The Screening Room isn’t riding to movie theaters’ rescue. It’s part of an effort to bolster a sagging home entertainment market, according to executives at the National Association of Theatre Owners.
“Any talk about shortening the window is not in order to benefit the theatrical market … it is because of the difficulties in the home [entertainment] market,” Patrick Corcoran, vice president and chief communications officer for the exhibition industry trade association, said at the Gabelli movie and entertainment conference on Thursday.
He noted that the domestic box office reached a record $11 billion last year, but that the home entertainment industry, weighed down by the collapse of DVD sales and rentals, has lost $6 billion in revenue since 2005.
Screening Room, a startup backed by Sean Parker of Facebook and Napster fame and Prem Akkaraju, is trying to capture an older audience they claim is not going to movie theaters. The company is offering new theatrical releases in the home for $50 a rental. To interest exhibitors and studios in the initiative, they plan to share the profits with both groups. But Corcoran suggested that their pitch is falling on deaf ears. AMC, the country’s second largest chain, is backing Screening Room, but no studios or other major theater groups are supporting the technology.
“It got a lot of attention in the press, but it didn’t get a lot of traction in the industry itself,” said Corcoran.
NATO has no official position on Screening Room, but Corcoran said that it was critical that the industry protect the “exclusivity” of the theatrical release window. The fact that audiences can only access certain movies in theaters for a select period of time is a major reason that they continue to draw crowds.
As the home entertainment industry constricts, the Chinese marketplace continues to expand at a dazzling clip. Ticket sales in the Middle Kingdom grew 49%, hitting $6.8 billion. Analysts expect that China will surpass the U.S. as the top market for film by 2017.
However, only a small percentage of those riches are reaching studios, Corcoran argued. He noted that China is dependent on local producers for the bulk of their films. Domestically, the seven top studios, a group that includes Disney, Universal, and Warner Bros., account for 90% of theatrical revenue. In China, they are responsible for 38.5% of the market share. Moreover, because of Chinese regulations, Hollywood companies can only take out 25% of revenues out of the country. That means that despite the record ticket sales, China only contributed $650 million to major studios in 2015.
“While China is important … it’s still not anywhere near what they’re getting domestically,” said Corcoran.
Hollywood’s attraction to China extends beyond its massive population of moviegoers. Chinese firms and companies such as Dalian Wanda, Alibaba, and Studio 8 have partnered with the biggest studios or invested in their slates in some capacity.
“It should be taken as a vote of confidence in the power of Hollywood to create global products,” said Phil Contrino, data research manager at NATO.
Beyond China and Sean Parker, Corcoran argued that concerns that younger consumers are rejecting movies for digital forms of entertainment are overblown. Teenagers over-index in terms of their attendance, representing 8% of the population, while buying 16% of movie tickets, he said. Studies show that this audience segment has declined in recent years, but Corcoran suggested that the problem was with the surveys themselves. He noted that younger consumers don’t have landlines, making them hard to poll.
“They are not only hard to reach in terms of marketing, but they are hard to reach in surveying behavior,” said Corcoran.