Exhibs, studios war over windows

Post-theatrical plans create friction in biz

Many studio execs feel that film schedules need a breath of fresh air, but exhibs are determined to keep the window shut.

A number of exhibitors last month pulled “Cloudy With a Chance of Meatballs” from theaters early to protest Sony’s high-def video-on-demand offering of the movie in December, one month before the DVD release. That was the third recent example of exhibs pushing back when studios shortened the traditional timing of post-bigscreen releases. And as studios continue to experiment with windows, the battle lines are being drawn.

Disney CEO Robert Iger leads the battle cry by repeatedly stating his conviction that audiences want to see films at home soon after their theatrical releases. Throwing another wrench into the touchy negotiations, the Federal Communications Commission is expected to decide soon on yet another studio plan to change the traditional windows.

The trick for the studios will be to find methods that will not harm existing revenue streams — or raise the ire of exhibitors. With DVD sales on the decline and consumer appetite for on-demand content rising, distribs are experimenting with various innovations: VOD, premium-priced VOD, and even the age-old war over early DVD releases.

The “Cloudy” offer requires that consumers buy a Bravia TV to receive the high-def VOD for free; if they already have an eligible model, the 24-hour rental costs $24.95. The move was intended to showcase Sony Bravia TVs with Internet capabilities, but theater owners considered it another breach against theatrical windows.

Under one scenario similar to the “Cloudy” offering, studios would transmit movies directly to TV sets in high-def significantly before the home­vid release, for a premium price. This distribution prospect, backed by Fox co-chair Jim Gianopulos, is considered a way to take advantage of improved TV technology and give movies that never quite took off at the box office a second chance before they arrive on homevideo.

The barrier against such specialized movie-night offerings — similar to pay-per-view boxing events — is the threat of piracy. Under certain TV setups, it would be possible to divert such transmissions for illegal distribution.

To prevent that, the MPAA has been lobbying the FCC for a waiver that would enable it to use selectable output technology to force the transmissions through secure connections to TVs. A few weeks ago, MPAA chairman-CEO Dan Glickman raised eyebrows when he filed a statement with the FCC calling the option of viewing movies earlier in homes a liberating choice for those who cannot easily make it to theaters due to family, health or geographical impediments. He said studios are simply trying to meet growing consumer demand to provide movies directly into homes in a secure fashion.

“This is going to take a number of pathways both over the Internet as well as direct transmissions over cable and satellite systems,” he said. “We believe that the ultimate beneficiary of these offerings will be the American consumer.”

The problem for theater owners and other watchdog groups is that the FCC waiver request, originally made in June 2008, is short on specifics. “What does this mean? It’s hard for us to say,” says John Fithian, prexy of National Assn. of Theater Owners. “The studios and MPAA are not telling anyone when they are planning on doing this.”

The Consumer Electronics Assn. has also protested the waiver.

Glickman says it’s up to each studio to determine the type of offerings and when they are offered. And studios aren’t going to secure deals with cable companies — or intensively research the best pricing options — until they’re confident their movies will be transmitted securely.

Fox execs, for example, have proposed a 60-day window for high-def VOD costing $25-$30 per transaction as one possibility. Over the years, rival studio execs have talked about $50 in-home movie-viewing events.

Fithian declined to specify which windows and pricing schemes might be acceptable to NATO, but indicated the group would not necessarily be opposed to earlier in-home movies, as long as the releases did not impinge upon the box office.

“The vagueness of studios saying, ‘Trust us, just give us the authority’ is a problem,” he says.

Independent Film & TV Alliance prexy-CEO Jean Prewitt also has railed against the MPAA request, calling it vague and unsubstantiated. She charges it would diminish access to films that are produced independently, arguing that realistically only the major studios and their video distributors would initially benefit from the new window of exploitation such a waiver would enable.

What’s more, she points out that existing VOD services on cable do not have the benefit of such a waiver. This includes indie companies like IFC that offer movies on VOD before their theatrical release.

IFC and Magnolia have been offering movies on VOD, homevideo and in theaters near simultaneously for several years. However, unlike the majors, each has its own theater outlets to book movies into — IFC theaters and Landmark Theaters, respectively. And their releases do not generate as much at the box office, mitigating the risk of cannibalization from other platforms.

Sony already has an online VOD service through the PlayStation Network that offers movies in high-def; on Nov. 19, the company unveiled plans to expand its online media delivery service to other Sony devices.

Before the “Cloudy” storm, Sony wanted to release “This Is It” on disc before the holidays, arguing that the Michael Jackson concert pic should not be subject to normal window policies since it had been a limited theatrical release, but it backed off when exhibs protested. Paramount drew flack for releasing “G.I. Joe: The Rise of Cobra” on homevid Nov. 3, slightly less than three months after its theatrical debut.

The “Cloudy” resistance caught the studio by surprise, especially since Sony had made a similar offer for “Hancock” over the previous holiday season without any fuss.

Sony vice chair Jeff Blake admitted that he “probably didn’t discuss it enough” with exhibitors, but says that the studio does not view it as a precedent for opening a new window.

The movie will become available on VOD Dec. 8, less than three months after its Sept. 18 theatrical bow. Although there are no hard and fast rules, exhibs prefer that big hits not arrive on disc for at least three months, well after most theatrical runs have concluded. According to NATO, the average DVD window exceeds four months, as it has since 2003; the org sends out alerts to members whenever it’s concerned about short windows.

Blake says exhib pullouts the week of Nov. 9 had minimal impact since the movie was at the very end of its run. “We were down to a few hundred theaters through attrition,” he says.

Premium VOD movie nights are not, one studio exec says, intended for mass audiences but rather as another option for those willing to pay more to see movies in their home a few months before they arrive on disc.

Studios may decide to offer an array of premium VOD offerings at flexible price points depending on how badly consumers want to see certain movies. In this regard, the movie options could mimic pay-per-view boxing matches, which can range from $20 to $55 in high def. Even if these scenarios don’t come to fruition, it’s unclear how long theater owners will be able to hold studios to established windows at their current length.

Disney CEO Bob Iger went on record in October about the pressure to shorten DVD windows to keep up with consumer demand; he said that the product has to be perceived as fresh in the marketplace in order for the DVD biz to remain vital.

Since that time, he and studio chief Rich Ross have restructured the company to give home entertainment chief Bob Chapek oversight of the entire distribution process from theatrical to pay TV and new media.

Four years ago, Iger stirred controversy by advocating the collapse or near collapse of theatrical windows. At that time, the box office was down and studios were worried about the implications for their business. Now, with technology moving ever faster and media consumption fragmenting into new directions, studios again are taking a hard look at the way they distribute movies.

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