Could Theater-to-DVD Window Shrink to Zero?

[dkennedy]

Could Theater-to-DVD Window Shrink to Zero?

Amid Box Office Slump, Some See Answer in Simultaneous Marketing and Release in Multiple Formats

July 23, 2005

By Brian Rooney, ABC News

So far this year, a blockbuster about the Crusades, "Kingdom of Heaven," fell on its sword, and even "War of the Worlds" didn't quite wake up an audience that seems to be falling asleep at home.

DVDs bring in more than twice the money as theaters, but disappointing sales of some recent hits have the industry talking about changing the way the movies do business.

"One day, if 'King Kong' is going to be released on Friday, Dec. 14, it will be released theatrically around the world, DVD around the world, pay-per-view around the world," says Peter Sealey, an adjunct professor of marketing at the University of California-Berkeley's Haas School of Business. "That's where the marketplace is going."

Sealey's example may be hypothetical, but Steven Soderbergh, the Oscar-winning director of "Traffic," and Mark Cuban, the Internet billionaire who bought the Dallas Mavericks basketball team, have joined forces to do just what he describes — release a series of films simultaneously in theaters, on DVD and on Cuban's HDNet Movies cable TV channel.

"Once you start giving the customer what they want, when they want it, how they want it, they'll pay you for it," Cuban says.

In addition, the actor Morgan Freeman and Intel Corp. are among investors in a venture called ClickStar Inc., which will distribute movies over the Internet before they become available on DVD.

It already costs a fortune to market movies for shorter and shorter runs in the theaters, the theory goes. So why not market once, and sell all at once across multiple formats all over the world?

'Serious Threat'

That doesn't play well with the theaters, where attendance is off by about 10 percent from last year.

"You're talking about a serious threat to exhibition," says Kendrick MacDowell of the National Association of Theater Owners. "And [it's] not just a threat to exhibition — [it is] potentially a threat to the studios, and potentially to patrons."

Cuban says digital distribution and universal release will expand both the audience and the profits, while curbing piracy.

"Historically, people talked about how radio was going to kill orchestra," Cuban said, "and how TV was going to kill film, how DVD was going to kill both. It just has never turned out that way."

He envisions a future in which you can still go to the movies. But if you want, the movies will come to you.

ABC News' Brian Rooney originally reported this story for "World News Tonight" on July 17, 2005.

[zekmoe]

Many people miss the point. Going to watch a movie in a theater is a crappy experience. Crackly sound, out of focus, stained screens, homeys on cell phones, $10 cold stale popcorn. It sucks. My home system is way better on everything but screen size (60" 16x9 HD properly calibrated) and it's simply a better , more immersive experience watching without all the distractions.
I still go to kids movies in the theater with my son, but more so he can expereince the joy before he grwos up realizes that there are better ways to see it.
Bob

[dkennedy]

War of the words at summer box office, Disney may open the gates to simultaneous DVD and movie theater releases...

August 19, 2005

Guardian Unlimited Entertainment News

A row over sluggish ticket sales in the US opened up this week as the man who represents US cinema owners accused the Hollywood studios of making films that simply aren't good enough.

John Fithian, who heads the National Association of Theatre Owners, went on the attack after Disney's incoming chief executive officer Robert Iger told reporters that the antidote to the box office slump was to move towards simultaneous release in theatres and on DVD.

"Here's what we know about 2005: the movies are not as good," Fithian said in a statement released to the press. "They're not terrible; they're just not as good. And so the industry has experienced a temporary drop-off compared with 2004, the biggest box office year in movie history."

He continued: "[Iger] should know that Hollywood studios would be merely one shrivelled vendor among many in that new world of movies-as-commodities-only."

He said cinema owners were tired of taking the blame for the decline this year in ticket sales, adding that a move away from the traditional releasing model, whereby a film opens in cinemas roughly four months before it comes out on DVD, would leave Hollywood with "no viable [cinema] industry".

Fithian's rebuke followed comments by Iger to reporters earlier in the week. "Windows [between cinema and DVD release] need to change," said the man who will replace Michael Eisner. "They need to compress. I don't think it's out of the question that a DVD can be released in effect in the same window as a [cinematic] release.

"Although I'm sure we will get a fair amount of push-back on this from the industry, it's not out of the question. I think that all the old rules should be called into question because the rules in terms of consumption have changed dramatically."

According to the Hollywood Reporter, some cinema chains have already refused to take part in a simultaneous release plan put forward by 2929 Entertainment, the company owned by billionaires Todd Wagner and Mark Cuban.

The partners announced last spring that they would put six specially commissioned high definition projects by Steven Soderbergh in simultaneous release in cinemas, on DVD and on cable TV.

Certain cinema operators are already refusing to book the films. Not that it will bother Wagner and Cuban that much - they own the acclaimed Landmark arthouse cinema chain, not to mention their own HDNet television network.

[dkennedy]

Studios scrambling to adapt to fast-changing DVD marketplace

August 28, 2005

By Gary Gentile, AP Business Writer

Someday the phrase "Coming soon to a theater near you" could be replaced with "Coming soon to a Wal-Mart near you."

The tradition of major films debuting first in theaters, then across staggered release "windows," including pay-per-view, home video, cable and, finally, broadcast TV, is being openly questioned.

Robert Iger, CEO-elect of The Walt Disney Co., recently suggested the day could come when a DVD is released while the movie is still in theaters. The millions of dollars that studios spend marketing first-run movies would serve double duty promoting the more profitable DVDs, making for a faster and more efficient return on investment.

"Consumers have a lot more authority these days and they know that by using technology they can gain access to content and they want to use the power that they have..." Iger told financial analysts earlier this month. "We can't stand in the way and we can't allow tradition to stand in the way of where the consumer can go or wants to go."

Iger's remarks are heresy to theater owners who fear people with flat screen, high-definition, surround sound systems in their living rooms will abandon the megaplex.

"Mr. Iger knows better than to tell consumers - or Wall Street analysts - that they can have it all, everywhere, at the same time," said John Fithian, president of the National Association of Theater Owners. "He knows there would be no viable movie theater industry in that new world - at least not a theater industry devoted to the entertainment products of Hollywood."

Theaters have already seen profits shrink as movies move more quickly to home video. Studios and theaters split profits in the early weeks of a movie's run, with the theater making most of its money from concessions. The theater's split gets larger the longer the movie plays, giving studios an incentive to release films on DVD even earlier.

Studios make the majority of their profits from home video sales, with theatrical runs serving largely as marketing for the DVD.

That has led some to question business models that have not kept pace with technology or consumer demands.

"Why do we make the assumption that five months later people are still interested in your product?" said Todd Wagner, co-owner with Mark Cuban of 2929 Entertainment.

"If I hear a song on the radio, they don't say, 'Five months from now you can buy the CD.'"

The gap between a movie's opening weekend in theaters and its debut on home video has been narrowing from about six months in 1994 to about four months in 2004.

Some studios release their DVDs even sooner. The action sequel "XXX: State of the Union," which fizzled at the box office, hit video shelves 11 weeks after its theatrical debut.

Many studios announce the release date of a movie on home video while the film is still in theaters - a practice that infuriates theater owners.

"This is something that drives us nuts," Fithian said. "When Wal-Mart starts putting up signs a month and a half or two months into the movie's run, that just kind of tells the consumer: 'Wait - it's coming.'"

Before Iger's remarks, studio executives spoke of releasing DVDs simultaneous with a theatrical run only in the context of fighting piracy. Many studios are already premiering films around the world on the same date to undercut pirates who distribute illegal copies of films in China, Eastern Europe and elsewhere.

In the United States, studios are pressured by a box office slump and a DVD glut that has led to a sharp decline in sales for new releases that compete for shelf space with old TV show box sets and older hits.

New technology is adding to the competition as cable operators promote video-on-demand services and phone companies, such as SBC and Verizon, are creating high-speed Internet networks that will make on-demand viewing even easier.

Advances in wireless are also challenging old business models. In Europe, Sony Pictures has released a full-length version of "Spider-Man II" for viewing on a cell phone.

For some industry players, simultaneously releasing a movie in theaters and on DVD makes perfect sense.

"Most packaged entertainment - books, CDs, games - most all of these make their debut at retail," said Ted Sarandos, chief content officer of Netflix Inc., which rents DVDs by mail. "It isn't that radical a proposition that movies could follow that same path."

In April, 2929 Entertainment, which owns two television networks, a chain of movie theaters and film and television distribution companies, announced a partnership with Oscar-winning film director Steven Soderbergh to direct six films and release them simultaneously in theaters, on TV and on DVD.

Wagner, the company's co-owner, said under his model, theater owners share in the revenue made from distributing films on DVD and other media.

"We want the exhibitors to be a part of this because they should be and from my perspective, they always should have been," Wagner said.

Wagner also disputes the notion that people would stay away from theaters if they could watch the same movie at home.

Wagner and Cuban own the NBA's Dallas Mavericks, which still draws a crowd when games are broadcast on radio and TV.

"It didn't kill professional sports when it was available simultaneously on different mediums," he said. "They cross promote each other and they're all doing just fine."