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» Film-Tech Forum   » Community   » Film-Yak   » Hollywood, Apple Said to Mull Rental Plan, Defying Theaters

Author Topic: Hollywood, Apple Said to Mull Rental Plan, Defying Theaters
Frank Cox
Phenomenal Film Handler

Posts: 1974
From: Melville Saskatchewan Canada
Registered: Apr 2011

 - posted 08-18-2017 03:45 PM      Profile for Frank Cox   Author's Homepage   Email Frank Cox   Send New Private Message       Edit/Delete Post 
Hollywood, Apple Said to Mull Rental Plan, Defying Theaters

Movie studios are considering whether to ignore the objections of cinema chains and forge ahead with a plan to offer digital rentals of films mere weeks after they appear in theaters, according to people familiar with the matter.

Some of the biggest proponents, including Warner Bros. and Universal Pictures, are pressing on in talks with Apple Inc. and Comcast Corp. on ways to push ahead with the project even without theater chains, the people said. After months of negotiations, the two sides have been unable to arrive at a mutually beneficial way to create a $30 to $50 premium movie-download product.

The leading Hollywood studios, except for Walt Disney Co., are eager to introduce a new product to make up for declining sales of DVDs and other home entertainment in the age of Netflix. They have discussed sharing a split of the revenue from premium video on demand, or PVOD, with the cinema chains if they give their blessing to the concept. But the exhibitors have sought a long-term commitment of as much as 10 years for that revenue split, which the studios have rejected, the people said.

Deals with potential distributors such as Apple and Comcast could be reached as soon as early next year to sell digital downloads of major films as soon as two weeks after they debut in theaters, the people said. Comcast, the largest U.S. cable provider, is also the owner of Universal Pictures.

Those pacts would give the studios a way to issue an ultimatum to the theater chains: Agree to a deal, or we’ll start selling the movie downloads anyway. The movie houses could fight back by boycotting films slated for sale via download days after their theatrical debut.

Shares of three of the largest movie theater chains were down Friday. AMC dropped as much as 8.4 percent, Regal Entertainment Group fell 5.4 percent and Cinemark Holdings Inc. slid 3.2 percent.

Unless studios definitively decide against a PVOD window, exhibitor shares will remain under pressure, said Michael Pachter, an analyst at Wedbush Securities Inc. “They can’t recover because there will be the specter that it’s imminent,” he said.

But he was skeptical that studios would go ahead with digital rentals without an agreement with theaters. ““They always claim they’re going to do something dramatic, and then they don’t,” he said.

To read Bloomberg Intelligence analysis on movie windows, click here.

Some studio executives are taking a less aggressive stance and don’t want to fight against exhibitors who still wield enormous power in the industry. The studios and movie chains have to negotiate independently because of antitrust rules.

The escalating tensions are likely to fuel investor worries about the movie industry as more viewers find reasons to stay home. The shares of leading circuits such as AMC Entertainment Holdings Inc. have been buffeted all year by the uncertainty around the talks as well as a more than 12 percent decline in the summer box office. In the year to date through Aug. 13, the North American box office is down 4.1 percent, according to ComScore Inc.

The theatrical window of exclusivity over new movies has long been sacrosanct, in part because Hollywood’s biggest directors and actors value the big screen over television. But the industry has allowed the exclusivity period before DVD sales to shrink to about three months after a movie’s opening weekend, compared with six months historically.

Walt Disney Co.’s recent move to create its own streaming service for some of its films, another nod to the growing demand for home viewing of movies, has also added pressure on the exhibitors to reach a deal with studios, the people said. Movie distributors argue that selling movie downloads sooner would let them capitalize on the hype generated by opening weekends in theaters.
Share Decline

The cinema chains have downplayed the severity of the threat even as shares have plummeted this year. AMC Chief Executive Officer Adam Aron spent “days and days devoted to meeting with investors” in mid-May, he told analysts earlier this month on an earnings call with investors. They were focused on “PVOD, PVOD, PVOD,” Aron said. The uncertainty he said was “driving investors bonkers.”

So Aron held one-on one, “emergency meetings” with studio CEOs on the topic over the past two months and concluded there was no consensus and no deal was likely in the U.S. in 2017.

In a call with analysts last month, Regal CEO Amy Miles read aloud from the New York Times an article that claimed the need for PVOD was urgent because of the decline in DVD sales. The article was from 2010, she revealed. “Here we sit today, seven years later, still discussing the urgency of premium VOD,” Miles said. “There is not a consensus amongst the studio partners with respect to what any kind of long-term windowing structure should be.”
Varying Approaches

Yet the talks continue. The terms being discussed vary between each studio and each cinema chain, with some talks focusing on a release date of about 17 days after debut, for about $50, or four to six weeks from release for $30, people familiar with the talks said. Another possibility is first experimenting with a new release window overseas before trying it in the U.S., which is the biggest home-entertainment market, one of the people said.
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Some theater executives have highlighted to studios that about 50 percent of a movie’s revenue now comes from its theatrical run, which they could be jeopardizing, one of the people said. But studios have countered that theatrical has become a larger share of the revenue because of the collapse in DVD sales, one of the people said. In the first half of 2017, DVD sales were down 10 percent, according to industry-backed researcher DEG. DVD rentals from stores fell 20 percent year on year. Digital sales rose 8 percent, a slowdown from previous years.

Disney isn’t interested in participating in the discussions because it believes in its strategy of focusing on fewer, bigger event movies that need to be seen on the big screen. Smaller producers like Lions Gate Entertainment Corp., the studio behind “The Hunger Games” franchise, are hoping for a deal. CEO Jon Feltheimer said he believed PVOD would be introduced in the next 12 months. “You’re going to see some tests done at least in some territories in the near future,” Feltheimer said on its earnings call this month. “I hope that will happen, I think it will be great for the business.”

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Mike Blakesley
Film God

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From: Forsyth, Montana
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 - posted 08-18-2017 09:28 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
I've said this before, but my "crystal ball" tells me that they'll do a test on some huge movie, but they won't promote the crap out of the PVOD...they'll just "introduce it." Then, the movie will still do big theatrical business (because the majority of people won't know about PVOD right away), which will cause the studios to crow "see, it didn't hurt theatrical at all!"

And then the wolf will be in the henhouse and the big slide will begin. Slow but painful.

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Corey Witherow
Film Handler

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From: rancho cordova ca
Registered: Jun 2017

 - posted 08-20-2017 10:40 AM      Profile for Corey Witherow     Send New Private Message       Edit/Delete Post 
This will be very interesting to see unfold. PVOD is certainly the future.

I agree with you Mike, they will need to be clever with introducing PVOD. I can easily see the studios forming a new conglomerate after they see how much more money PVOD makes than theaters. They will also need to combat piracy by offering new movies (and all of their prior releases) for a low enough price, high enough quality, and convenience that people feel that it's easier to pay for the film than pirate it.

I wonder if the industry will settle with one-time fees or a subscription service. Also, isn't it a law that studios cannot be exhibitors? Easy enough to get around I suppose.

The potential money to be made off this will be unlike anything ever seen.

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Daniel Schulz
Master Film Handler

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From: Los Angeles, CA USA
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 - posted 08-20-2017 11:05 AM      Profile for Daniel Schulz   Author's Homepage   Email Daniel Schulz   Send New Private Message       Edit/Delete Post 
I'm surprised no one's tried an experiment in the opposite direction: pick a movie that would be considered a "must-see," part of the water-cooler conversation. Star Wars, or Nolan, or Marvel. And then announce, to great fanfare, that the filmmakers have decided this movie is so epic and awesome it can only be seen in theaters. And therefore, it won't show up on VOD or Blu Ray for some 9 months after the theatrical opening day. The pitch is that the *only* way to see it will be to see it in the theater.

You'll lose some hypothetical sales to piracy, probably, but might make them back with all of the people who often skip the theatrical run saying "I'll just wait 'til it shows up on Netflix" getting cajoled into the cinemas. I think it's worth a shot!

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Justin Hamaker
Film God

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From: Lakeport, CA USA
Registered: Jan 2004

 - posted 08-20-2017 03:55 PM      Profile for Justin Hamaker   Author's Homepage   Email Justin Hamaker   Send New Private Message       Edit/Delete Post 
In all of the articles about this topic, I think the exhibition side is really failing by failing to talk about how chipping away too much from theatres will result in the collapse of the movie theatre business. When this happens consumers will be without the choice of watching movies on the big screen.

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