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CinemaCon: Hollywood Tested By New Distribution Models

In the world of theatrical exhibition, the struggle between preserving traditional business methods and forging new ways to expand moviegoing has never been more intense.

A recent deal by top exhibs with a new production entity to book movies directly into theaters and bypass the studios threatens to put a significant strain on the historically close but uneasy relationship between exhibitors and the Hollywood majors.

The four largest U.S. theater chains — Regal, AMC, Cinemark and Carmike — earlier this month cut a direct distribution pact with producer Robert Simonds’ newly announced movie company, backed by investors TPG Growth and China’s leading equity firm Hony Capital, to release at least 10 films a year.

Such a pact is unique in several respects, portending perhaps more such arrangements to come. It will enable theater owners to get their hands on more content, specifically midrange-budgeted movies that the studios have largely abandoned for tentpoles as they release fewer films each year.

“We don’t want to piss off the studios,” Simonds tells Variety. “Our goal was to occupy a niche that’s frankly missing.” The producer notes that no one knows moviegoers’ needs better than exhibitors. “They’ve got a strong relationship with the consumer,” he says. “They know who is buying what and when.”

Simonds’ arrangement with theater owners is emblematic of dramatic shifts in the way movies are now being consumed and distributed. In another recent example of a nontraditional release, the Kickstarter-funded feature “Veronica Mars” was distributed simultaneously on digital platforms and in theaters, with a nominal marketing spend by Warner Bros.

John Fithian, prexy of the National Assn. of Theatre Owners (see Facetime, page 21), which hosts the annual exhib confab CinemaCon currently running through March 27 in Las Vegas, readily acknowledges that efforts to grow the moviegoing audience require a significant change in thinking among those in the industry.

“There are a lot of old rules that don’t make sense anymore,” Fithian says.

As proof, overall attendance, though up last year in the 2-11 and 50-59 age brackets, sits well below where it was a decade ago, with admissions among teens and young adults among the most affected. And in a battle that unites theater owners and studio execs, the fight to keep younger generations going to the movies — instead of consuming entertainment in their homes or via mobile devices — remains a significant concern and top priority.

Yet the exhibs’ recent deal with Simonds also touches a long-exposed nerve for theater owners, who say they perpetually get the short end of the stick when it comes to splitting box office returns with the studios. In dealing directly with independent producers, with no interference from the majors, exhibs can ostensibly negotiate more favorable terms.

Though no major studio executives would speak on the record about the new deal, due to their delicate relationship with exhibitors, they contend that Simonds’ direct partnership with theater owners will not significantly alter the current state of negotiating distribution deals or threaten to glut the marketplace.

To be sure, theaters — both major and smaller circuits — still rely heavily on studio agreements and big event films to fill seats. Similarly, most independent film producers still look to the studios and their specialty labels like Fox Searchlight and Focus Features and other indie distributors for their built-in infrastructure, both to market and release their movies.

“While (the direct partnership is) an interesting proposition, we still need the established system in order to have our movie really land,” says Sarah-Violet Bliss, co-writer and co-director of SXSW prize winner “Fort Tilden.”

Noah Fogelson, a top executive at Simonds’ venture, agrees that direct deals between producers and theaters are difficult for larger releases: “You still have obstacles you need to overcome to self-distribute a wide theatrical release on a one-off basis, unless you have the capital and the manpower to do it.”

AMC Theaters’ content and programming chief Elizabeth Frank says both parties will work together on release dates and marketing strategies.

“From an exhibition perspective, we’re still far at the end of the line, even though we’re the first dollar the movie ever makes,” Frank says. “So for us, it’s exciting to be a part of the dialogue earlier in the process.”

Regardless of the changing distribution models, the need for diverse and flexible programming continues to be key for exhibitors in filling seats. To that end, NATO is exploring several different strategies, including dividing a single screen’s showtimes among multiple films that would maximize business potential throughout the day, and is advocating for discount pricing, whereby exhibitors would vary the cost of tickets based on demand.

“We’re trying to use the technology to be more creative and innovative to sell more tickets,” Fithian says.

And that’s the bottom line.

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