In just a few days, Woody Allen will climb the red-carpeted steps of the Palais du Cinéma for the Cannes world premiere of his latest film, Café Society. Only this time, his festival hopeful is funded by Amazon Studios, one of several from Amazon to debut as the first Cannes titles coming from any SVOD service.
Yet unlike other original SVOD films (see Netflix’s Oscar-nominated Beasts of No Nation), Café Society will not premiere simultaneously in theaters and on digital. It will follow a release pattern that’s ruled for decades in Hollywood: theatrical first, everything else after.
That carefully laid-out set of distribution windows has come under intense attack lately, notably from services such as Napster co-founder Sean Parker’s Screening Room. It promises to deliver first-run movies like the newest blockbuster, Captain America: Civil War, day-and-date to the home for $50 a pop (after consumers shell out for a dedicated set-top). The move subverts the century-old concept of going out to the cinema, but it also enables films to skip the lucrative, well-established path through MVPD bundles, user interfaces and barker channels where most American movie buffs catch a flick.
The disruption to an already fragile movie going economy has drawn howls from predictable corners, mostly exhibitors and certain filmmakers like Christopher Nolan and James Cameron (though others support it as a way for the movie business to thrive in a Netflix age).
But that’s the Hollywood side of the street. Equally unsettled are a host of stakeholders from the worlds of home entertainment, video distribution and major TV programmers. The VOD marketplace for first-run films is a multi billion-dollar asset that rarely gets the kind of ink accorded Game of Thrones. But it’s a part of the landscape that a few years ago seemed safe from the kind of disruptions upending the rest of television.
WHAT MOVIEGOERS WANT
The notion of paying $50 for a movie ticket seems laughable, but for a roomful of people looking to avoid the hassles of going to the theatre, it starts to seem attractive. Recent research and industry observers Next TV spoke with point to the same reality: Traditional windows are collapsing, and premium VOD is looking like a reasonable response to shifting consumer behaviors.
“Nobody was asking what consumers wanted,” Chris Rethore, the VP and GM of Los Angeles-based research firm MarketCast told Next TV. “Nobody asked when cost would become a factor for those who would use [premium VOD].” So Rethore co-authored a study, interviewing 1,200 U.S. consumers (ages 18-64) in March, focused around a simple question: would you pay $50 to watch a film the same day it appeared in theaters?
The results of his study—which prompted a lot of discussion at April’s movie exhibition trade show CinemaCon—were mixed and telling: one in four said they would “definitely pay” for a premium VOD film. One in three said they would “definitely not,” pointing to the potential cost and need for another set-top in the living room. Seven in 10 pegged their average trip to the movies at $40 or less, and Rethore’s study found that, on average, $35 is the most per movie consumers would spend to watch a new release at home.
“Moviegoers are sensitive to costs when it comes to new [releases], and when they start to consider other ways they can watch [entertainment], cost becomes a huge factor,” Rethore said.
The studios aren’t fighting digital. In recent years, they have enabled their content with Ultra Violet, the buy-once, play-anywhere cloud-enabled content service supported by an industry consortium. They have also driven near-universal acceptance of Digital HD — where content is not only cloud-enabled, but often offered weeks ahead of DVD or Blu-ray Disc. And it is paying dividends, according to the latest figures from DEG: The Digital Entertainment Group.
In the first quarter, VOD revenue jumped more than 7% over the year-earlier quarter to $561 million in the U.S., with subscription streaming revenue up nearly 19% to $1.41 billion. Total digital revenue hit $2.5 billion, up 13% year over year, a contrast to the $1.37 billion Americans paid to buy physical content (down 13%), and the $697 million they paid to rent discs (down 19%).
Anyone wondering how important digital is to Hollywood today, ask 20th Century Fox: on May 5, the studio reported early digital sales of 1 million units for its summer blockbuster Deadpool, after just one week of availability. And the guardians of the first-TV-window galaxy are bullish on the value of movies to their business. HBO chief Richard Plepler, during a May 5 talk at New York’s Paley Center, said movies account for 78% of HBO’s linear viewing and 64% of its VOD consumption. “It’s a big thing,” he said. “You look at a movie like Jurassic World and you think, ‘Well, it’s a year old.’ By the end of its run, tens of millions of people are going to watch that.”
As with the Jurassic beasts, though, extinction may be the fate for the gap between the amount of time between when a film first hits theaters and when it’s become available for the home. In the digital age, it has shrunk dramatically. Research from the weekly newsletter The DVD and Blu-ray Release Report, which has tracked disc releases in the U.S. market since DVD’s introduction in 1997, found that, among films that grossed $25 million or more at the box office in 2015, the average number of days between the theatrical opening and disc was 114 days. In 2004, that number was 146. Go back to 1998, and that average was around 200 days.
Considering the trends, Jason Peterson, CEO of Marina Del Rey, Calif.-based Content Bridge—a digital content supply chain company, counting Netflix, Vudu, iTunes and Comcast among its clients—said it’s no surprise day-and-date, premium VOD is on Hollywood’s radar. “Windowing in general has always been about matching price to consumer utility, and if you have a segment that aren’t going to the theater, [premium VOD] would probably benefit the industry at large,” he said.
The Screening Room idea isn’t anything content owners haven’t heard before: A Rockville, Md.-based start-up (Xcinex) has been shopping exactly this idea to studios, long before anyone had heard of Parker’s pitch.
EXPERIMENTS AND FAILURES
Still, MVPDs and content owners have both beat when it comes to experimenting with day-and-date offerings. In 2006, Comcast worked out a deal with IFC Entertainment, offering two indie films from the distributor each month — the same day as their theatrical release — via Comcast , for $5.99 each.
In 2011, DirecTV tested its Home Premiere service, offering films for rent 60 days after they debuted theaters, for $30 each. Later that year, Time Warner Cable offered up the films Trespass and Marginal Call via VOD the same day they hit theaters.
But other than a few day-and-date offerings with indie films, MVPDs haven’t taken too many windowing risks of late.
Content owners? They tread lightly when it comes to upsetting content windows. Indie distributor Magnolia Pictures has been doing day-and-date VOD with films for years, but none of its properties have really hit the mainstream radar.
And since 2011, major studios have tested the waters only when it made sense and usually on smaller genre/niche fare. That was the year Universal Studios tried to offer big-budget action-comedy Tower Heist to Comcast subscribers three weeks after the film’s theatrical debut. Blowback from exhibitors scuttled that plan quickly.
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