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Studios vs. Theaters: Clash Over FCC Waiver

Studios vs. Theaters: Clash Over FCC Waiver

National Association of Theater Owners (NATO) president John Fithian is at war. He is in Washington right now fighting a pitched battle for exhibitors at the FCC.

The LAT reported Wednesday:

In regulatory filing today, the Motion Picture Assn. of America, the chief lobbying group for the major studios, restated its support for a waiver of current Federal Communications Commission rules that would clear the way for a technology that would allow consumers to watch movies at home close to or during their theatrical release. The so-called selectable output control technology would prevent the illegal copying of movies, which has been a major stumbling block to delivering first-run movies directly to consumers.

Most exhibitors saw this fight coming. Brand-new Disney chairman Robert Iger hinted at the future when he publicly questioned ancillary windows back in 2005. Then he was roundly rapped on the knuckles by theater owners. “It’s in our best interest to put some of the old rules aside and create new ones and follow the consumer – what the consumer wants and where the consumer wants to go,” he has said. Four years later, with DVD revenues dropping, the studios are finally going public with what they’ve been talking about behind closed doors for a while now. Finally, they are considering changing the windows paradigm. And exhibitors are furious.

Outgoing MPAA chairman Dan Glickman speaks for the studios in this statement:

“Many of us love movies, but we just can’t make to the theater as often as we’d like. That is especially true for parents of young children, rural Americans who live far from the multiplex and people with disabilities that keep them close to the home. Having the option to enjoy movies in a more timely fashion at home would be a liberating new choice.”

“Once this door opens,” writes San Francisco exhibitor Gary Meyer, “it will keep pushing the window. The studios must survive too, but they are going to kill the hen that hatches their eggs, golden and rotten alike. They have developing ancillary options. We don’t. And theatrical distribtion staffs will likely shrink. It is really coming to an end for independents who already have a tough time with terms, play time and availability. And the exhibs have paid for [the transition to] digital [exhibition] which should have been the studio responsibility.”

Back in 2003, I remember the studios debating these issues with cable and consumer electronics companies. The studios were obsessed with what they called “the analog hole.” They were concerned about how Sony and other hardware makers equipped their DVRs and set-top boxes. The FCC provision that went through then made it impossible to transmit a signal through only one output; you had to have all of the others open as well. Now the studios want to use the HDMI outlet on hi-def TVs and shut off the analog outputs, to prevent copying. This requires the FCC waiver. And the studios would then negotiate with cable cos about what would be transmitted, and when. Inside the theatrical window? The PPV window? “It’s up to each studio to determine their marketing plans,” said MPAA spokesman Howard Gantman. “The MPAA would like permission from the FCC to push creative content over a secure line.”

The MPAA release waved a red flag with the words “close to or even during their theatrical run.” That’s what has theater owners freaked.

It’s a losing battle. As much as I care about theaters and the experience of going out to the movies, the studios are actually taking Iger’s advice and listening to their consumers. This is about making it possible to sell and deliver movies directly to the home for viewing on computers, big-screen TVs and home theaters. We all know this is where it’s going. Event movies big and small will still pull customers to theaters. But a pipe into the home is the future of movies. The theaters are going to lose the day-and-date argument, eventually. IFC and Magnolia, which are in the VOD business, insist that booking a movie in a market where a movie is available on demand does not hurt theatrical box office.

UPDATE: Here’s David Poland’s take.

Here’s the MPAA release:

Washington, D.C. – In a filing today with the Federal Communications Commission, the Motion Picture Association of America, Inc. (MPAA) reinforced the benefits of allowing studios the option of sending movies fresh from the box office to tens of millions of American households.

“Many of us love movies, but we just can’t make it to the theater as often as we’d like. That is especially true for parents of young children, rural Americans who live far from the multiplex and people with disabilities that keep them close to home,” MPAA Chairman and CEO Dan Glickman said. “Having the added option to enjoy movies in a more timely fashion at home would be a liberating new choice.”

In its filing, which was in response to letters of opposition filed by the group Public Knowledge, the MPAA said: “grant of the waiver would for the first time allow millions of consumers to view high-value, high-definition theatrical films during an early release window that is not available today. MPAA has explained that release of this high-value content as part of an earlier window, especially with respect to movies released for home viewing close to or even during their initial theatrical run, necessarily requires the highest level of protection possible through use of SOC.”

SOC, or selectable output control technology, would allow televisions with digitally secure interfaces to receive first-run, high-definition content from a cable or satellite provider. Using SOC protects content because it essentially disables non-secure, analog outputs to avoid illegal circumvention and distribution of copyrighted material. These outputs would be disabled ONLY with respect to the proposed new content, and this technology would NOT have any impact whatsoever on the ability of existing devices to receive all of the content that they get today. Consumers will continue to have access to everything they have today, including DVDs, Netflix, etc.

The MPAA filing noted: “By Public Knowledge’s odd reckoning, however, no consumer-oriented technological breakthrough ever could be introduced to American homes unless and until every single American home had access to the same opportunity at the same moment in time. That is a recipe for holding every innovation hostage until the last consumer adopts a new technology.

“Under Public Knowledge’s approach, the Commission would have taken decades to permit television stations to broadcast in color, since millions of American homes already had purchased black-and-white sets when color broadcasts were introduced in the 1950s. Indeed, whenever innovative technologies bring consumers new and better opportunities to media content, there is always a lag between when early adopters take advantage of these opportunities and when they become ubiquitous.”

Glickman added: “I, like most movie-goers believe the best way to enjoy a movie is to go to the theater with friends and share a communal laugh or adventure together. But I also believe there is ample room for additional choices that satisfy consumer demand to enjoy movies in diverse new ways. If allowed by the FCC, I believe this new choice will be just one of many exciting innovations to come that benefit consumers and sustain the future of this unique creative medium.”

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