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Analyst Says PVOD Concern Overblown

10 Jul, 2017 By: Erik Gruenwedel



Following a Wall Street firm’s recent note suggesting desperate Hollywood studios would likely pull the trigger on premium video-on-demand in the face of shrinking movie margins at the box office, another analyst says the rush to cannibalize moviegoers is premature.

Premium VOD would give consumers in the home streaming access to new theatrical releases priced from $35.

Michael Pachter with Wedbush Securites in Los Angeles agrees the summer theatrical release slate has been lacking, with some movies’ releases put on hold or pushed into previous “shoulder periods.”

That said, the analyst contends exhibitors are countering market trends with the deployment of luxury recliner seating and enhanced concession options.

“Clearly, the summer box office has been disappointing relative to initial expectations, and our new estimates reflect this. Current share prices reflect the bearish view that summer box office softness is a signal that secular trends are deteriorating for the exhibitors. We disagree,” Pachter wrote in a July 10 note.

Yet, adding to release slate woes is the omnipresent threat of subscription VOD in the form of Netflix and similar services.

Wall Street bears contend consumers — particularly millennials — are becoming less interested in visiting the theater to watch movies and more interested in watching (on a delayed basis) at home or on mobile phones. SVOD is becoming the go-to source for later-released content and PVOD for new releases.

Pachter agrees SVOD has altered the landscape for film and TV viewing, but thinks studios are adapting by focusing on films primarily enjoyed on premium large-format screens — such as Warner Bros.' Wonder Woman, which has generated $745 million globally, and Sony Pictures' Spider-Man: Homecoming, which generated $117 million domestically in its weekend box office debut. 

“[Exhibitors'] discussions with studios on PVOD will end without moving forward, or will reach a mutually beneficial and limited agreement with certain studios over the coming year or longer,” Pachter wrote.
 


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