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‘Paranormal Activity: The Ghost Dimension’ Flop Shouldn’t End Early VOD Experiments

Paranormal Activity: The Ghost Dimension” represented a bold distribution experiment and an unprecedented alliance between a major studio and a handful of exhibitors.

By cutting theater chains in on digital revenues, Paramount, the studio behind the horror franchise, was allowed to release the film online 17 days after it left most screens. It could have revolutionized the movie business, offering up a new model for the way that Hollywood releases its more modestly budgeted offerings for mass consumption. Unfortunately, it was a gambit that failed to pay off.

Resistance from three of the country’s four biggest chains limited the film’s theatrical footprint. It opened to just $8.2 million on 1,656 screens, roughly 1,000 fewer locations than the previous film in the horror series. That was the worst kick-off in the franchise’s six-film history and significantly below tracking that suggested it might open to $20 million if it had more screens.

“My gut reaction was it probably wasn’t worth it to alienate theater owners,” said Jeff Bock, an analyst with Exhibitor Relations. “But the franchise was dying so it probably seemed like a good idea to try to change things up.”

The bad blood that erupted may make other studios leery of trying to mess around with distribution models. In 2011, Universal was eager to see if they could get customers to part with $60 to watch “Tower Heist” in their homes three weeks after the comedy hit theaters. Exhibitors went ballistic, however, threatening to boycott the film. Universal ultimately shelved the plan and hasn’t attempted anything similar in years.

Just as they did when Netflix’s “Beasts of No Nation” whiffed in theaters after debuting simultaneously on the company’s streaming service, look for certain sectors of the exhibition community to label the “Paranormal” experiment as a failed one and to argue that theatrical windows should not shrink. However, the evidence suggests that conclusion may be wrong-headed.

“It’s hard to say the box office was impacted by the windowing instead of being effected by a lack of availability in the marketplace,” said Rob Moore, vice chairman of Paramount.

“There’s no question it cost us a lot of box office that major theaters wouldn’t play the movie,” he added.

Customers didn’t appear to be staying away because the film could be available to watch at home in a matter of weeks as opposed to the standard 90 days. AMC was one of the only major chains to show the movie and “Paranormal Activity: The Ghost Dimension” did robust business at its locations. The chain was the weekend’s best performing circuit, producing $15 million in revenue, with the “Paranormal” sequel accounting for $3.1 million of that figure, the most of any film it showed. All told, AMC showings of “Paranormal Activity: The Ghost Dimension” were responsible for 51% of the picture’s receipts, despite the fact that the circuit comprised 20% of its overall screens.

“It wasn’t about consumer rejection,” said Moore. “Theaters that had the movie and promoted the movie did exceptionally well.”

He noted that many of the locations that agreed to show the film were dollar houses that didn’t usually play first-run movies. That also may have depressed box office results.

The studio will have a second chance to experiment with its unorthodox distribution strategy next weekend when “Scouts Guide to the Zombie Apocalypse” debuts at AMC and other sympathetic chains. Pre-release tracking for the film is weak, but it also has the option of debuting digitally early.

Paramount and other studios looking to experiment with earlier home entertainment releases believe that there needs to be greater flexibility in how films are distributed. Marketing costs continue to rise and they would like to see smaller films debut on-demand and on disc earlier so they can piggy back on the promotional roll out for their theatrical releases.

They’re not looking to play around with the distribution patterns for pictures like “Jurassic World” or “Avengers: Age of Ultron,” just smaller films that often struggle to attract big crowds. They may have a point. Just look at this weekend. Pictures like “Rock the Kasbah” and “Jem and the Holograms” failed to do significant business. They will likely languish in a handful of theaters for a few weeks before being forced to wait months before a digital debut. That’s costly for studios, it puts them in an even deeper financial hole and it makes them less likely to back pictures that aren’t sequels or comic book adaptations.

Exhibitors have other ideas. Theatrical exclusivity is seen as an important advantage at a time when digital forms of entertainment are dominant, streaming services like Netflix offer easy and cheap access to content, and television overflows with a wealth of high-quality shows. They fear ceding ground by allowing studios to collapse the window between a film’s theatrical debut and its home entertainment launch would be catastrophic.

Paramount executives say they won’t know if the experiment was worth it until they see the digital results for “Paranormal Activity: The Ghost Dimension.” There is some evidence to suggest it might work out to the studio’s advantage. After “Hot Tub Time Machine 2” flopped last winter, Paramount pushed it onto digital platforms 46 days after it opened. The early release resulted in Paramount making several million dollars more than it expected to generate.

“There is a structural inefficiency to how we distribute most films,” said Moore. “It’s bad for the long-term health of the business.”

He may be right, but that won’t stop theater chains from shooting the messenger.

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