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Art House Convergence Releases Open Letter Opposing Proposed ‘Screening Room’ Platform

Art House Convergence Releases Open Letter Opposing Proposed 'Screening Room' Platform

The Art
House Convergence (AHC), a specialty cinema organization representing 600
theaters and allied cinema exhibition businesses, has announced today in an open letter its position on Screening Room, the controversial and much-buzzed-about day-and-date home viewing platform being backed by Napster co-founder Sean
Parker and Prem Akkaraju and championed by such directors as Peter Jackson, Steven Spielberg, Martin Scorsese, Robert Zemeckis, J.J. Abrams and Ron Howard. Screening Room would sell home viewers a $150 screening device and would then allow them 48 hours to watch new movies on the same date they open in theaters for a $50 dollar per household charge. As news around the new platform has grown, the AHC took to polling its members to hear their take on the new technology. 
In short: They oppose it.

For AHC, the issue at hand is not any problem with the day-and-date aspect of the new technology (nor are they denying that home video is desperately in need of new options) but the impact they foresee on the cinema market itself. Coming from an organization made up of actual theater distributors, this should come as little surprise.

Although AHC is concerned about the quality of home-viewed films and the possibility of a major uptick in pirating, they also have a number of questions regarding the various financial implications of such a service. While the original proposals for Screening Room have indicated a revenue sharing plan for theater exhibitors, the AHC has a number of questions as to how this will actually play out, and what financial benefit, if any, they will see from it.

The final world? “At this time and with the information available to us we strongly encourage all studios to deny all content to this service.”

READ MORE: The Screening Room’s Home Viewing Platform Gets Peter Jackson’s Support

You can read the full text of the open letter below.

“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

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

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

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

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.”

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

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