Jan 21 2006
01:27 pm
By: R. Neal

Here's an interesting article from the other day:

Currently, studios carefully control the release of major motion pictures to maximize profits. Films are first released in theaters, then on pay per view, home video, pay cable networks such as HBO, and finally on broadcast TV.

But the time between those windows has been shrinking. In 1994, the average time between a movie's opening in theaters and its debut on home video was about six months. In 2004, that span fell to four months, with some studios releasing films on DVD even sooner.

(Read more after the jump...)

A typical film now earns about half of its revenue from home video and only about 25 percent from theaters. The remainder comes from selling the film to cable and broadcast TV and other sources. Releasing DVDs sooner would also let studios get more mileage from the millions of dollars spent marketing new movies.

Theater owners argue that people are already staying away from theaters because they don't have to wait long for the DVD. Releasing disks the same day a movie debuts in megaplexes will shave theaters' already thin profit margins, even if consumers have to pay a premium for the simultaneously released DVD.

Profit margins for theater chains generally run in the mid to low teens, according to Matthew Harrigan, an analyst with Janco Partners Inc. If studios began releasing films on DVD the same day as the theatrical release -- an unlikely scenario, in his opinion -- it would "completely collapse the domestic theatrical industry and you would have a spate of bankruptcies," Harrigan said.

Which raises a question: what is the value add of a cinema style theater delivery channel for motion pictures? It sounds like the theater chains are saying, "not much."

I have long believed that theaters are in snack and soft drink business, not the movie business. I'm probably like a lot of people my age, who'd rather stay home and watch the DVD and provide my own (inexpensive) popcorn and soda. But, I also appreciate the "big screen" and awesome THX/whatever sound for certain types of movies. (Although the types of movies that appeal to me as I get older, i.e. movies with a lot of smart dialog, don't benefit much from the "big screen experience" as big special effects extravaganzas like Star Wars, which I pretty much lost interest in a long time ago.) There's also the "going out" and "something to do" aspects of moviegoing.

It seems to me that instead of complaining about DVD release dates, theater chains should promote the "big screen, better sound, better experience" aspects of moviegoing (and offer more reasonably priced snacks) to convince the public that it's a higher quality product and a good value.

They should also demand better product from the studios. If their only product is exclusivity, a lot of people have already decided they can wait a few weeks to see "Deuce Bigilo IX". On top of that, if the studios are now deciding to seek a faster return on their investment by going straight to DVD and cable, theaters chains could become obsolete. Which would be a shame, if you think about it.

veery's picture

That would be a shame,

That would be a shame, especially with a cinema sitting at the core of the downtown commercial revitalization plans. The impressive turnout for classic movies at the Tennessee Theater suggests that sitting in a big, dark room with lots of strangers still has appeal. It could actually be the suburban theaters that take it on the chin since their clientele is more in-and-out, whereas going downtown to watch a movie implies eating dinner or having a drink afterward or otherwise participating in the human density.

As far as how theater chains should respond, how about a card swipe and touchpad in the arm of your chair or the seatback in front of you that gets your snacks and drinks brought to your seat?

Number9's picture

I have been concerned for

I have been concerned for some time about the new downtown cinema. I support the project but two issues are troublesome. First, the increase of 3 million dollars in the scope of work. Second, that Regal will contribute only 2.5 million dollars.

I question whether this will be the saving grace for downtown. I would suggest a fallback plan. Even with new theaters with stadium seating and the expanded concessions the movie experience still depends on the movie. I would think most would agree that movies have become a commodity and do not have the quality of a decade or two decades ago.

Apparently even the movie business has seen this.


"The Backlot: The "chatter" in and around the entertainment industry is increasingly consumed by techno-talk, but one very basic reality seems to be emerging: The major media companies are significantly reducing their financial commitment to the motion picture sector.
Substantially fewer films will be produced over the next year or two. And a significant portion of the production costs of the reduced slate will be borne by hedge funds and other investment groups.

Talk to the corporate hierarchs and you quickly elicit the thinking behind this pullback: Too many movies have been crammed into a market whose appetite for new product has obviously leveled off."

Number9's picture

More news on Hollywoods

More news on Hollywoods problems.


"You look at the slate, and it doesn't appear to be that different from last year," says Brandon Gray of Box Office Mojo. "Hollywood has been letting moviegoers down, and I'm not seeing anything that screams that's going to change."

Even studio executives, who publicly are some of the most optimistic people on the planet, concede that the battle against the box office slide is an uphill one.

The numbers added up to some sad figures in 2005, with attendance down 7% from the previous year, the third straight year of declining ticket sales.

"I don't see us beating last year," says Bruce Snyder, head of distribution for 20th Century Fox. "We don't have a Star Wars or Harry Potter, and that's $700 million right there. That's a big chunk to make up."

Add to that the rising competition for entertainment dollars - from home theater systems to video games to Internet distractions - "and it's clear the movie business is going through the perfect storm," says Tom Sherak, co-founder of Revolution Studios.

"All of these things are colliding at once," he says. "People have a lot more alternatives. Kids are into their computers. Or DVDs. Some people are turned off by the ads before movies."

But Sherak also believes that the attendance slide is part of the historical ebb and flow of moviegoing.

Some sure things

If 2006 becomes the year that saves the day, it will do so with at least 21 sequels, 16 remakes and 10 animated films.

That has some analysts nervous that Hollywood has run out of ideas - and audiences are running out of patience.

Rich Hailey's picture

I wrote a bit about

I wrote a bit about Hollywood's woes a while back, linking their financial troubles directly to the product they are producing. I just wanted to mention that Randy's dream of reasonably priced snacks is a pipe dream. When I was a kid, I asked a theater manager how come popcorn was so expensive. His answer surprised me. Movie theaters make next to nothing on movies; the studio takes virtually all of it. ON a major blockbuster like the Harry Potter movies, it may take 6 weeks or more before the theater gets to keep more than a few per cent of the ticket sales.

The only way they have to generate revenue is through snack sales.

The writing is on the wall for movie theaters, and has been ever since the demise of the drive in. Just as theaters and TV killed the drive ins, so will home theaters, cable, and DVDs kill movie theaters.

But this is not a bad thing.

Freed of the pressure to make a movie that will sell 10 million tickets, filmakers can actually make movies that don't suck, targetting them and marketing them directly to the audience they want to reach.

And, just like the remaining drive in theaters, for those who just love the atmosphere of seeing a movie in a ral theater, there will be enough surviving theaters so that will be an option.

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