The long-discussed idea to shrink the window between movies’ theatrical and video-on-demand premieres finally seems poised to become a reality in 2017. And while much of the buzz around the shift has centered on the century-old movie business, cable operators could reap significant benefits as well.
VOD revenues had off years in 2014 and 2015, but in 2016 the picture was rosier, according to the Digital Entertainment Group, an industry consortium. The DEG’s annual report, released in January, showed digital gains of more than 5% for VOD and electronic sell-through (EST). Physical disc sales continue to plummet, but the appetite for movies is a key reason for overall digital gains of 15%, per the DEG, including streaming services. Digital sales totaled $10.3 billion, dwarfing the $7.5 billion spent on physical discs.
Recent reports of active negotiations among major studios and exhibitors have the attention of cable, satellite and telecom distributors, not to mention major players in movies’ digital lifespan like Apple and Amazon. This week in Las Vegas, Hollywood studio executives, directors and stars gathered for the annual Cinema-Con trade show, where talk of the industry’s likely embrace of “premium video on demand” (PVOD) predominated.
No firm plan exists, but all studios (with the exception of Disney) are in talks for services that could be priced anywhere from $30 to $50 per transaction and offer films on VOD as early as 17 days after their theatrical debut, or as long as 45 days (still half as long as the traditional 90-day window). While Disney’s holdout is noteworthy given that the studio has been the clear winner of the market-share race of late, the sentiment among other participants in talks is a lot more upbeat than last year. That was when Facebook founder Sean Parker’s Screening Room startup floated a similar day-and-date venture and was largely dismissed, especially once A-list filmmakers got wind of it.
Directors are still grumbling about the idea of anything horning in on the theatrical experience. Christopher Nolan, for example, said theatrical is “the only platform I’m interested in talking about” during his appearance Wednesday at Cinema-Con to promote his summer release "Dunkirk," a pointed reference to PVOD. Sofia Coppola, similarly, said she hoped audiences would see her upcoming film, "The Beguiled," “in a theatre, where it was intended to be seen.”
Previous efforts to test new windowing strategies have blown up when theaters revolted. Their typical stance has been to threaten to yank movies from their screens if their distributors are planning release patterns that threaten the theatrical experience. But John Fithian, who heads the National Association of Theatre Owners, offered a more open-minded assessment during Cinema-Con. “Home-market revenues are our concern,” he said at a press conference. “We want our distribution partners to make more money, so they can make more movies to put on our screens. Finding a way to grow the home market is important, because that grows the pie.”
The main stimulant for the PVOD, box office, in North America grew 2% to $11.4 billion in 2016, but grosses have posted gains due to higher ticket prices as theaters add luxury amenities like leather seats and food service. The number of tickets sold has been largely flat since 2004.
One major variable in all of this is the split on a VOD ticket price that would soar way above the typical current rate of $5 to $7 a pop. Exhibitors are likely to be cut into the deal in order for them to play along. So how much would go to the Comcasts of the world? No one is saying, but one thing was made clear in Vegas: Hollywood’s new order of business does seem to be inevitable.