked to comment on Premium VOD — although News Corp’s Chase Carey sort of addressed it today. And don’t expect much more from DirecTV, which likely will stay silent on the matter when the satellite provider presents its first-quarter earnings Thursday.
The propaganda battle over the decision by four studios to supply their films for VOD viewing 60 days after release is intensifying. Today, NATO released an open letter by a group of filmmakers speaking out against the shortening of theatrical windows: Michael Bay, Kathryn Bigelow, James Cameron, Guillermo del Toro, Roland Emmerich, Antoine Fuqua, Todd Garner, Lawrence Gordon, Stephen Gyllenhaal, Gale Anne Hurd, Peter Jackson, Karyn Kusama, Jon Landau, Shawn Levy, Michael Mann, Bill Mechanic, Jamie Patricof, Todd Phillips, Brett Ratner, Robert Rodriguez
Adam Shankman, Gore Verbinski, Robert Zemeckis
AN OPEN LETTER FROM THE CREATIVE COMMUNITY ON PROTECTING THE MOVIE-GOING EXPERIENCE
We are the artists and business professionals who help make the movie business great. We produce and direct movies. We work on the business deals that help get movies made. At the end of the day, we are also simply big movie fans.
Lately, there’s been a lot of talk by leaders at some major studios and cable companies about early-to-the-home “premium video-on-demand.” In this proposed distribution model, new movies can be shown in homes while these same films are still in their theatrical run.
In this scenario, those who own televisions with an HDMI input would be able to order a film through their cable system or an Internet provider as a digital rental. Terms and timing have yet to be made concrete, but there has been talk of windows of 60 days after theatrical release at a price of $30.
Currently, the average theatrical release window is over four months (132 days). The theatrical release window model has worked for years for everyone in the movie business. Current theatrical windows protect the exclusivity of new films showing in state-of-the-art theaters bolstered by the latest in digital projection, digital sound, and stadium seating.
As a crucial part of a business that last year grossed close to $32 billion in worldwide theatrical ticket sales, we in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry.
DirecTV said today that it is launching its much-discussed premium video-on-demand service on Thursday, with Sony’s Just Go With It the first movie available to subscribers. Universal, Fox and Warner Bros also are in on the partnership, and cross-channel promotions begin today, followed by national ads. Under terms of the service, a movie will become available to download every two weeks for $29.99, which gets the user multiple views over a 48-hour period before the film disappears from the hard drive. All films will be in 1080p HD and Dobly 5.1 Surround Sound.
Other films in the early rollout include Universal’s The Adjustment Bureau, Fox’s Cedar Rapids and Warner Bros’ Hall Pass.
At a second glance, the VOD service seems a bit less than meets the eye. It is available only to DirecTV subscribers who have HD DVRs — that’s only about 6 million of the satellite company’s 19.2 million subs — and only one movie is available every two weeks. Not that any of that is much consolation to steamed theater owners, who have slammed the service for shrinking the theatrical window and are forming plans to retaliate against the studios by limiting their films’ trailers and signage.
Nikki Finke (who’s just fnishing up her medical leave with a last visit to the doctor) will be posting a complete update on the battle over DirecTV’s recently announced premium plan in partnership with Sony, Warner Bros, Fox and Universal to offer on-demand movies only 60 days after they premiere in theaters. On Wednesday, she revealed that Regal Cinemas warned studio marketers that it will drastically reduce the amount of play time for each of the quartet’s movie trailers in every Regal movie house (just in time for the summer tentpole season, too). The Cinemark chain is following suit with boycotting trailers and signage from the participating studios. Now comes this statement from AMC Entertainment:
We at AMC feel movie theatres are a critically important business to many parties: the 200+ million guests we host year after year who choose to view films on the large screen; the communities of which our theatres are an integral part; the artists who create the movies we show; and ultimately the entertainment industry for which our theatres generate the highest quality source of revenue.
We believe the theatrical experience has a bright future, and we are aggressively investing to prepare for it. We are in the midst of a multi-year, multi-million dollar rollout of digital projection and 3D, IMAX and our own proprietary ETX format. We are also introducing a new guest rewards program, better-for-you items, enhanced food and beverage offerings, dine-in theatre options and alternative, engaging programming for our guests to enjoy in our comfortable,