The concept of structured releases has at one time or another driven every type of media. Books were once released first in hardcover, later in paperback. Music was released as singles and as albums. Movies released to cinemas and later to home. Most of these windows have collapsed, providing benefits to the consumer, but with little or no benefit to the industry itself. With full awareness of the failures of others, the cinema industry has successfully maintained exclusivity in the first release window for motion pictures. But as the industry faces issues related to changing consumer behaviors, the subject of exclusivity has become a target for outsiders, who see an opportunity to profit from in-home viewing. This trend was highlighted this past month by the very public announcement of Sean Parker’s Screening Room, which has generated no end of controversy (best captured by this Deadline article).
Screening Room is not the first entity to attempt breaking exhibition’s lock on the first release window. DirectTV, a popular satellite TV provider in the US, tried the same in 2011. Disney announced in 2014 that it had investigated the idea but decided to pass. Paramount staged a failed effort for early release to home of two movies last year.
There are reasons for these attempts. Cinema attendance in the US has been in gradual decline over the past 10 years. While tentpole movies appear to fare consistently well, the decline appears to be driven by lower attendance for non-tentpoles. Movie going is becoming more of a premium experience as the cost of home entertainment options become cheaper. A pragmatic goal, then, is to focus on increased returns from non-tentpoles, which would benefit a wide set of filmmakers and bolster the filmmaking industry as a whole.
The problems of rolling out in-home viewing of movies during the first release window, however, are substantial. Numerous challenges exist:
- Participating exhibitors must financially benefit from sales.
- Non-participants cannot be compromised.
- There can be no compromise in exhibitor negotiation and deal making power.
- Mechanisms must be in place to offset cannibalization.
Exhibitors can financially benefit by receiving a cut from in-home sales.Screening Room has a plan to share in-home revenue, for example. Paramount’s method of sharing revenue was to divide it up among participants, presumably on a percentage-of-box-office basis. Exhibitors didn’t take very well to Paramount’s idea. Early comments heard on Screening Room’s proposal haven’t been much warmer.
A very real concern among exhibitors is the loss of deal power once the window is opened. If the deal is constructed without protections to ensure that exhibitors retain control over in-home viewing, then it’s not a good deal. The protection mechanism should be more than contractual. Most deals offered to date offer no mechanism for exhibitors to affect the market forces that determine their fate.
In-home revenue to exhibitors must be additive to the bottom line. Some cannibalization is expected, where would-be movie attendees transition to in-home viewing. Parameters such as the in-home release date and rental pricing are levers that come to mind to control such consumer behaviors. But without direct access to these levers, exhibitors are at the mercy of another entity. An effective means to manage this situation is needed.
In-home viewing is a complex subject, and one that is expected to receive a lot of attention at CinemaCon in April. Screening Room may not be the answer. But it may be time to pull back from the customary “no,” and begin to ask “how.”