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Art House Theaters Release Open Letter Against Sean Parker’s Premium VOD Plan

Art House Theaters Release Open Letter Against Sean Parker's Premium VOD Plan

The lines are starting to get drawn in the sand. Last week, Sean Parker of Facebook and Napster fame, made waves in Hollywood when it was revealed his latest startup, The Screening Room, is aiming to give moviegoing a major shakeup. The plan is to give customers the chance to watch new-release films day-and-date in the comfort of their own home for $50 after purchasing a supposedly piracy proof box for $150. And big-league directors have thrown their support behind the endeavor, including Steven Spielberg, J.J. Abrams, Brian Grazer, Martin Scorsese, Ron Howard and even Peter Jacksonwho in 2011 was part of a group of filmmakers who spoke out against a similar plan on DirecTV. However, many of them are now explaining why The Screening Room offers something different, and positive to film distribution.

READ MORE: Would You Pay $50 To Watch A First-Run Blockbuster Movie At Home, The Same Day It Opens In Theaters?

“I had concerns about ‘DirecTV’ in 2011, because it was a concept that I believe would have led to the cannibalization of theatrical revenues, to the ultimate detriment of the movie business. Screening Room, however, is very carefully designed to capture an audience that does not currently go to the cinema,” Jackson told Variety in statement. “That is a critical point of difference with the DirecTV approach — and along with Screening Room’s robust anti-piracy strategy, is exactly why Screening Room has my support.

“Screening Room will expand the audience for a movie — not shift it from cinema to living room,” he added. “It does not play off studio against theater owner. Instead it respects both, and is structured to support the long term health of both exhibitors and distributors — resulting in greater sustainability for the wider film industry itself.”

Meanwhile, at SXSW, Abrams also shared what attracted him to Screening Room. “I responded to that system mostly because it actually is beneficial to the exhibitors,” he said. “I think the metrics on that are very impressive and they’re targeting groups that actually don’t go to the movies at all. If they could harness even a fraction of the number that don’t [go to theaters], the amount of money that would go to the cinemas is significant and actually is amazingly helpful to the cinematic experience.”

Even Grazer and Howard issued their own statement of support. “When we met Sean and Prem [Akkaraju] last year, it was clear Screening Room was the only solution that supports all stakeholders in the industry: exhibitors, studios and filmmakers,” they said. “The SR model is fair, balanced and provides significant value for the entire industry that we love. We make movies for the big screen and for as many people to see it. Screening Room uniquely provides that solution.”

READ MORE: Michael Bay, Kathryn Bigelow, James Cameron & More Stand Up Against Premium VOD Plans

Indeed, promises are being floated that studios and distributors will get healthy chunks of that $50 price tag, and even cinemas will see attendance encouraged with customers earning free movie tickets for each $50 rental. That being said, no studios or distributors have gone on record just yet, nor major theater chains. However, a group representing arthouse cinemas have released an open letter standing firmly against The Screening Room.

The Art House Convergence, which represents 600 theaters, openly questions just how exactly piracy will be stopped, pointing out that even if hackers don’t directly steal the video file, an HD camera and tripod will be sufficient to rip a movie. They also question of the economics of The Screening Room’s plan, and how they actually will divide the revenues that roll in. Moreover, they point out that theaters were pressured into switching to digital projection not that long ago, at great expense, and now a distribution model is arriving that directly threatens their existence.

Read the open letter below (via Indiewire) and share your thoughts in the comments section.

The Art House Convergence, a specialty cinema organization representing 600 theaters and allied cinema exhibition businesses, strongly opposes Screening Room, the start-up backed by Napster co-founder Sean Parker and Prem Akkaraju. The proposed model is incongruous with the movie exhibition sector by devaluing the in-theater experience and enabling increased piracy. Furthermore, we seriously question the economics of the proposed revenue-sharing model.

We are not debating the day-and-date aspect of this model, nor are we arguing for the decrease in home entertainment availability for customers — most independent theaters already play alongside VOD and Premium VOD, and as exhibitors, we are acutely aware of patrons who stay home to watch films instead of coming out to our theaters.

Rather, we are focused on the impact this particular model will have on the cinema market as a whole. We strongly believe if the studios, distributors, and major chains adopt this model, we will see a wildfire spread of pirated content, and consequently, a decline in overall film profitability through the cannibalization of theatrical revenue. The theatrical experience is unique and beneficial to maximizing profit for films. A theatrical release contributes to healthy ancillary revenue generation and thus cinema grosses must be protected from the potential erosion effect of piracy.

The exhibition community was required to subscribe to DCI-compliance in a very material way — either by financing through VPF integrators (and those contracts have not yet expired) or by turning to other models which necessitated substantial time and commitment. Those exhibitors who were unable to make the transition were punished by a loss of product. The digital conversion had a substantial cost per theater, upwards of $100,000 per screen, all in the name of piracy eradication and lowering print, storage and delivery costs to benefit the distributors. How will Screening Room prevent piracy? If studios are concerned enough with projectionists and patrons videotaping a film in theaters that they provide security with night-vision goggles for premieres and opening weekends, how do they reason that an at-home viewer won’t set up a $40 HD camera and capture a near-pristine version of the film for immediate upload to torrent sites?

This proposed model would negate DCI-compliance by making first-run titles available to anyone with the set-top device for an incredibly low fee — how will Screening Room prevent the sale of these devices to an apartment complex, a bar owner, or any other individual or company interested in creating their own pop-up exhibition space? We must consider how the existing structures for exhibition will be affected or enforced, including rights fees, VPFs and box office percentages.

A model like this will also have a local economic impact by encouraging traditional moviegoers to stay home, reducing in-theater revenue and making high-quality pirated content readily available. This loss of revenue through box office decline and piracy will result in a loss of jobs, both entry level and long-term, from part time concessions and ticket-takers to full time projectionists and programmers, and will negatively impact local establishments in the restaurant industry and other nearby businesses. How many of today’s filmmakers started their careers at their local moviehouse?

There are many unanswered questions as to how this business model will actually work. The proposed model, as we have read in countless articles, suggests exhibitors will receive $20 for each film purchased. At first glance, an exhibitor may think it represents a small, but potentially steady, additional revenue stream. But how will this actually be divided among the number of theaters playing the purchased title; will exhibitors who open the title receive more than an exhibitor who does not get the title until several weeks later (based on a distributor’s decision); who will audit the revenue to ensure exhibitors are being paid fairly; does this revenue come from Screening Room or from the distributor… these are just a few of the issues yet to be explained.

Similarly, Screening Room promises to give each subscriber two free cinema tickets with each film purchase. Yet to be disclosed is how an exhibitor will recoup the value of those tickets from Screening Room so they can then pay the percentage of box office revenue owed to the distributor of the film. Yet to be explained is who will manage the ticket program details such as location choice, method of purchase, and so on. Will all exhibitors be expected to honor Screening Room free tickets, or will some exhibitors receive preferential treatment over others?

We strongly urge the studios, filmmakers, and exhibitors to truly consider the impact this model could have on the exhibition industry. We as the Art House and independent community have serious concerns regarding the security of an at-home set-top box system as well as the transparency and effectiveness of the revenue-sharing model. Our exhibition sector has always welcomed innovation, disruption and forward-thinking ideas, most especially onscreen through independent film; however, we do not see Screening Room as innovative or forward-thinking in our favor, rather we see it as inviting piracy and significantly decreasing the overall profitability of film releases.

At this time and with the information available to us we strongly encourage all studios to deny all content to this service.

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