I read Ira Deutchman’s recent article about virtual cinema with great interest. As the first to market with a virtual cinema title – Kleber Mendonça Filho and Juliano Dornelles’s “Bacurau” on Thursday, March 19 – we at Kino Marquee have thought a great deal about this phenomenon.
I am gratified that Ira is prophesying what we at Kino Lorber also believe to be the case — that virtual cinema is here to stay for the foreseeable future. As someone in the business almost as long as Ira, I share his commitment to the theatrical experience. I had a hard enough time accepting DCPs into my 35mm world, let alone digital delivery to the home. But when theaters shut down in mid-March as a result of the pandemic, it took me about two beats to realize we had to find a work around, and that work around was digital delivery to audiences in partnership with movie theaters. We called it virtual cinema.
Indeed, the speed at which Kino Lorber and other distributors rushed to market has led to an unfortunate Tower of Babel, but none of us thought we would still be here nearly four months later and counting, and our immediate goal at the time was to find continuity and a return on our not-insignificant investments in titles released to theaters in February and March. Fortuitously, we had launched a proprietary TVOD site, Kino Now, in late 2019, and that provided the backbone upon which we could build Kino Marquee quickly. We considered fast far more important than perfect, a decision I stand by today. Any of us could have taken our titles straight to VOD – and some did – but we small independent specialty films distributors are keenly aware that our success is inextricably linked to that of our exhibition partners. Therefore, everything about Kino Marquee was consciously designed to emulate the theatrical experience, from the theater marquee graphics on every portal, to the opportunity to buy a “ticket” to “screen” a film. We never use the word “stream.”
Ira’s suggestion to create one common virtual cinema platform sounds great, but it’s frankly impracticable. Who will design it? Who will pay for it? Will a financial entity start charging VPFs for its use?
Meanwhile, a number of exhibition venues are launching their own virtual cinema platforms, and I see that as a trend that will continue. I believe most distributors, including Kino Lorber, will be happy to show our films on proprietary theater-based sites … provided they incorporate geo-fencing so as not to pirate other theaters’ customers.
As for Ira’s point that customer service has become the theaters’ burden: I don’t know what’s going on with other distributors’ platforms (indeed, the Tower of Babel effect), but at Kino Marquee, we are the ones who handle what was a large number of customer service inquiries at the beginning, but which have tapered off over time as consumers got the hang of it and we ironed out the bugs. We provide clear instructions for how to access purchases on Roku, Apple TV and Amazon Fire and guarantee a refund to customers who still cannot get it to work. See (and scroll down), here for example.
Ira cites widespread disappointment with the number of tickets sold. Yes, ticket sales do not equal that of physical theatrical. On the distributor side, we were able to make some of that up by playing on a far greater number of screens than we normally get access to. Theaters soon recognized that they too had to aggregate multiple revenue streams, and rather than take films “off-screen” when sales dropped off (which is what we assumed would happen as it does in physical exhibition), most theaters chose to keep all films on-screen indefinitely, leading to diminishing returns per title over time as they focused their marketing solely on new releases. Moreover, as more and more small players saw the low cost of entry to the virtual market as an opportunity, the market became glutted with too much product, much of it second rate, and much of it not properly marketed as theatrical releases.
This is why I am really looking forward to the re-opening of theaters and what we are calling a duplex model of side-by-side physical and virtual cinema. We have spoken to a good sampling of our theatrical partners and the vast majority understand that ongoing virtual theatrical presentations will be necessary to supplement in-theater box office constrained by reduced capacity and customer reticence. Based on these discussions, we envision three duplex scenarios: 1) day-and-date on both a physical and virtual screen on opening day, 2) a right-sized physical opening followed by expansion to a theater’s virtual screen, and/or 3) using the virtual screen for move-overs.
The first scenario maximizes the return on opening week investment. The second encourages customers to return to theaters, but offers virtual to the more cautious customers while buzz is still strong. And the third enables us to capture residual value that is almost always remaining when a film must be moved out of an under-screened environment to bring in the next title. All three scenarios benefit both distributor and exhibitor.
With an eye on the future, Kino Marquee has acknowledged and addressed many of the other problems Ira raises. We have built out an automated payment system that reports and pays theaters on a monthly basis. We will roll out geo-fencing in late July, and with geo-fencing, we will also be able to offer variable pricing theater by theater, and within theaters to enable member pricing.
This brings me to the final, and probably thorniest question: Who owns the customer’s data?
We did not design our virtual cinema platform with the intention of capturing user data. From day one of Kino Marquee, a unique user registration was technically required to provide a secure delivery of the film along with access to our apps. To our surprise and delight, we did capture a list of cinephile email addresses, many of whom chose to opt-in to our house list. Acknowledging that these came from participating theaters, we share the list of buyers with all theaters that request it, and are confining our infrequent marketing messages only to those who opt-in to receive them. And since most of our messages are used to promote our next virtual cinema release which will be purchased via a theater portal with revenue shared, I don’t know what all the fuss is about. After all, we are not planning to open a competing theater across the street. On the other hand, distributors spend tens, if not hundreds, of thousands of dollars publicizing and marketing films only to see theaters benefit from our spending without any requirement to share data with us. Imagine what we could do together if theaters and distributors did more to pool their shared data in efforts to reach theatergoers.
We have never faced a situation like this before, and it is one that requires the utmost flexibility as we draw a roadmap to the future of theatrical exhibition. I anticipate further refinements as we move into the duplex era. Already, we are developing customized offerings such as theater-curated playlists, package-pricing and season-passes, and the option to buy tickets at half-price to distribute to members or resell.
Ultimately, our shared goal is to keep movie theaters solvent and vibrant as together we work to keep the theatrical movie experience alive.
Wendy Lidell is Kino Lorber’s Senior VP of Theatrical and Non-theatrical Distribution and Acquisition.