New strategies for theatre chains, digital movie downloads

By Sarah Sluis

Technology is a tricky beast, and changes in home entertainment technologies have caused both exhibitors and the home entertainment market to change their tune.

First up, AMC and Regal announced their plan to get into the acquisition and distribution market. Yes, exhibitors are adopting vertical integration, the same strategy that was outlawed by the 1948 U.S. vs. Paramount case. According to this article by the L.A. Times, enforcement of the edict has become lax, and there are several instances of exhibitors also involved in production or distribution. AMC and Regal will acquire small independent films for theatrical release. What could this be a response to? The rise of the simultaneous theatrical/on-demand market. Distributors like IFC Films have offered VOD releases for amped-up prices during a film's theatrical run, or even in advance of its release. However, AMC and Regal also plan to handle video/Internet distribution, so preventing the theatrical window from disappearing isn't their whole rationale. The article also points to declining amount of movies. Even as the number of screens increased slightly, product decreased 15%. I'm more skeptical of this argument. Theatres need more quality product, not just more product--even with more films, there could still be the same percentage of duds and winners.

The market for downloadable/streaming movies is also in flux. A recent survey of people who pirate movies conducted by PricewaterhouseCoopers released dismal news. Many of the piraters would only buy movies if they were cheaper, around $3. THR pointed out another comment from the survey's responders: They download because of window restrictions, wanting to watch the movie at home before it comes out on Netflix or legitimate online downloads. Because of the pressure to see content sooner, I predict the windows of availability for Blu-ray/Netflix/online rentals/downloading will continue to change. It's still being figured out. Warner Bros. is trying something new for its marquee releases Inception and The Dark Knight. A free "app edition" can be downloaded by iPhone/iPad/iPod users, which has a few short extra features and five minutes of the movie. Then, for prices ranging from $7.99-$23.99, depending on the country, users can download the full movie. The app-to-download purchase allows for flexibility between devices and could also be a way to include more bonus content, like an Inception-themed game for a mobile device, for example. But it appears that Warner Bros.' biggest reason for releasing this is to work around Apple's own shortfalls. Apple simply doesn't have iTunes stores (or ones that offer video downloads) in every country, and this could be a way to bring Warner Bros. releases to underserved territories.

With new innovations (and challenges) in the movie downloading market and AMC and Regal stepping into the independent acquisition and distribution game, the entertainment market is showing itself to be surprisingly dynamic. It already seems laughable that people used to have to wait six months to see a movie on video. What other practices will seem dated a few years from now?

Would you pay $30 to watch a movie at home?

By Sarah Sluis

Watching a movie at home used to mean heading over to Blockbuster, paying four bucks to rent a DVD, and heating up some popcorn. Now Blockbuster's gone bankrupt, and renting a movie can be done from the couch via on-demand or an Internet rental. But it's going to cost consumers.

There's been talk about charging $20-50 to rent newer movies for some time now (I wrote about changing theatrical windows back in May), but it appears that Sony, Warner Bros. and Disney have now banded together and plan to use the $30 rental model to push movies during the post-theatrical pre-rental window. Earlier, Lionsgate said it would not be participating in the model because it doesn't do many family movies, so the idea is that a family of four would be able to see a movie for as little as five bucks a pop, compared to double that at the theatre. So will it work?

In favor: People are impatient. They want to see a hit film now. If all of a kid's friends at school have seen a movie, don't parents feel guilty for depriving them of something to talk about around the water fountain at recess? For more adult movies, seeing, say, an Inception at the same time everyone's talking about it has a value of its own, and it also cuts down on babysitter costs for busy families.

To make the service valuable, however, it has to be just close enough to the theatrical release and just far away enough from the video release. Studios have already started this process: Netflix now gets movie for rent a month after they've been released in stores and to other rental outlets such as Blockbuster. There's also the drawback that seeing a movie at home is not as immersive of an experience as seeing it in theatres. Interruptions happen, you're more likely to have a faulty Internet connection or some other technological hassle, and even with a home theatre system, everything is smaller and quieter.

With three big studios on board, growth of on-demand seems inevitable. If I look through my Verizon Fios on-demand section (in the New York City area) there's already a significant amount of content with tiered pricing, depending on how close the movie is to its theatrical release. However, I actually think the model is much more effective for specialty films, not blockbusters.

Before moving to New York City, I would frequently find out about films and then check listings for weeks until the movie finally came out in my town. Most specialty releases open in just a few geographic areas and then expand. For those in tertiary markets, the wait can be frustrating (and it's not infrequent to miss a movie altogether). On-demand, which IFC has pursued for many of its releases, can be a very effective way to hit the indie audiences across the country.

The most daring strategy yet may be that of Freakonomics. The movie will release in 16 theatres starting October 1st, but the movie was made available on iTunes on September 3rd for $9.99 ($10.99 for an HD version). In the comments section, some people seemed confused about why the movie was so expensive, but others were willing to pay to see a movie in advance (it helps that millions of people have read the books).

Forget focus groups--demand already exists for at-home movies shortly after theatrical. It's called piracy. Within days or weeks of a movie's release, unknown amounts of people download torrents of films. Wouldn't at least some of them be willing to pay a little for an HD, high-quality version of a movie they're too lazy to see in theatres? Time will tell.