Six of the seven biggest Hollywood studios are continuing to push to offer movies in the home mere weeks after their theatrical debuts.
However, the companies, particularly Fox and Warner Bros., are showing greater flexibility about timing. Initially, Warner Bros. CEO Kevin Tsujihara had kicked off negotiations with exhibitors by offering to cut them in on a percentage of digital revenues if they agreed to let them debut films on-demand for $50 a rental some 17 days after they opened. Currently, most major movies are only made available to rent some 90 days after their release. Some studios offer films for sale electronically roughly 70 days after their bow in theaters.
Other studios, particularly Fox and Universal, felt that $50 was too steep a price to ask consumers to pay. They are now trying to get exhibitors to agree to a plan that would involve a lower priced premium on-demand option that was made available at a slightly later date, according to three studio insiders and two exhibition insiders. Fox and Warner Bros., for instance, are considering making films available between 30 to 45 days after their opening, but at $30 a rental, a price they believe won’t give customers sticker shock. Universal, which is seen as being the most aggressive negotiator in these talks, would like the home entertainment debut to remain in the 20-day range.
Studios are looking for ways to shore up home entertainment revenues as DVD sales continue to slide. They also believe that their advertising can be more effective and cost efficient if a film’s home entertainment release is closer to its theatrical debut. By grouping those two things closer together, studios wouldn’t have have to launch a massive promotional campaign to reintroduce consumers to a movie months after it was on the big screen.
Then there’s the issue of shifting consumer tastes. Younger consumers, used to streaming services such as Netflix, are accustomed to being able to access content whenever and on whichever device they would like — they’re not used to having to wait months to watch something.
Lionsgate, Paramount, and Sony have also been talking with a group of exhibitors that includes AMC, Regal, and Cineplex. Disney is not interested in shortening the release window, the industry term for the amount of time a film runs exclusively in theaters. That’s unsurprising because Disney releases Marvel, Star Wars, and animated movies that tend to have long runs in theaters and have a size and scope that tends to work well on the big screen.
Because of anti-trust laws, the studios cannot work together to sign deals. They have to reach agreements with each participating chain on an individual basis. The talks have been going on for over a year, and are still very much in flux, insiders caution. Many issues have to be resolved before a final pact is in place.
Further complicating the picture is the fact that there are a number of different models being circulated. Some studios, for instance, are weighing a scenario where movies could be made available for rental at a higher price as soon as they dip below a certain number of screens. The thinking is that it doesn’t make sense for a movie to stay exclusively in theaters if it isn’t being widely shown.
Universal would like all of its films to be released on premium video-on-demand early, but other players like Warner Bros. and Fox seem more amenable to having a different release pattern for different movies. In that kind model, bigger franchise films that tend to have longer runs in theaters might be held back from release on demand.
No deal is imminent. Theater owners are engaged in the talks, and they’ve spent million of dollars researching consumer behavior. They’re particularly concerned that if movies are offered to consumers too early and at too low a price they will stop showing up at the cinema.
Sony is very early in its discussions, but it would be in favor of an early on-demand debut that’s somewhat later than the one being floated by the likes of Universal and at a higher price point.
Exhibitors are firm on one point. If they agree to shrink the amount of time they have exclusive access to movies then studios must agree to keep the window for lower priced rentals and copies of movies at roughly 90 days. Those movies typically cost between $3 to $6 a rental and in the range of $20 for a disc or digital copy. Exhibitors want studios to make a pact not to try to alter the traditional home entertainment distribution model for between five to ten years.