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Could the Theatrical Window Snap Shut?

24 Jun, 2005 By: Holly J. Wagner


In a climate of sagging box office receipts and studios battling elusive digital pirates, entrepreneurs Mark Cuban and Todd Wagner believe they have an answer: release titles to all forms of media — theatrical, DVD and cable — on the same day.

“Our goal is to release movies in this fashion on a quarterly basis, so that consumers get used to this choice being available,” Wagner said of the so-called “super-release” concept. “We believe there is pent-up demand from the largely neglected and ignored 30- to 60-year-old audience who does not go the movie theaters, but would like to see first-run theatrical movies that they can talk about at the water cooler next week.”

Cuban and Wagner's 2929 Entertainment debuted the documentary Enron: the Smartest Guys In the Room simultaneously April 22 in Landmark Theaters, which they own, and on Cuban's HDNet cable channel, and recently announced a deal to do the same with six yet-to-be-produced high-definition films from director Steven Soderbergh. Studios are reluctant to tamper with release windows and theater owners are understandably opposed.

2929 has yet to strike a DVD distribution deal for the plan. “We are working that piece as we speak,” Wagner said.

Despite theatrical exhibitor concerns, others also see the window system collapsing.

“I think the big determinant will be if the theatrical business remains soft, as it has been all year, which creates tremendous pressure on studios to garner incremental revenue growth,” Netflix CFO Barry McCarthy told analysts in June. “They need to underwrite more risk if they are going to do that, and more risk would be compressing that window shorter and shorter and shorter. I think when that is fully compressed, it will expand the market for home video rental because instead of waiting four months for the theatrical new release, people will just walk into Blockbuster and rent it and possibly get it from cable on a pay-per-view basis.

“If the tide comes in, if the window shrinks,” he said, “it will benefit everybody.”

At least one studio's president, speaking on condition of anonymity, took a wait-and-see attitude, basing his opinion in part on the only example in the marketplace.

“If he [Cuban] wants to take a shot at it, that's fine with me, but I don't see theater owners embracing it because they don't want to open the floodgate. If they do and there's all this marketing behind it, ultimately DVD is going to win,” he said. “The last time someone tried to do this was with Noel, with Susan Sarandon, and look what happened ... Retailers are smart — they know there's money out there, they put it out in front and they're going to capture most of the business. Theater owners aren't going to open that Pandora's Box.”

Noel isn't a perfect example, however. It aired on TNT for two nights including the theatrical release date, was offered for sale only on Flexplay's expiring DVDs and only on Amazon.com. Neither company has disclosed sales figures.

At least one analyst thinks theaters are on the wane.

Bear Stearns analyst R. Glen Reid downgraded Carmike Cinemas and Regal Entertainment June 2, saying home entertainment is stealing the show.

“We believe that we are at the tipping point of a home entertainment boom, as the prices for consumer electronics have fallen and quality has risen to a level that is extraordinarily compelling for consumers.,” Reid wrote in a note to investors. “The proliferation of DVD players, home theater systems, VOD, DVRs and the advent of HDTV are just a few of the new technologies that are changing the way in which consumers view the world of entertainment.”

An Ipsos consumer survey conducted June 13-15 seems to indicate consumers would love that. Fully 23 percent of respondents said they prefer watching movies at home to going to theaters. It also found that 82 percent of respondents use a DVD player at home and a surprising 77 percent use a VCR as well. People who watch more movies at home also go to movie theaters more, the authors said.

Closing windows are the missing link, and analyst Tom Adams said that's not likely to change any time soon.

“Never,” he said. “Well not never, but [a super-release might happen] the day that the box office reaches a third of the size it is today and only teenagers will go to a theater any more — and them not very often either — and the movie business is so battered it won't matter.”

The entrepreneurs are confident that technology has caught up to the public's need for convenient entertainment and it's time to rethink the system of releasing films in windows. And they aren't the only ones.

Piracy may be forcing the issue.

The Motion Picture Association of America (MPAA) has made headlines in recent weeks for forcing the shutdown of elitetorrents.com, a peer-to-peer (P2P) Web site where file traders were known to be trading copies of Star Wars: Episode III — Revenge of the Sith the same day it launched in theaters.

“What we've seen happen is, as certain P2P companies are shut down or hobbled, the activity springs up elsewhere,” said Bruce Eisen, president of video-on-demand service CinemaNow.

“This [super-release] is a powerful antipiracy play,” said Eric Garland, CEO of Internet measurement service BigChampagne. “The shutdown of a site like elitetorrents.com is really a blip because there are so many dozens of popular torrent sites to offset the traffic, and more springing up every day.”

In fact, at least one major studio, Warner Bros.. has toyed with simultaneous release to combat piracy — albeit in a foreign market. The studio released The Sisterhood of the Traveling Pants on a bare-bones DVD in China the day it was released theatrically in the United States.

Theatrical exhibitors, Wagner acknowledges, are the most resistant group to the super-release concept.

“The exhibitors are the ones we have to do a better job of explaining that this is not meant to negatively impact them,” he said. “We are merely trying to increase the size of the pie, lower the costs and create some cash flow efficiencies along the way.”

“If all movies were released day and date in theaters and to the home, movie theaters would be forced to exhibit more ‘television-like' product and alternative product simply to stay in business,” said John Fithian, president of the National Association of Theater Owners. “Hollywood movies would become a lesser thing. The Academy Awards would lose their very special value."

Retailers are on board with the super-release concept for obvious reasons, Wagner said.

“Everyone from Best Buy to Blockbuster loves this,” he said. “Getting more titles earlier and helping them to drive either sales of HDTV's or other in-store sales is a good thing for them.”

The studios may also secretly support the idea, he said.

“Behind closed doors almost every studio head will tell you this is the direction that things will go. In fact, [former MPAA president] Jack Valenti thought it was a great idea when I spoke to him about it.”

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