How is Digital Technology a Game Changer?

A report from the panel at Variety’s Future of Film Summit

By Lauren Zima

Moderator: Kevin Yoder, Managing Director of Marketcast

John Griffin: Director of Connected Electronics, Dolby Laboratories
John Calkins: EVP, Global Distribution and Commercial Innovation, Sony Pictures Home Entertainment
David Fenkel: Co-Founder, Oscilloscope John Fithian: President and CEO, Nat’l Assocation of Theatre Owners
Tom Quinn: SVP of Magnolia Pictures, Magnet Releasing Michele Martell: COO, Cinedigm Entertainment Group

Fithian says movie theater owners are excited about digital technology. He says they are supportive of VOD so that studios can make more money; their only question is the timing of when that VOD happens. They’re concerned about the release cycle, especially with piracy.

Martin says audiences will take advantage of the theater space: other people, great sound — innovative ideas such as “event” showings (special showings of films that otherwise wouldn’t be in theaters.)

Griffin: “My wife was watching a movie on a hammock on a beach on her iPhone, and I thought, ‘Wow, who would’ve thought five or ten years ago that it would be so easy to get this content.’”

Fenkel: “Our biggest challenge is finding partners that are going to preserve the value of the films. We’re assessing all the different windows, and we do a different strategy basically for every film: We don’t have one strategy that works for everything. Sometimes we hold VOD back. Sometimes iTunes is very excited for a film, and that turns into a revenue-generating opportunity. I think you’re going to see more and more of that. For us, as long as there is a transaction, especially on the windows, we preserve that. We want users to get used to paying for movies.”

Quinn: “It’s not one size fits all. The thing to recognize is that we do films that every now and then compete with the big studios. We are specialized; there’s no way I can replicate a 3,000 print release. That’s the beauty of VOD. For me, in many ways it’s the first tier of theatrical. The argument is are we giving up a theatrical dollar in pursuit of a VOD dollar, or are we gaining access to an audience that would never have seen this film? The ultra VOD model is really changing our bottom line approach to evaluating films, and that’s in the specialized side of things. We’ve been in that space hardcore for about two-and-a-half years, and seeing those numbers month in and month out, I’m still surprised. The number is ever-changing. TimeWarner, Comcast — who is the more adaptable consumer venue? These things affect our bottom line.”

Fithian: “The numbers they’ve been describing are not the models for bigger releases. Think about the possibility of a big event movie, not an independent film, being released on VOD at the same time or shortly after it’s been in theaters. Consumers have the option to see it at home, and what happens is they’ll invite 10 of their friends over to watch it with them. The economics of VOD in the theatrical space for major commercial product is very different than it is for smaller independent product. Every home release has started a price point that’s impossible to maintain. The danger of going way too early on VOD is you siphon off sets of eyeballs, and you can’t maintain your price point.”

Yoder asks about the “social currency” of film watching — cites “The Town” as a big event movie that people are discussing.

Martell: “There’s whole groups of people for whom leaving the house is a critical experience — teenagers, going on a date. The studios own that space, but what we see with digital cinema is that you can create your own space.”

Yoder: What about overcluttering the consumer?

Martell: “The system has been cluttered. There’s 600 theatrically released movies a year.”

Yoder: Assume that there’s going to be even more usage of VOD in the future that comes on the heels of a theatrical release, what are the implications going to be for content providers and creators?

Griffin: “We’re really focused on quality and making sure consumers don’t have to sacrifice quality for convenience — one of the great things about technology today is that you can deliver things like HD video. They get a quality experience, a good version of what the director intended.”

Calkins: “It’s a great opportunity for non-studio producers. Consumers will no longer be spoon-fed whatever the blockbuster de jour is, but they’ll have plenty of options.”

Fithian: “Digital cinema certainly opens up a bunch of possibilities for independent film — it makes it a whole lot cheaper. Independent films will thrive in the digital age. But the danger of condensed windows is that product becomes homogenized. The consumer knows what it means to have a theatrical release; different budgets, different scopes, if you condense the windows, you essentially make it all the time. We’re for VOD, we’re for making it easier for independent filmmakers, we just have to be very carefully with the windows that are involved in distribution. I would urge all of our partners to do what Sony does, which is to talk with their exhibition partners as their developing these models.”

Martell: “Independent producers have to think like a studio — how am I going to sell this, how am I going to make money, because if I make money I get to do this again. Producers can own their opportunities – they don’t have to go sell their souls to studios.”

Fenkel: “We all have to get used to the idea that the only thing constant is change. That’s why we’re having these conversations — the windows are changing, the money is coming from different places and we have to recognize that and, as content providers, stay on top of it. They have to take their future in their own hands in a lot of ways. It’s not one size fits all at all — in any way. Everyone’s got to share information and be on top of it all, and in ten years these conversations will be much different.”

Calkins: “The rule of thumb for me is to follow the consumer.”

Martell: “If you look at the changing demographics, there’s a huge boomer audience. There’s an opportunity to get people to the theater — you can be very targeted. Look at the success of opera in theaters. It’s all being intelligent about who your audience is and how you build your model so that you can deliver what that audience is looking for.”

Fithian: “If you completely follow the consumer, what the consumer wants is everything all the time and free, and that doesn’t work for those of us in this business. We have to continue to give consumers options without giving them everything for free all at once.”

John Griffin: “Consumers do care about the quality: They want the full ‘Avatar’ experience.”

An audience member asks about Netflix.

Fenkel: “I wouldn’t give Showtime or network television a window that’s near my DVD window, so why would I do that with Netflix? The danger is they get people used to getting whatever they want for $10 a month. We’re very careful about windows.”

Calkin: “Netflix grew faster than anybody expected. They’re also moving their DVD window back; even they would now like to push that window back to save their product cost.”

Quinn: “As long as Netflix is monetized appropriately, we’re still exploiting our films theatrically. So, in that goal that’s great.”

Fithian: “There’s a big range of windows. For smaller budget films, there’s the ninety day range, for bigger budget, all the way up to the 120-day range. If we can get a bigger title out in March and the studio has to get the DVD out earlier to make the holiday period, we get something and they get something. There’s certainly different needs based on the product. There is flexibility based on the type of movie being released.”

Martell: “If you’re talking about alternative content, you’re not cannibalizing your theater audience. You’re bringing in something that wouldn’t have been there otherwise.”

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