Will Premium VOD Hurt Theaters? Not Very Likely, Most Experts Say

16 May, 2011 By: Chris Tribbey

Upon word that studios were tinkering with the window between theatrical and home entertainment, a prominent filmmaker spoke out against the idea.

“It’s greed. It’s heartless and soulless and disrespectful,” director M. Night Shyamalan said, according to Moviefone.com. “And of course, cable companies are behind it, and Internet companies. They need their product. But they have to wait their turn. Wait for the thing to finish its life.”

That was in 2005, before Steven Soderbergh’s Bubble hit theaters, VOD and DVD on the same day, and as far as theater and filmmaker complaints about changing windows, not much has changed since.

Right before DirecTV launched Home Premium in April, offering Sony Pictures’ Just Go With It 60 days after its theatrical debut, filmmakers and theater owners protested the “cutthroat” premium VOD model.

Candace Carlo, partner and chairwoman of the entertainment group at entertainment law firm Greenberg Glusker, said at the recent Variety Entertainment and Technology Summit that filmmakers are concerned that premium VOD undervalues their product.

“From a talent perspective, it’s ‘How does this affect us artistically and on a financial basis?’” she said. “They make a film released in theaters with certain [video and sound qualities]. To have a situation where … you can watch it on a television set, it diminishes the value.”

Russ Crupnick, entertainment industry analyst for The NPD Group, said filmmakers always are going to look at their product as art first and a money-making vehicle second.

“People go to the movies because they want to get out of the house,” he said. “It’s a social experience. This argument that people are going to abandon theaters because of premium VOD shows a misunderstanding of why people go to theaters in the first place. All this ‘the sky is falling’ assumes it’s all about watching the movie, and it’s not.”

From the first TVs in American homes to Betamax to premium VOD, the theaters always have been protective of their product when new distribution models come along, long-time industry observers point out.

Ted Engen, president of the Video Buyers Group, said theater owners always will fear new ways for consumers to access content.

“I remember when cable was going to kill theaters; it never happened,” he said. “Premium VOD, TV, the video store, whatever it is, we’re all competing for the consumers’ time. The difference now is [theaters] see fewer bodies in the seats on a Wednesday or Thursday, and it’s scaring the hell out of them.”

Scott Hettrick, owner and editor of 3DHollywood.net and HollywoodInHiDef.com, agreed.

“[Theater owners] were actually right in being worried about TV: Business dropped significantly and never recovered, but they established a new norm that was perfectly viable,” he said. “Home video didn’t hurt at all, and, in fact, some argue it helped increase interest in movies. They have been complaining about shortening home video/PPV/VOD windows since they were 12 months, then 45 days, then 30 days — none of which hurt them.”

“The Betamax never darkened the skies for theatrical exhibition, and I doubt that a strong, smartly priced, marketed and timed window for premium VOD will rain on the attraction of movies in theaters,” said Bo Andersen, president of the Entertainment Merchants Association.

He added that windows between theatrical and DVD are too long as it is.

That’s been changing, according to data from the DVD & Blu-ray Release Report. During the first decade of DVD (1997-2007), for films with a box office take of more than $25 million, the average number of days between a theatrical debut and disc was nearly 160 days. In 2010 the average number was a little more than 121 days.

For the studios, premium VOD still is an experiment — one everyone on the content side is keeping a close eye on.

Curt Marvis, president of digital media for Lionsgate, speaking at the recent Digital Hollywood conference, said an earlier VOD window offers the potential to stunt piracy. However, the National Association of Theater Owners argues the opposite, saying premium VOD makes it easier for pirates to get their hands on a quality film copy earlier.

For 20th Century Fox, premium VOD is attractive because the studio can capitalize on the marketing dollars it already has spent, said Aubrey Freeborn, SVP of marketing and product management for worldwide VOD and electronic sellthrough.
For other studios, premium VOD that attractive an option.

“It’s not our customer, and it’s not relevant to us today,” DreamWorks Animation CEO Jeffrey Katzenberg said.

Time Warner chairman and CEO Jeff Bewkes said studios should keep theater owners’ concerns in mind.
 

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