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Analyst: Theaters Should Pay More for Movies

28 Feb, 2011 By: Erik Gruenwedel

Facing a 20% decline in theatrical attendance, 12% drop box office revenue (through February) and declining packaged media sales, studios are being urged to raise the per-title rental fee charged to theatrical operators.

Analyst Richard Greenfield with BTIG Research in New York says Hollywood should up the fee to 60% of ticket sales from 50%, which he said would generate an additional $1 billion in revenue industry-wide when factoring in the $10 billion box office in 2010.

Specifically, Greenfield argues studios should take a page from their own home entertainment playbook. He said rolling out day-and-date availability of transactional video-on-demand with packaged media, creation of premium VOD six to eight weeks after a title’s theatrical launch, and 28-day windows for Netflix and rental kiosks (i.e. Redbox) all were met with initial resistance but are now either becoming the norm or already well-established.

“Even Disney, which had been a holdout, plans to release every single movie in 2011 on VOD day-and-date with its DVD release,” Greenfield wrote in a post. “While Wal-mart and [other] retailers were not thrilled at enabling such a convenient form of rental the day a movie comes out on DVD, too many lower margin forms of rental have emerged.”

Indeed, Disney appears to be a game-changer in distribution policy after it made waves last year placing then No. 1 box office release Alice in Wonderland weeks early into the retail pipeline. Recently, Disney raised its disc wholesale price to rental channels, offering discounted rates only six weeks (not 28 days) after street date.

Time Warner CEO Jeff Bewkes has publicly hinted at raising the four-week release window for its new releases earmarked for kiosks and Netflix (disc only).

Greenfield said studios should start raising exhibition rental fees entering the summer as release slates expand. He said expected theatrical pushback, including the threat to not show trailers will be a non-issue. With theaters more dependent upon new content than studios are reliant on current theatrical windows, the former has little leverage.

“With the film business changing, industry norms can no longer be relied upon — everyone needs to start thinking differently,” Greenfield wrote. “Studios need to maximize profitability for themselves and not worry so much about their so-called ‘partners.’”


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