Cable threatens the movie theater model

Jim Barthold

The idea of going out for a night at the movies is becoming an almost quaint memory for the small percentage of the public that remembers local movie houses with big silver screens (OK, so nobody really noticed that the screens were silver) showing flicks years after they'd already been premiered in nearby metro theaters to the more affluent and, it was assumed, sophisticated audiences.

The only thing that remains intact from that model is that theater popcorn is still too buttery, too stale and too expensive and you always pay too much for tickets and sodas. Otherwise, movies are being released nearly simultaneously in the few remaining big city screening rooms and to the suburban multi-theaters with screens just slightly larger than the average sized HDTV. To make matters even more complicated, the movies only last a couple months before they're released onto DVDs which, in their turn, have replaced the videotapes that threatened to ruin the movie business.

Finally, there's cable. It used to be an afterthought for pay channels and now, with VoD and the aforementioned HDTVs and home entertainment centers, it's becoming a frontline entertainment option that threatens the movie model.

The buzz around a first-run movie still sends thousands, sometimes millions, of Americans rushing to their local 20-screen movie house to catch it when it comes out. After the buzz, though, which sometimes shuts down as soon as the first audience member texts the first negative opinion to their Facebook friends, theater owners still have to make their bucks. That means even the dogs hang around for a couple more weeks or months, lingering malignantly as the television advertising starts to promote DVD release dates and the cable operators promote day-and-date release with those DVDs.

The trend seemed inexorable. Films would get a few weeks' showing in the theaters then move to the cable screen in video-on-demand, bypassing, in some instances, the DVD rental model. Theater owners, of course, noticed this and made it clear that earlier release dates for cable systems ranks just below oil spewing from an untapped well in the Gulf of Mexico.

"While some proponents of 'new media' make promises and predictions of large profits, they ignore the bigger picture," said a National Association of Theatre Owners (NATO) statement issued last week. "The revenue stream from motion pictures can best be optimized by intelligently integrating new technologies and ideas such as premium video-on-demand with other existing, proven revenue streams. Theatres offer the most control of the product and the most revenue. A short window with the potential to siphon off a significant number of movie goers benefits neither the studios nor today's high-tech theaters."

In other words, the theaters are the spigot that spews liquid gold to studios and those same studios should not touch that dial.

When it comes to theater owners and movies, it would be easy to take the historical perspective and say "there they go again." After all, TV threatened theaters and theaters survived; videotapes made them apoplectic and they survived; and now early VoD release has them issuing statements threatening the very studios that provide their products.

They'll no doubt survive, but this time they may actually have a point that slow the studios' march onto cable.

"Collapsing windows muddies the value proposition for the consumer, blurs distinctions between theatrical and ‘straight-to-video' and undercuts one of the important selling points for theatrical exhibition--the timeliness of the exclusive event," NATO continued.

It's a well made point. Studios will have to reconsider earlier release dates and the cable operators, looking for that next revenue stream to combat their own over-the-top gremlins, will have to look elsewhere. That's why sports, already a thorny issue between service providers, will gain even more importance as cable operators try to lock up exclusives, satellite providers fight back and telcos make and place their name on everything and anything that's sports related. Theater owners, of course, don't care about live sports.

If you take the movie chip away from cable, it will need another source of exclusive content. The national fascination with sports, shown via modern technology like interactivity, VoD and 3D should fit just fine. And the popcorn will be fresher.

For more:
- read the NATO statement (PDF)

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