As Theaters Boycott Netflix, Collapsed Windows Seen as Inevitable

Theaters Boycott Netflix, Collapsed Windows Seen

Major theater chains are united in their opposition to a plan by IMAX, Netflix and the Weinstein Co. to make “Crouching Tiger, Hidden Dragon: The Green Legend” available for streaming on the same day it hits theaters in 2015 but the question remains — how much longer can theater owners withstand the battering ram of technology?

The “Crouching Tiger” standoff heated up Tuesday after the four largest exhibitors in the U.S., AMC, Regal, Cinemark and Carmike, pledged not to show the martial arts sequel next year. That represents 257 of IMAX’s 418 U.S. screens, and these theater chains were joined by Canada’s largest exhibitor Cineplex, and Europe’s second largest theater chain, Cineworld, in a boycott that has grown international in scope.

It means “Crouching Tiger” could play on a limited number of IMAX screens in the U.S., and likely for no more than two weeks, the typical IMAX playing time.

But their efforts may be for naught, analysts say. Even if they succeed in preventing the “Crouching Tiger” revival from showing in theaters while it bows on Netflix at the same time, the old release date patterns are starting to look too archaic to the current insta-generation of consumers.

“The reality is that the future is going to be a lot different in the way that movies are consumed,” said Daniel Ernst, an analyst at Hudson Square Research. “There is zero doubt in my mind that over the next 20 years a lot of these windowing things will erode.”

Tuesday’s show of solidarity among theater owners has not been seen since 2011, when exhibitors banded together and refused to screen “Tower Heist” after Universal unveiled a plan to make the action comedy available on-demand for $60 three weeks after hitting theaters. Since then a tentative peace agreement has adhered to at least a three month window between when a film debuts and when it premieres on home entertainment platforms.

But Hollywood knows that change is coming — a lot faster than 20 years from now.

DreamWorks Animation CEO Jeffrey Katzenberg predicted earlier this year that theatrical windows would shrink to three weeks in the next 10 years, suggesting that audiences should “pay by the inch” to see a movie based on the size of the screen they watch it on.

“A movie screen will be $15,” he said, “A 75-inch TV will be $4. A smartphone will be $1.99.”

Privately, other studio executives may also be ready for the next step. There’s a sense among many Hollywood leaders that the window between a film’s theatrical debut and its release on homevideo is too long, especially for the Internet age. Plus, studios spend tens of millions of dollars marketing films to the masses only to have to turn around and shell out again to re-familiarize audiences with a particular picture when it hits home platforms.

“The moviegoing experience is evolving quickly and profoundly, and Netflix is unquestionably at the forefront of that movement,” said TWC co-chairman Harvey Weinstein in Monday’s announcement.

IMAX claims that the “Crouching Tiger” experiment’s success hinges on its burgeoning network of overseas theaters, but it will need a much warmer reception overseas than it received among North American and European exhibition giants.

If it works, the theater company, Netflix and the Weinstein Company aren’t ruling out other release date tests.

“If there’s an appetite there among exhibitors and among audiences we expect to do several more, but I’m not committed to a strategy,” said IMAX CEO Rich Gelfond. “We’re going in with our eyes open and we were fully aware of the issues people might have.”

IMAX will have over 200 screens in China by the time the “Crouching Tiger” sequel debuts on Aug. 28, 2015, so it may be able to make up for the loss of China’s Wanda, which owns AMC theaters. It also helps that Netflix does not operate in China, which means the film will not ignite as much controversy among exhibitors.

“Provided it gets through the quota on foreign films, this is an important market and we do intend to show it there,” said Gelfond. “Given the nature of the film, it should do well there.”

Not every one is convinced that releasing the “Crouching Tiger” film on Netflix and in theaters at the same time endangers ticket buying. The late August release date was selected by IMAX and its partners because it historically is one of the worst box office weekends of the year. Moreover, the film itself is modestly budgeted in the $20 million range.

“We believe there are a number of relatively small sized budget films ($15mn-$30mn) which could draw an audience via Netflix without impacting exhibition industry grosses,” wrote Eric Handler, an analyst with MKM Partners, in a note to investors. “In fact there are hundreds of films every year that bypass theatres and launch direct to DVD/VOD.”

He noted that films like “Arbitrage” and “Margin Call” have been unveiled on-demand at the same time they hit theater without disrupting the exhibition game — all films that opened in limited release, like Radius-TWC’s own VOD success this summer, “Snowpiercer.”

If theater chains want to thwart the digital threats, analysts argue, they need to improve the premium nature of their experience. Not only must they compete with each other, they would need to head off against gleaming home entertainment systems and the ubiquity and convenience of streaming services and mobile devices.

“It’s got to be different,” said Ernst. “You’ve got to win customers every single day.”

There is one issue on which theater chains and IMAX’s leadership agree:  the best way to see a movie is in theaters.

“A movie like ‘Crouching Tiger,’ which is a visual spectacle that comes off a highly successful prequel, should be seen in the way it was meant to be seen — with big screens, big images and great sound,” said Gelfond.

The only difference is that in the case of the “Crouching Tiger” sequel, people can see it on a 3-inch screen instead, and that’s what has theater chains seeing red.

CORRECTION: An earlier version of this article misattributed the investor note by Eric Handler to a different analyst.

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  1. cy12 (@cy12) says:

    This has less to do with technology and more to do with rights. Once again Netflix is dangerous for the industry: the way the content industry makes money is through sales based on territorial rights. Right now its the theatrical issue but after this, Netflix will start targeting the territorial rights system which TV and VOD is based on. Its in their interest to get rid of this all together. Studios need to stop feeding the beast and recongnize Netflix as also a threat. What happens when Netflix becomes the ‘Global Amazon for all filmed entertainment’? who else will studios and producers be able to sell to?

  2. Used to love movies says:

    I have stopped going to movies, as most of them now are directed at teen boys. :( Television has much more sophisticated offerings these days. I, like many adults, am not interested in overdone CGI effects, loud music, and very little plot, which seems to constitute most movie offerings. We have had some great decades in movie making, but this is not one of them.

    I agree that theatre owners need to do more to curb behavior which causes many of us to stay home: silence — and no bright screens from mobile devices in the dark theatre, please.

    Also, the prices for refreshments have skyrocketed! Who can afford to pay that? I cannot.

    Please bring back the movie-going experience the way it used to be:

    1. Great movies
    2. Reasonably priced tickets
    3. Quiet theatre with NO mobile devices active when the theatre is dark
    4. Reasonably priced refreshments

    I agree that every theatre should have an attendant who enforces the rules so that everyone can enjoy the movie.

    Do that, and I will return to the movie theatres.

  3. Mike McMeans says:

    We want to see movies, but we don’t want to pay $50 for two people to see the movie. My wife and I almost never go to the movies. Even here in this small town, it is basically $10 for each ticket and then a ton more for popcorn and drinks. I would rather pay for Netflix and microwave popcorn and get far more for my money.

  4. Anita Bailey says:

    Instead of boycotting the Weinstein/Netflix deal, theatre owners need to do more to bring people back to the theatres. There is nothing like watching a film on the big screen! It is the greatest feeling. Growing up, the theatres held promotional events to advertise a film including giving away souvenirs from the film. Theatres have stopped making it fun to bring the entire family to the theatre to see a film. My advice to theatre owners…reinvent yourself. Learn to us the current technology and social media to your advantage. Dust off that old business plan you had when you first started your theatre which details how you were going to run your business 30 years ago and update it to the 21st Century! Then maybe you will be in a position to make deals like Netflix and The Weinsteins!

  5. Movie theaters need to fix the one problem that ruins them: the people.

    Seeing a movie is awful. People talk, sit on their cell phones. I used to go every week. I’m a movie fanatic. I complained to the theater during the entirety of Skyfall that someone near me was talking. The guy flipped out, threatened to kill the whole theater. Most of us left. During another movie I asked the guy next to me to stop using his cell phone. He kicked my friend in the face (missed me because he was uncoordinated) after the movie.

    Fix that. I don’t want to have to deal with that. I went to a theater (sadly) a long way away recently where an employee watched the whole movie. Anyone talked, they were removed immediately. Same with phones.

    I would pay extra for that experience. A theater that figures out how to kick out the bad customers and make the movie going experience fun again. I have a 75 inch screen at home and surround sound. No one talks, no one is on their phone. It’s beautiful. Why would I pay $15 plus $15 for snacks to have a worse experience? Address that issue.

  6. leewriter says:

    I don not understand the concern by movie theater chains. I would they understand that people who go to theaters very muv
    ch are a different beast (target audience) than people who don’t mind watching movies on mobile devices. People in latter group focus more on content than presentation. That means earlier releases on streaming platforms wont negatively impact ticket sales. It is different with Home Video as the larger screens are closer to quality in regular movie theaters.

  7. Nick Turner says:

    Collapsing windows are inevitable. But so is the public’s appetite for the shared movie experience. Theatre owners, wake up. Get proactive and find new financing structures with Netflix to start to “program” your own screens for more tastes/ages and own a piece of the rest of the income. You cant lick ’em, join ’em.

  8. Matt says:

    How dumb can they be, not showing the movie in protest is only going to hurt them more….

  9. Pete Largo says:

    All this means is theatres will pay less for films, and most likely, Netflix will pay more. They’re so flush with cash they probably don’t care.

  10. druxmanworks says:

    I have not been in a movie theater for almost 2 years. I don’t mind waiting 2-4 months after a film’s release, so that I can rent it from Netflix and enjoy it in the comfort of my home on my 55″ Hi-Def TV.

    On the other hand, these short windows are killing the theater business. As I recall, when Beta/VHS was first introduced in the 1970s, it took the better part of a year (or more) before a new movie was released onto a home video format. By shrinking that window, the studios have destroyed their own market.

    Goodbye, movie theaters.

  11. Tim says:

    I think releasing all three platforms on the same day is a great idea. I do not think it will hurt ticket sales. There are poeple that just do not go to the theater, and if they buy the Netflix or phone version it won’t matter. I’m sure there will be others who would buy the netflix version and like the movie enough to watch it a second time in the future.

  12. NunyaBidness says:

    How bout you make the video available for sale 3 weeks after its release, but not available for rent/streaming until the 2 months.

    $20 for the dvd or blueray
    $15 to see it in the theatre
    $10 for a digital download of the movie

    Then, what you do is you set up a website that lists all the theatrical releases, and on what date and time it will be available for streaming rentals. Give that website a facebook page and a twitter account, and use that to promote what movie is coming out that specific day.

    Movie companies need to stop spending so much on TV ads, and happy meal toys. That is how you promoted movies in the past. In todays digital world, I would rather get an email every monday morning telling me which movies are coming out that week.

    Also, movie companies should start adding after credit scenes that are not available on the digital downloads or purchases. If you want to see the special scene, you have to go to the theatre.

  13. It’s all moot, just food for thought. Anyone who’s interested in CTHD 2 has a Netflix acct. Guaranteed. They’re just fighting the future, and standing their ground. I love David Geffen’s 17 day model, it would lead to crazy money from day 18 to 31 compared to today’s model.

    • Lex Walker says:

      Nah, I find Netflix’s library of actual A-list (and even B-list) titles to be too small. I ended my subscription because of that years ago. If there’s a movie I really want to see, I venture to the theater (probably for a matinee showing) or I buy it and then either resell it for a mere $3-5 loss if I don’t like it or keep it on the shelf. Netflix is overrated. Until Studios decide whether they each want to open their own streaming service or accept that their profit margin isn’t ever going to be what it used to be on home video and thus start to play nice with streaming subscriptions, services like Netflix and Amazon Prime are always going to have libraries that are too small and padded extensively with C-list titles so they can claim to have “over 10,000-20,000 movies/features/etc.” There simply aren’t any really good options at the moment, we’re in that flux period as the players come to terms with what’s realistic.

      Best case scenario: theater ticket prices drop back down to $7-10 to lure people back, the waiting window between theatrical and home video/streaming drops to 3 weeks or vanishes altogether, and streaming services get a better negotiating position so they can have decent libraries without gouging the customer.

  14. Sylvia Llewellyn says:

    Of course there are movies you can watch in the comfort of your own home. I have a 55″ screen and buy many many dvds in blue ray (unfortunately many of those don’t play on my theater surround sound player that I paid a fortune for)… I must have at leave 5-600 in my collection…. but folks that’s okay for later viewings… first time viewing MUST be on the large screen to feel it and see it in all it’s wonder … just like Guardians of the Galaxy and many many others over the years….. Sure I could wait for the dvd… but sitting on my couch watching a movie you’ve never seen before… is never as thrilling as watching it on the big screen in a theater with other people… that’s it…. that’s the excitement…. I take my grandkids to the theater as often as I can…I want them to have this experience whether it’s 3D or whatever… I want them to have that experience of the wonder of it all. I have three tvs in my house… from 32 inch to 55 inch… of course we enjoy them… but they will NEVER replace the theater experience in my view. Theater owners look at Tarantino’s Beverley cinema reservations…. 35 mm… that’s what people want.

  15. Lynnacworth says:

    Not that I would have seen this movie anyway but as an old school cinephile I am detesting the trend for instant viewing for the virtual viewer who stays at home. I see 2 sometimes 3 movies a week and nothing that anyone does can duplicate the theater experience. With friends who have invested thousands of dollars in a home theater I have never been jealous, have never minded the time involved in going to movie and, in fact, don’t even resent the weather on the way there. As to movie makers having to spend a chunk if money to reacquaint the viewer with a film when it is released to the home buyer, if it was good enough in the first place you don’t have to remind us to buy it – we are already waiting its release.

  16. harry georgatos says:

    Cinemas know if people had a democratic choice of watching films in the privacy and security of their homes most would choose to stay at home and watch movies on their sophisticated digital tv’s! Who still wants to be stuck in those bacteria infested feral ratholes? One has to be a lunatic in watching mainstream films among a pack of uncontrolled wolves in those cinemas that brings the worse of the worse in those auditoriums. There’s also expensive ticket pricing and parking prices. Cinemas have had a good run and it’s time for those rotten relics to disappear as most want movies streamlined in their homes. I can see IMAX cinemas having a productive life as people will want to watch event pictures on that particular format. All these Hollywood personalities who come to the defends of Cinemas watch films in the privacy of their own private cinemas in their Hollywood mansions and haven’t been in a multiplex trying to follow densely plotted movies with the ferals that inhabit those ratholes that are todays cinema industry. It has become a degrading experience in watching films in the multiplex and good riddance to them!!!

    • Ken says:

      Sheesh, you make going to the cinema sound like Captain Willard’s journey up that river in APOCALYPSE NOW – a film, btw, that demanded to be seen on the big screen. Where on Earth do you live??

    • Mike Smith says:

      Geez, man. What theaters are you going to?

      • Lex Walker says:

        The AMC Empire or Regal in Times Square is pretty horrid if you make the mistake of going on a Friday or Saturday night. Easily the worst theater situations I’ve ever been in. (On non weekend evenings: not bad at all)

  17. Woodwind says:

    I quit going to theaters 10 years ago. I prefer to view at home where I can control the experience. I spent a lot of money on a home theater system. That’s money the movie houses will never see.

  18. John Shutt says:

    I just hope all parties can sit down and come up with something that is reasonable for both sides, maybe have some footage made exclusivley for the theater without disrupting the narrative of the story. They got almost a year

  19. Meredith says:

    This is an inevitable evolution. The movie industry hopefully learned a lesson from the music industry who fought progress, came to the digital table too late and ultimately had their profits plundered. I love going to theaters but I also expect to be able to get movies VOD quickly.

  20. Wayne says:

    I have slowed my theater visits by 1/3 over the past two years. The IMAX CEO is making it easy for me to stop all together. I comfortable at home, no kids crying during movies they cannot understand anyway, no tacky floors from spilled who knows what. No high rates for seeing a movie in 3D and being charged for the glasses. No more popcorn that was left over from the previous Wednesday where not many came in to see over priced seats. No more 5.75 sodas, no more 5.50 popcorn’s, no more lines. It is changing, AMC and Regal better get with it or get out of it. Netflix is nice, I appreciate being able to watch when I want at a monthly price which for a family plan is lower then one visit to the theater. Drive-in theaters are all but dead, walk-ins could be next if someone doesn’t step up and make some changes.

  21. Keith says:

    Isn’t it great the way the theaters want what is best for their patrons? They are fighting the inevitable instead of focusing on making the theater a more attractive experience. The desires of the public and technology will win the fight against poor management and an attachment to yesterday. Seeing films in theaters is a great experience – they should be trying to make it better for the consumer – and a better value.

    • DG says:

      It seems to me, Keith, that theaters have been making strides to do some of what you’ve suggested–at least they have in my neck of the woods. The only “problem” I see is the issue of admission and concession prices. But I have seen great improvements in the areas of presentation and seating quality.

  22. Joyce Conner says:

    I’m all for this type of progress in movies. It should not cost roughly 10$ a person when you can own the movie of what it costs two people to see at the theatre. Competition is key to success for Hollywood. Keep it up netflix if this proves successful others will try and home entertain will improve

    • John says:

      You realize movies cost millions of dollars to make? And $10 is a small price to pay to see a movie that took over a year to complete. And movies still have trouble making profit. You may think that doesn’t impact you, until you realize fewer movies can get made, smaller movies can’t find funding, theaters start to close and people in the industry lose jobs. $10 is not that much.

      • harry georgatos says:

        The real problem are all these elite Hollywood actors, directors and producers who walk away with huge salaries and profits of the film at the expense of studios. If these parasites weren’t so greedy the industry would be better off!! I’m from Sydney Australia and a movie ticket for me is an outrageous $28!!

      • Woodwind says:

        Too much money is spent producing movies today. The whole system from craft services to insane union rules to exorbitant salaries for “stars” is completely out of hand. No movie should cost $100 million. No movie did during the Golden Age. Great movies, telling great stories with real stars. Movies costing $1 to $2 million tops. Showing at theaters where first run movie tickets cost a dollar a car load.

      • Wayne says:

        John, movies are so high also due to the fact they pay actors WAY too much.

  23. dg says:

    I can understand theaters not wanting simultaneous playoff on VOD, but I don’t understand the 90 day delay. We *need* to be able to exploit our titles in VOD and other markets immediately after we exit the cinemas.

  24. jhs39 says:

    Arbitrage and Margin Call were both low budget movies and both made most of its money on VOD rather than through theatrical exhibition. Releasing a bigger budget movie like that would be a disaster unless VOD purchases widened dramatically to accommodate a bigger budget, more commercial film. The other problem with relying on VOD is that high quality copies of VOD films are available for download within 24 hours of the movie’s premiere–unless the price for VOD is pretty low a lot of people will just download the movies for free.

  25. It worked for buggy whip manufacturers.

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