Four majors back VOD service

Studios were hit with a barrage of threats from exhibitors last week after theater owners learned about the upcoming launch of a premium video-on-demand service backed by at least four of the majors.

The largest theater owners — Regal Entertainment, Cinemark Holdings and AMC Entertainment — have so far led the charge in demanding to know which films will appear on Home Premiere, set to bow on DirecTV and cablers around the end of this month, so that their posters and standees won’t bedisplayed, their trailers won’t run on screens and distribution terms can be renegotiated.

“It is simply not in Regal’s best interest to utilize our resources to provide a marketing platform for the release of premium video-on-demand movies,” said Regal chief Amy Miles in a statement last week.

A decade ago, exhibitors had some negotiating power, but their dominant position over how films are promoted and seen has weakened over time.

Ten years ago, trailers were still a significant part of the moviegoing experience, but the Internet has changed that, with studios increasingly turning to the Web to premiere the first look at film ads or host presentations at confabs like Comic-Con and more recently WonderCon that get buzzed about online.

Megaplexes were also attracting larger audiences back then, but the recession took a toll in ticket sales, while more attractive home entertainment systems have also had an impact, as have cheaper rental offerings from Redbox and Netflix.

B.O. down 20% so far

Although chains have invested heavily in 3D to fill more seats, the box office so far is down 20% this year in the U.S. and Canada. Last year, it was flat at $10.6 billion with 2009′s record-setting tally, which was ahead of 2008 by 10%.

With the exception of 2008, attendance has also seen a year-over-year decline, with admissions in the U.S and Canada off by 5% in 2010 to 1.3 billion.

As a result, exhibs are booking more alternative forms of entertainment like sporting events and concerts to fill empty screens during the week.

Theater operators essentially find themselves in the same position as most studios that are forced to take a closer look at their businesses and come up with ways to revitalize their bottom lines.

So it’s no surprise that they are furiously fending off any threat to future ticket sales.

Last week, the National Assn. of Theater Owners ramped up a letter-writing campaign to enlist the support of filmmakers who want their pics to play longer in theaters rather than have them move onto smaller screens at an earlier date. So far, James Cameron and Todd Phillips are among helmers who have backed the effort.

NATO made a similar move in 2005 when Mark Cuban sought to shatter release windows and suggested that films unspool across all platforms at the same time so that consumers could decide how to view them. “Release windows have been defined by Hollywood, not by the consumer,” he said at the time. A list of NATO’s supporters are still listed on its website.

“NATO has repeatedly, publicly and privately, raised concerns and questions about the wisdom of shortening the theatrical release to address the studios’ difficulties in the home market,” the org said in a statement when details of Home Premiere emerged.

But studios aren’t making the same request that Cuban sought.

They’re still too reliant on the cash that movies earn from the worldwide B.O. that last year hit nearly $32 billion and helped exhibs get behind the installation of digital projection and 3D to keep theaters full in recent years.

And even if studios wanted to provide exhibs with a list of pics that will appear on Home Premiere, they couldn’t until after a film is released in theaters. Studios say they will experiment with which films to offer and consider the B.O., among other factors, when choosing which titles to make available. But again, the films would have to unspool first in theaters.

In the meantime, angry theater chains aren’t likely to hold off on releasing films, especially high-profile tentpoles, in retaliation and risk losing millions in revenue as a result, once again, further hurting their negotiating power in meetings with studios.

Studios have been trying to calm down exhibs by saying both sides need each other more than ever to remain healthy — movies need theaters to play their product and theaters need the films to play.

The majors argue films have collected most of the coin they will earn from playing on the bigscreen well within the first 60 days of release, meaning that offering titles after that through Home Premiere shouldn’t cause much concern. But exhibs, which make a greater percentage of coin off a film the longer it plays, are concerned that the occasional super-long-player might be impacted by a reduced window.

At the same time, the $30 price for a two-to-three-day rental is still considered by many, including theater owners that are critical of Home Premiere, steep enough to put off most consumers, particularly when they can wait another month until the DVD or Blu-ray is released.

And that was always the point.

Another option

The fee is meant to appeal to filmgoers that aren’t already going to see movies in a theater for various reasons, including the cost to hire babysitters or pay for the tickets and concessions for large families, for example.

“This was never meant to replace anything,” said one studio executive with knowledge of Home Premiere. “We want premium VOD to be another option out there for people without hurting a very important business to us.”

AMC seems to realize the necessary moves of the studios.

“The future is bright, even as it promises to be different, and we look forward to the success that lies ahead for all parties,” it said in a statement late last week. But “the premium VOD world as currently defined threatens” the health of exhibitors, it added.

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