The National Association of Theater Owners, which represents exhibitors and speaks for the top theatre chains, has finally weighed in on the much-debated The Screening Room, which offers day-and-date home delivery of first-run movies. Their statement is more about who initiates discussions about changes to the status quo than the clear rejection from The Art House Convergence, which organizes independent (specialty) theaters.
Both organizations raised concerns that hint at the chance to negotiate. (Read full NATO and AHC statements below.)
The Screening Room concept involves consumers buying a $150 device that will attach to their home entertainment system so that they can pay $50 to watch first-run movies in a 48-hour window at the same time as initial theater play. The plan attempts to include from the start exhibitor participation (unspecified revenue sharing, two admissions for each purchase to theaters where concessions would be bought), recognizing that without theater incentives and approval NAPSTER-founder Sean Parker’s proposal would have no chance to get studios, much less the theater owners, on board.
Way back in 1979, when I was a young film buyer working for Chicago’s top locally-owned theater chain (back then, most theaters were based in one compact region), studios announced that they were going to start releasing their films a half year or more after their premiere on the new videocassette format, sending shock waves through the industry.
The reaction from most theaters owners, who are by nature resistant to change as retailers in a system that gave them the sole viewing option for at least a year (16 mm in schools and other institutions came next, then network TV two-three years later, with individual ownership of a copy not an option) was overwhelmingly negative.
The owners of my company had a different reaction. My boss contacted the heads of distribution with a proposal: ‘Why not talk to theaters about their becoming your retail outlet when they go on sale?’ (Rentals were an afterthought.) No infrastructure then existed for this beyond regular retail outlets (for both music and wider wares) and there was no precedent for the public to purchase movies to own. But had theaters nationally bought into this early, they might have controlled the sale and rental of videos and enhanced their own business and made themselves even more integral to future developments.
The idea went nowhere as theaters dug in their heels and hoped it would all just go away. So videos went forward, an entirely new industry was created and thrived, and theaters lost a chance to be involved on the ground floor as partners as the industry shifted.
The vast income videos brought to the studios helped finance movie production, in turn buttressing theaters with product. The model remained theatrical-driven (as the credibility of video releases was built from their success at theaters). But it also introduced for all time the alternative of seeing movies at home, uncut and without commercials at the viewers’ own pace.
Flash forward nearly four decades, and although home viewing has evolved — DVDs, Blu-rays, Video on Demand (first-run in limited cases), cable movie stations, far larger international markets— the core model of top studio releases shown initially in theaters has stayed the same (although with a shorter three-month window).
Now that we have both NATO and AHC on record, we get a sense of where this evolutionary process could be headed. Theaters both operate from a position of strength and weakness. Studios at this point have little alternative with the expense of their movies and the bounty that comes from the present model—reconfirmed above all by the huge showing of "Star Wars: The Force Awakens"— to risk total exhibitor rejection.
But their current distribution paradigm is threatened by non-studios with deep pockets like Netflix and Amazon starting to initiate significant projects (both traditional movies and longer-form programming) that have the option of totally bypassing theaters. So the trajectory is moving toward coexistence and finding a model that maintains as much of the status quo as possible while adapting to new paradigms.
NATO’s statement should be seen in the context of its complex internal politics. Second-biggest circuit AMC, which is trying to merge with fourth-ranked Carmike (transforming them into the biggest exhibitor), is reported to be an active participant with The Screening Room. This makes sense: they are the only big chain to play films day and date with Video on Demand (although with the subterfuge of renting auditoriums to distributors, thus not violating NATO policy) and they played Paramount’s two horror films last fall that had pre-announced VOD availability early in their release.
The NATO statement takes note of the surprisingly strong support from directors of The Screening Room (a shrewd move to build credibility, although influential techno-futurist James Cameron and celluloid defender Christopher Nolan are opposed) and recognizes the need for potential change release models while still keeping theatrical play first and foremost. It states that initiatives should come out of exhibitor/studio discussion, rather than from third-party outsiders. This doesn’t address what is proposed, but rather sounds like a consensus statement as they slow things down rather than totally reject the concept.
The AHC statement gives a much more detailed case to block the proposal. The articulate and detailed response comes from a group of theaters who have little chance of making or breaking the concept. That power lies with the Big Four chains (Regal and Cinemark along with AMC/Carmike, as well as a handful of powerful regional chains like Pacific and non-AHC participant Landmark). But their points deserve attention, because they reveal the shared concerns of all exhibitors.
Their reasons for asking studios not to participate revolves around four main concerns. First is the elevation of alternatives to the theatrical experience. Second is how piracy will increase with the ease of home viewers’ ability, even if there are anti-recording devices in the equipment, to film the movies (with better quality than similar illegal recording from movie screens). Third is uncertainty about revenue sharing and particularly how they with less clout than the bigger chains might fare in this. And fourth is no recognition of the need for changed film rental terms with increased competition.
The statement recognizes up front that AHC members have been among the most willing theaters to play VOD releases. AHC is in an awkward position as the group that pushed Sony a little over a year ago to make their North Korean pirated "The Interview" available for theaters after the studio announced a VOD rather than normal release. Both sides benefited; many AHC members, with less competition with most chains refusing to play the film, garnered great grosses and Sony earned added revenues while still having a strong VOD play.
No one seemed to be concerned with piracy then, or damage to the theatrical experience. Members couched playing "The Interview" in terms of freedom of expression and patriotism rather than a windfall, but the profit motive was a key factor.
No doubt if most or all movies had this availability, it would reshape the industry. But accepting it in some cases and then rejecting wider use puts members in the position of being half-pregnant and less credible in wholesale rejection.
The larger piracy issue—with more interest in higher profile movies and a $50 rather than $10 or lower charge current VOD fee as the alternative— is legitimate. It is hard to believe that The Screening Room’s backers haven’t thought this through, with some sort of identification of each individual purchase detectable by hi-tech investigators who doubtlessly would pursue offenders and make examples of them. But the risk is real.
The AHC statement also expresses concerns about lost income for bars, restaurants, hotels and others showing these movies. But that issue already exists for high expense, high profile events like boxing championships, and a solution has been found for that (no use without permission and payment, something theaters would want to make certain didn’t happen).
Their final point about the shared revenues hints at the main reason for the strong statement, apart from wanting a seat at the table. How they share in the proposed revenues is a concern for any theater participating; they are right to worry about getting the short shrift. But by raising the question of normal film rental, they also hint at a way studios could entice all exhibitors. Yes, they realize there will be lost revenues (particularly concessions, a much larger profit maker for theaters than their share of ticket prices). So in rejecting the idea, they add an area where if their financial concerns are addressed, perhaps the door isn’t totally closed.
My guess is that although the independents of AHC will have a small voice in whatever happens, their statement speaks for concerns of all exhibitors big and small. And it suggests, contrary to the initial exhibitor reaction to videos of just wishing them away and not getting on board early, exhibitors are aware enough of changing times and new models that they now think it is time to openly discuss options, and discuss which one works best, rather than totally rejecting discussion. The much more powerful NATO in its statement, that focuses more on who originates future delivery patterns rather than rejecting consideration outright, reiterates how much they’ve learned since 1979.
ART HOUSE CONVERGENCE STATEMENT: