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Kevin Tsujihara Zeroing In on Theatrical Movies in the Home

29 Nov, 2016 By: Erik Gruenwedel

Warner Bros. CEO Kevin Tsujihara

Long before Netflix CCO Ted Sarandos began waging war on the theatrical window, Warner Bros. CEO Kevin Tsujihara has quietly been seeking to meld new movies in the Cineplex with a home entertainment component.

Speaking Nov. 29 at the Credit Suisse Technology, Media & Telecom Conference in Scottsdale, Ariz., Tsujihara said the time had come to afford consumers with the option to watch studio movies earlier at home concurrent with their theatrical run.

While not revealing any specifics, the executive said Warner is having “constructive conversations” for the first time "in a  long time" with exhibitors about significantly narrowing the current three-month exclusive box office window.

“We’re working with them to try to create a new window,” Tsujihara said, adding that the studio was “very focused” on the issue and willing “to do it” alone if necessary. “We have to offer consumers more choices earlier. We think it’s an imperative.”

That's no small talk considering Warner will end the year second at the domestic box office behind Disney with more than $1.8 billion in revenue.

As former president of Warner Bros. Home Entertainment Group, Tsujihara is well versed in entertainment retail, including packaged media, UltraViolet and Digital HD. Back in 2006 he discussed the idea of an exclusive pre-packaged media release window for VOD movies delivered via pay-TV.

“We, like everyone else, are trying to figure out what is the right window for pay-per-view in regards to the distribution food chain to maximize profits,” Tsujihara told Home Media Magazine at the time. “From my perspective you have to work backwards from the consumer. What makes sense to the consumer and what offerings are you going to make to the consumer and when.”

Industry efforts at launching Premium VOD over the years has seen its share of missteps, in addition to exhibitor pushback and consumer indifference toward titles priced exponentially higher than the typical movie ticket.

Tsujihara contends that in a market beset by burgeoning over-the-top video options, consumer demand for in-home access to new movies is real and underscored by piracy.

“We have to meet that demand with a legal solution,” he told analysts.

Netflix last year bowed its original film business by making critically acclaimed Beasts of No Nation available for streaming worldwide concurrent with a limited theatrical run.

Paramount Pictures last year bowed landmark rev-share agreements with AMC Theatres, Cineplex Entertainment, National Amusements, Alamo Drafthouse Cinema, Southern Theatres and Landmark Cinemas, by making movies available on home entertainment platforms 17 days after they dipped below 300 domestic theaters.

Theaters receive a percentage of the studio’s digital revenue through 90 days from the initial U.S. theatrical release, with each exhibitor’s share proportional to its theatrical gross market share.

Paramount is ending 2016 with about $750 million generated at the domestic box office.

Separately, Tsujihara agreed consumer demand for DVD is declining but said Warner remains focused on home entertainment’s contribution to the bottom line. He said that with the growth in electronic sellthrough, home entertainment is approaching an inflection point with profitability between digital and physical roughly equal at 50% each.

“That’s going to tilt, obviously, towards digital, which has much higher margins [than disc]. So even with flat [home entertainment] growth, we can have an improving bottom line.”

Finally, the CEO envisions “doubling down” on Warner brands "DC Comics," "Lego" and "Harry Potter," among others, across all distribution channels, including possibly launching branded direct-to-consumer streaming platforms to “capitalize” on the respective “rabid” fan bases.

“[We’ve been] working on that quite feverishly over the last 12 months.”

About the Author: Erik Gruenwedel

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