It’s easy to look at the Hollywood studios and national theater chains as old sticks-in-the-mud who are refusing to change with the times, but truth is, a lot of smart folks are trying to get ahead of the game–in order to beat out their rivals.
The studios and theaters have historically struggled in their symbiotic relationship, but they truly cannot thrive without cooperating. That relationship has never been more fractured than it is now, as their mutual interests are no longer the same.
Both theater owners and studios are competing with so much noisy
content– online, video on demand, theaters and TV– that they need to
be smart about reaching and luring the consumer to the multiplex.
While the theater chains are
unified in their mission to hang onto moviegoers for dear life, the seven studios have their own conflicting agendas. They are well aware that they have many more distribution
options than ever before: the global theatrical market is just the most crucial
and significant.
On this year’s CinemaCon State of the Industry Panel 2.0, the panelists dug into these issues in a more candid way than usual, including Universal Pictures chairman Adam Fogelson, David Passman, President & Chief Executive Officer, Carmike Cinemas, producer Michael De Luca (“Moneyball”, “Captain Phillips”, “Fifty Shades of Grey”), Bud Mayo, Chairman and CEO, Digiplex Destinations and Matt Jacobson, Head of Development, Facebook.
Anne Thompson: Why don’t more studios fill in the gaps that are all too apparent every first quarter, why don’t they book films all year round, as Universal does?
Adam Fogelson: As a studio that does not have the luxury of relying on tentpole films… the discipline of doing that has created a real confidence inside our organization that if you really examine the data, there are very few reasons other than historical behavior why almost any film can’t work on almost any weekend. There are any number of things. The first weekend in January used to be a non-starter for people, we had a this little horror movie “White Noise” that did business, and that has become a place where movies that that tend to operate.
Even on our big movies: the fourth “The Fast and the Furious” opened north of $70 million on the first weekend in April, where the previous biggest opening had been $35, and the last one opened to $87 million on the last weekend of April. Our belief is it tends to just come down to people following the same behavior as they’ve always done and not being incentivized to do otherwise. It’s a combination of a cold and rational analysis of how the marketplace works and a need we have had that might have been different from others.
AT: What do you exhibitors think of the stream of product coming from the studios?
David Passman: The first quarter of last year led to an all time record at the box office for the entire, what I hear about the first quarter this year across NATO is not enough family films, first quarter got off slow as exhibitors were prone to blame the content providers. So give us more first quarter G and PG but don’t– in respect to what John Fithian said yesterday–but please don’t stop making the Rs either.
AF: Because the quarter didn’t work, people looked for reasons and there were a really a strange number of R rated movies that came out in the first quarter and a lot of them didn’t work. To draw the conclusion that there were too many R rated movies is simplistic. If “Django” hadn’t opened in December and opened in January it would have been a huge hit, if “Ted” had opened in January or February it would have been a huge hit. “Identity Thief” was a huge hit. It happens to be about the movies. People tend to if not forget minimize how complicated this is. I took my job three and a half years ago, Donna [Langeley] and I have been working on the slate.
Last year was the first year where the slate reflected our strategy of what we wanted Univeral Pictures to do. We’re making the decisions three and a half years back and living with the consequences. We’re trying to see where the marketplace and filmgoer interest and the world is going to be a long way out. Sometimes you wind up in a circumstance where it doesn’t work out. I’m very optimistic from where the whole industry is going to find itself starting now and going forward, the rest of the year looks incredible. It’s not like people said in December said, ‘let’s make a bunch of R rated movies and get them out in January.’ It doesn’t work like that.
AT: Explain Michael as a producer even at the top of the chain explain the challenges of coming up with this product. The studios do not make it easy.
Michael De Luca: The challenge is always getting to the material first, and finding new material and getting the studios to be open to what causes innovation which is new talent. Especially in times where you might catch a studio coming off a bad quarter, and cash is tight, the first thing they go after is development spending, but in a way it causes movies that aren’t ready to get made because they don’t have a deep enough bench of development to switch course, when something isn’t ready to go, you might have two or three lined up that aren’t ready. The challenge is always getting to the material first, getting the studio to spend money on it, it to the point where it’s viable and having enough stuff in rotation where you’re not caught making movies of a certain quality. You can’t predict what’s going to work with an audience. There are certain tenets to storytelling that have always been with us and you just try to have the best people around you to recognize those tenets and try to give people a choice.
AT: When you talk about “50 Shades of Grey,” it’s going to have to struggle to get the R rating…historically exhibitors tend to prefer the PG. How are you going to deal with this?
MD: As a producer, I can speak to it creatively. You have to divorce yourself from the idea that that book is going to be literally translated. The book is very explicit, because she wanted to get inside the head of that young girl as she goes through this character arc of growing up, and being opened up to a sexual relationship for the first time. It’s literal by design of the author. Movies we all know, a picture is worth 1,000 words, so the cinematic language for the movie, is the opposite. It doesn’t have to be explicit, because images are so powerful. You’re dealing with a cinematic language from adult human relationships that have worked, like Adrian Lyne’s ouevre from the late 80s and early 90s.
AT: What are some of the ways the digital world can enhance moviegoer interest?
Bud Mayo: At Digiplex we are using digital from the get-go. Everybody in our company is part of the social media that we’re creating to reach audiences. Universal may not need our help marketing their movies but the smaller films, the independents, the alternative programming that’s enabled by digital cinema, absolutely we need to reach those audiences. They’re underserved, some of them have stopped going to movies a long time ago, we’re bringing them back and when we do we’re introducing them to a whole new picture of what’s going on in the theaters, social media, the digital era we now live in, what we’re working to use to change the equation and to move the needle with Facebook, and social media of every type.
AT: How does Facebook work in this regard? How do you work with the studios?
MJ: I come from a studio background and the film category is the first category … We’ve done a really good job of becoming fundamental and foundational for how studios market their films. We always think of our studio as a distribution platform… This is the beginning of the company. You see whether it’s building awareness 12,13 weeks out to the week of release–I’m really proud of the way studios are leveraging what we do. We’re not part of every bit of the conversation… We work really closely with Adam and his team, we’ve become part of the mix… The idea, especially films people may not know about, there is social currency in saying you saw a film and you liked a film. There is value in that and that’s part of human nature.
BM: Exhibition needs to be part of this. We’re talking about Facebook, Twitter and all the other social platforms, but we as exhibitors need to become part of that platform…. We need to nurture that relationship and bring them back, and we’ve got the tools to do it.
The fabric of what we’re building at Digiplex: we’re looking to be in all the top markets of the US. We want a presence to be able to interact with audiences throughout the US and to pinpoint what they’re looking for, understand what it is, the Amazon model, and a very big part of where exhibition needs to go is to peek at the future of exhibition because how you use these tools and how you communicate with audiences and sell out an auditorium…We can do that, too while we’re filling in the gaps around these major wonderful movies and still remain at the core of the business.
AT: The question of On Demand: moviegoers wanting to see movies in different ways. Let’s get into this windows issue, is there room for experimentation, is there wriggle room?
AF: I hope so..When people go to the movies they talk about their experience of going to the movie theater… I say it every year, I believe it. On behalf of our company, we’re spending billions of dollars because we believe it. I think when exhibition believes it in total as strongly as I do, then there will be room for wriggle room because the fear that people would rather stay home and watch a movie on television would start to go away enough to allow for experimentation.
If you just deal with factual business reality, the factual business reality is very straightforward. The studios are losing billions of dollars a year in revenue because the DVD market has declined and has largely been replaced by much lower revenue generating options. We are owned by public companies who demand responsible business practices.
For us to continue to have enough money to make enough movies to stock all these theaters with great product, we need to be able to generate a proper return on investment, we need to claw back some of that revenue. I believe there are people who love going to the movie theaters. It is a fact that people who go to the most movies in movie theaters buy the most DVDs. It’s also a fact that for years the notion of a DVD in a movie theater was impossible to comprehend because that was the enemy. It’s not the enemy.
I think there are lots of examples that suggest that viewing begets viewing and consumption begets more consumption, I think you could find it in sports, in how our company handled the Olympics this past year. NBC decided that you were going to get to see every single event live on some platform as it happened even though the massive amount of revenue they paid to get these rights was in people tuning into the prime time show. A lot of people watched on different platforms live and then more people than have in a long time watched in prime time.
Because the experience of watching the Olympics, produced by a great network in primetime, is different, the way it’s packaged, the way it’s sold — it’s different. I’ve been in the best private screening rooms on the planet. They are not what a movie theater is. I believe movie theaters are spectacular and special and cannot be replaced and won’t be replaced and all I tried to do in the famous last test as to begin. I don’t know what the answer is but I know if we don’t experiment we won’t find out.
AT: Isn’t there some evidence that 3-D new releases show that you can have a scenario that works?
AF: I argue that it is good evidence but there are certainly exhibitors who have argued with me that it’s not…We opened “The Lion’s King,” the DVD was available a week later but still did not open to 100 million dollars, it’s not perfect, 3D in particular but there’s lots of evidence but all I am hoping is we find a mutually safe way of experimenting with what consumers want. I didn’t even mention the piracy issue. Clearly and we can look at examples in other industries, I’m not sure the millions of people who illegally downloaded “Avatar” in the first 72 hours it was in theaters or that it damaged box office … all did it because it was fun to do something illegal… by the way I do have great conversations… I understand the challenge, I understand the anxiety and I genuinely hope those conversations will lead to something meaningful.
DP: Let me go back to the 3D re-release issue and for me…the cinematic experience, it’s about telling the story so it really leads from an exhibitors’ standpoint that the general premise of the re-release is that you’re not telling a new story, you’re showing it in a different format. If people already have access to the story, there’s less damage to the exhibitor and we as exhibitors are very selfish and defensive but from our standpoint the argument that a re-release is the same as a new release with a new story, it’s not enough evidence.
I will say it’s not enough evidence to convince the exhibitor that day-and-date works. The biggest thing we struggle with as exhibitors, if you look at the revenue stream for a feature, there’s one piece or one bite of the apple that exhibitors get, and if one, just one patron would choose not to go because of a windows or day-and-date or an alternative method, then the exhibitors and the studios are hurt. I think the difficulty in the release window issue is that it’s more than just a question of when something is released. There’s a whole bunch of things that happen in that equation, from DVD sales to the home all the rest.
The formula and the solution has to include all of those things and where the exhibitor fits in that revenue change. I think it’s an entirely new model. Adam is right, we’ve had very good discussions, and I wish all studio chiefs were as open to that kind of dialogue as Adam. I think if we could sit the top 10 exhibitors in 7 studios down and have a 2 day workshop, we actually would create a new model that would work for all our benefits. That’s hard to do.
BM: I would argue that re-release 3D is an anomaly. Leveraging the huge marketing spend makes complete sense and there are some features that lend themselves to an earlier DVD download release. Today a download rather than a DVD sale, I think that moviegoers do buy content and there is no reason why we can’t be part of that process and actually sell the downloads, sell the DVDs in our theaters. The audiences will have already seen the movie, we can work through this in another window, so I think that what we need to do if we are going to change the model, we need to think about changing it entirely and we’re not talking about windows alone. There needs to be a discreet film window. What about day parks? What about day parks booking? Those kids are in school, they’re not going to the movies. It’s not the same thing during the day as it is in at night or late night and we need to start as an industry figuring out how to make that work.
MJ: Facebook doesn’t have a dog in this fight but what’s happening in the digital space, a trend, is this idea of curation, that the exhibitor in the local market has an editorial point of view that could extend beyond the screening of that film. Whether it’s becoming a curated place where downloads and DVS are being sold, creating demand for content that’s coming in the future and allowing people to talk about that in a meaningful way does have a ripple effect. When we started Facebook we started with bands in Boston gaining a little bit of cred, that’s how things grew and that idea of curating content. This idea of hyper-local is an important one writ large across social media, if the local exhibitor becomes the editorial point of view for our film.
DP: I want to add one more thing to this whole model question. One of the things I think would benefit us all if we figure out a way to grow the pie rather than simply argue over who gets the slices of it. Facebook could play a role in that, so could studios will play a role and I think exhibition with an open mind can play a role in that.
AT: What might the model be?
AF: We as a studio have been sort of studying the way a company studies, as any senior management team would. I don’t have answers. I knew if I came up here the conversation would end up here. And all I want to say is that people, once we were done with that conversation, I think people should go back and look at what I was proposing we do. The strategy behind it was awkward but in terms of what I’m hoping to accomplish I think that test was a good example of where we might start to learn.
My fundamental belief is this: I think there are people who love movies and love going to the movie theaters but who don’t have time — they tend to be people of a certain age, with children, of a certain professional life that makes it hard for them to go as often, but that they would like to be part of the dialogue of movies when they are at their MOST relevant which is early in the life cycle I believe there is a price point where we can bring those people who might not go to the theater and who may not be current DVD or even media purchasers because by then because it’s not the relevant thing anymore, we could probably find a price point in the delivery method where we add to the pie by bringing them in. That was the hypothesis, “The Tower Heist,” hypothetically begin to learn whether that works or not, we are open to finding other, different ways to talk about it but the basic concept was modeled around that.
AT: The other issue has to do with adult moviegoers being frequent moviegoers who aren’t being targeted for movies throughout the year. Been driven away to television, I’ve never understood why studios were always so willfully letting that happen.
MD: That’s a great loss for the industry and if that happens. Those movies, it means they have to be good to market them. We just happened to fall into a mini-slate with Sony with “The Social Network,” “Moneyball,” “Captain Phillips,” they’re all movies that were developed and designed for that audience. Sleeper hits were our business plan, but they’re work. They’re artisinal almost. They’re hands-on, do-it-yourself, exquisite movies to put together but they require skills involving story development and sometimes in the conversation about doing them summer tentpoles, it’s hard to have both conversations at the same time for a studio. The execution dependent movies are risky, tentpoles that look like a return on paper can go spectacularly wrong when they go wrong. When the midrange movies go wrong, it’s not as impactful sometimes when they go wrong, the whole genre, the drama doesn’t work, ‘oh we’re out of the drama business,’ it becomes a self-perpetuating thing, and those things are dropped off the development slate.
AF: That’s all fair, but I would say from where we sit it’s certainly nuanced and in many cases far more complicated than that. People like Mike are going to continue to be able to make the kinds of movies he referenced because a) he has demonstrated an extraordinary ability to make those movies well, b) he has demonstrate willingness to create those movies brilliantly on a budget that a studio could still come up with a rational business model to justify. C) Studios are still making movies like “Les Mis” and other films targeted to adults. D: The problem is not just studios A) not wanting to make quality product which I don’t believe for a second, or B) giving up on drama and letting TV viewers. The proliferation of good cable TV channels has made it possible and likely that television will be– talk about the great TV programs that everyone is talking about, and that kind of spectacularly-created episodic television is doing a great job of satisfying audiences in the category of drama. So while there’s still room for great certain types of drama in theater, we can’t ignore the reality that television is doing a great job of scratching that itch for a lot of consumers and the episodic quality of it is really compelling to people and we can’t ignore that reality as we figure out what kind of movie can get people to go to a movie theater which is the number one priority for all studios.
BM: What about thinking programmatically when you’re talking about the series on HBO or Showtime that is aimed at adults, why not a series that can play in a theaters programmatically for audiences able to go to the movies during the week, to bring empty-nesters, seniors, maybe singles back to the theater during the week which is the time that David and I have to deal with Monday through Thursday when almost no one’s in there, it would be great to see studios and distributors and people who acquire those rights could bring them into the theaters and target those audiences.
AF: The creative challenge of, what is that content that is made for a responsible price from a business standpoint, and a consumer says you know what that is the kind of content I want to leave my house for. You ask, is this an experience better had by somebody in a movie theater? The answer may well be yes, it’s hard to greenlight anything, but I do think we’re trying to wrap our minds around trying to do it. There is clearly capacity available in theaters when we give people a good experience in theaters they express their love for it. Figuring out how to use that reality in a mutually beneficial way should be a priority.
BM: The tools are there. Take the Metropolitan Opera, bringing in audiences for years and once you’re there, you can talk to them and start offering them things they would be interested in, the ballet or the symphony. Certainly that audience, the boomers, the empty-nesters, the senior citizens, need to be targeted, we need help in acquiring the content that they want to see.
AT: What can we do about small theaters not able to get quality adult fare for indie product for their theaters?
BM: What we’re doing is out there looking for alternative programming to fill the space that needs to be filled and targeting audiences that are in a position to go to movies during the week. When we talked about programming a network and that analogy that I heard before, it’s the same thing in a movie theater, who wants to go to the movies. Who is able to go to the movies during the week. I would suggest empty-nesters, senior citizens, and singles. Independent film in every theater we want to do. we just created a fourplex inside an 18-plex, different look and feel for a place to go for people interested in film culture.
AT: What can Facebook do to help with this? Do you do polling?
MJ: We work closely with the studios, some more than others. How do we use tools to inform the citizens? The way we’re working with studios closely, I’ll get a call on Sunday night, ‘I’ve got my Monday morning marketing meeting, how does it look, can you run some polling against this audience for me, so I can inform?’ I love that studios are using us that way. We work with studios in how they’re naming a film, it’s targeted to this audience, can you run some polling and give us an answer now. Pitting a movie against another movie in a quarter. We felt strongly after we polled that they should keep the movie where it was and it won the weekend. Market research has been important in tech and social prominence. People like Adam and his team and Michael Lynton got involved with us and built a relationship with us early on.
AT: Are the exhibitors taking full advantage of the marketing side of Facebook?
MJ: There’s only so many hours in the day. We’ve created a set of tools that are easy to use that allow people to communicate with their constituencies in a meaningful way. Theater chains are using our platform to tell stories locally.
DP: We had a prohibition when I first stepped in at Carmike against our theater managers being on Facebook or putting their theaters or saying anything about Facebook. We’ve come a long way. Now we’re posting theater managers and their staffs, particularly these high school fine arts kids, they will create skits to promote “Ted” coming to their theater. It’s cool. We’re still learning what we can do with Facebook and other social media forms. I’m excited about what we’re finding, the number of fans and likes were getting, and the offerings we’re able to do to try to pull in a little bit more incremental attendance. And the power that we see in that is enormous. Social media has a very big and fast payback.
MJ: So much decision making is being made standing in front of a theater. How can we become more part of the process at the 18plex in Grand Rapids. One thing we’re seeing is experiences is what people care about, checking in places, ‘what are you doing?’ It’s an attitude–we can work with a combination of exhibitors and distributors to solve what is that decision going to be at 8 PM, go to the theater or make a left turn and go somewhere else.? If we can be Henry Kissinger in this discussion and bring together the ten top exhibitors and studio heads, we’d like to host that.
AT: Where would you like to see things go in the future?
MJ: The theater is the last place where it’s very didactic as to what you can and can’t do that. ‘Why do I have to put my phone away? Where is the iPad? Why is this the only place where I can’t do what I normally do?’ I don’t want to sit next to a kid texting or using an iPad in a movie, but I like the idea of flexibility and testing, there’s not as many movies being made as need to be made to support the people who are depending on it, we need to have some flexibility of what is the movie experience is, as a platform on which films are marketed as well as a fan.
BM: It’s about what you do with that technology. What we need to do as an industry is we’ve got to think about interaction, we’re starting to see evidence of studios, like Disney. The technology and tools are here, we’ve got to use them. Content above all, do I want to see that? I don’t care what format it’s in or how big the seats are, we want a shared experience, that’s very different, it’s not at home. And finally flexibility in scheduling and how we plan what our people are going to see and when they’re going to see it.
MD: If the studios get into a business model that makes them feel healthy and secure and social media comes online as an engine for discovering new talent, it’s a new era for finding filmmakers, the tools of filmmaking have never been more available or cheap and they’re sophisticated, there are films being made on iphones and shown at Sundance, we’re on the eve of an explosion of bringing new talent to studios and financeers and the marketplace, if everything stays on the track it’s on and the umbrella is bigger and the industry able to absorb all these new voices people will show up.
DP: I deal in reality. I’m reminded every day of my responsibilities, we cannot have cleaner theaters, we have to do everything we possibly can do as exhibitors to help them moviegoers enjoy their experience. We’ve got to have better trained people who know the movies, who can talk to patrons when they walk up to the window and want to know about the movies, we’ve got to have more skilled merchandising people who understand profitability models, by upselling concession items, or dvd downloads in concert with our studio partners. At the end of the day we have to focus on the things we can change as theater owners. We can make a little more money and have a few more happy customers if we focus on them instead of some of these other things.
AF: Divine intervention to help identify high quality hits? Representing the studios, they are not all of one mind either. The future is not just from where I sit that exhibitors open their minds to new models and allow for the opportunity for us to learn together how to make this business better, it also requires the studios to do their part. I don’t think all the studios are necessarily doing their part in creating an environment to make it safe either. Everyone has a pint of view. If both sides don’t take responsibility for opening their minds to experimenting to find a better way to do this we’re all going to suffer, large or small, some kinds of consequences.
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