The precedent-setting deal Universal Pictures and AMC Theatres struck Tuesday to shrink the traditional film exhibition window from 70 to 17 days will surely accelerate experimentation with premium-VOD distribution.
With theaters shut down until who knows when, there’s already a steady supply of first-run movies available for consumers to stream in U.S. homes via multichannel video on demand and electronic sell-through platforms like iTunes. While studios are shelving tentpole titles like “Fast & Furious 9” and “Mulan” (for now), more modestly budgeted fare is finding new life outside theaters including Universal Pictures’ “The King of Staten Island,” “The Invisible Man” and “Trolls World Tour,” the latter of which netted a successful $100 million haul.
But there’s also a second variety of first-run movies hitting U.S. homes like never before, and they come via streaming services. Some studios have jettisoned films once intended for theaters—like “Greyhound,” which Sony Pictures shipped off to Apple TV+. Then there are instances when companies with studios have diverted titles to streaming services they own, as Disney has done moving “Hamilton” and “Artemis Fowl” to Disney+. In some instances, streaming services have taken more conventional routes for film acquisition, such as when Hulu picked up “Palm Springs” earlier this year at the Sundance Film Festival.
For those riding out the pandemic sheltering at home, the wealth of content has been a godsend. But the existence of the second variety of films presents a problem for the first variety of films.
Take “Staten Island,” which Universal offered for $19.99. A bawdy comedy starring young “Saturday Night Live” star Pete Davidson, you’d be forgiven if you confused it with another bawdy comedy starring a former “SNL” alum (Andy Samberg), “Palm Springs.” But the latter can be watched by buying one month of Hulu for as low as $5.99; that also comes with the added benefit of being able to access the entire Hulu catalog once the credits roll.
That’s a ridiculous price disparity for two movies that are incredibly similar in both budget and quality.
For “Staten Island,” let’s give the studios the benefit of the doubt that in this instance they can charge what we’ll call a “theater tax”: this first wave of premium VOD titles were understood to be coming to theaters, so maybe consumers will appreciate they are paying for the privilege of watching these movies in their homes.
But keeping prices artificially high beyond the near future is going to become increasingly difficult for studios aiming to keep their margins as large as possible at a time that their core business has essentially collapsed. The traditional system of windowed releasing that consumers have come to expect for theatrical distribution is already a fairly flimsy construct in the digital age; as the next wave of premium VOD titles are made available, the notion that they command some kind of higher price point at a time when streaming services are offering similar titles for far cheaper is going to become a problem.
It’s a difficulty compounded by Netflix, which isn’t just flooding its catalog with original films. Some of these titles are the kind of tentpole-caliber films that studios would rather hold out until theaters return to normal operations in 2021 than put into premium VOD. Action flicks with excellent production values that Netflix has produced, like “The Old Guard” and “Extraction,” have emerged as some of the most watched titles on Netflix (according to its own metrics).
Consequently, the PVOD-SVOD price disparity is getting more absurd. You can get multiple movies with production costs well north of $100 million along with everything else on Netflix for $12.99, but then pay $20 for studio titles that aren’t their A-level output?
There’s already evidence that consumers will respond to more flexible pricing. Perhaps the most unheralded cinematic success of the summer is “The Outpost,” a war drama adapted from a book written by CNN anchor Jake Tapper that was initially intended for theaters when it was released in July but made available to stream for just $6.99. As a result, “Outpost” has outperformed better known titles on transactional platforms like Apple TV and Spectrum; it’s even ranked second at FandangoNow despite that platform ranking titles by how much revenue each has collected.
TV tracking app TV Time surveyed 6,981 of its U.S. users at the end of April about their PVOD price expectations varied by genre. The results should be pretty sobering for studio execs considering how much even the highest average price lies far below $20:
Superhero — $14.17
Action/adventure — $13.49
Drama — $12.38
Comedy/romance — $11.86
Animation — $11.78
Live-action family/kids — $11.28
Horror — $11.12
Art house — $9.45
To top that off, just over half of those surveyed cited “too expensive” as a reason they hadn’t tried PVOD titles.
Studios need to wake up to pricing sensitivity that was already evident before the pandemic-induced U.S. economic downturn, which will surely make consumers even more selective about where they spend their money. Overpriced films clinging to the fast-fading notion that studios pegged them for theatrical distribution won’t fly for much longer.
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