Movies to the Home Revisited

Some things simply never die.  (See There Are Better Ideas for In-Home Movies than Screening Room.)  As long as streaming video on-demand (SVOD) exists, there will be those who want to use it to stream first release movies to the home. 

Each new entrant has an unwavering belief of success, while knowing virtually nothing about how the industry operates.  Heard on the street this month is that Screening Room was expected to sign a studio, although the time has passed.  Another says Preemz, a competitor, hopes to sign a studio next month.  And others are having their discussions, too.  There are differences in the proposals of each, but ultimately, companies in this space want to deliver first release movies to the home with pricing in the range of $25-$50 per movie.  One ambitious story heard is that once one studio signs, they all will sign, and the exhibitors will quickly follow.  Having once flown in that spaceship, it’s good to be back on earth.  Anyone who thinks exhibitors are a bunch of lemmings in search of a cliff is in for a surprise.

But SVOD for first release movies should be possible without the requirement of lemming behavior among cinema owners.  IMAX, for example, picked up where Prima Cinema left off.  Prima, who offers movies in-home for a mere $35,000 (including player and large-screen display), lost its engineers to IMAX.  It would likely be counted among the dead if not for its dutiful servicing of commitments to those who paid.  IMAX, on the other hand, charges over10x that of Prima for a basic home theater, and up to $1M for its top-of-the-line in-home theater that seats 40 people.  IMAX has the right idea.  First release movies in the home is a premium and exclusive service.  It deserves a high price.  That may be catering to social stratification, but it also caters to brick-and-mortar cinema.  IMAX in-home theaters will make IMAX a lot of money without cannibalizing the exhibition industry.

If another opportunity were to exist, it would follow the thinking of Fred Rosen, original CEO of Ticketmaster, the original and very successful retailer of event tickets.  Mr. Rosen instinctively understands pricing, and not one to leave money on the table.  He thinks $50 is too low for streaming first release movies to the home.  $500 is more of a sweet spot.  As Mr. Rosen would say, “a bottle of wine” to the clientele he would sell to.  As with IMAX, a lot of money can be made off of a relatively small but wealthy audience.  Also like IMAX, Mr. Rosen’s model won’t cannibalize the exhibition industry.  No lemming behavior required.

The Rosen model targets an audience for whom a $400,000 IMAX home theater is out of reach, but $500 per movie is well within reach. The difference between super wealthy and wealthy.  The challenge is to avoid selling specialized equipment, further differentiating the model from IMAX, and catering to customer tastes in display screen, rather than dictating it.  Streaming high-bit rate moves into homes of the wealthy should be doable, but for sake of the worst case, let’s say a media block is required.  The media block is given a DCP, and a key, and if all is well, you’re off watching a movie.  The difficulty, however, is in the display.  How to securely transmit the movie from the media block to the beautiful large-screen display specially selected by the customer and likely to be pricey at that?

Nine months ago, the answer was an HDMI interface secured with HDCP 2.2 link encryption.  HDCP 2.2 was touted as the latest and greatest security advance in the industry.  An earlier report covered the end-of-year filing by Warner Bros and Intel against Legend Sky, a manufacturer of a popular interface box called the HDFury, advertised to connect any media player with any display.  The box works with devices using HDCP 2.2.  But it was learned that it was possible to use the box to improperly connect a compliant HDCP 2.2 device with a non-compliant one, essentially breaking the link encryption and rendering the system insecure.

Not well publicized is that Warner and Intel settled with Legend Sky in April, to the advantage of Legend Sky.  This was not the outcome many in the industry had hoped for.  Several things can be deduced from this case.  The first is that securing the home is not so simple.  Each silicon chip for HDCP has a unique key, but tracking which manufacturer has which sets of keys has not proven to be easy.  Complicating the situation is the gray market for silicon chips.  With the loss to Legen Sky, HDCP 2.2 has lost its shine in Hollywood as the means to secure home viewing of all types of content.  Further, replacing HDCP 2.2 it won’t be easy, as it’s now implemented in scores of UHD displays.

In June an add-on to HDCP 2.2 was announced for special applications called HDCP Pro 2.2.  Details have yet to be confirmed, but it appears to require occasional online verification of the devices using HDCP 2.2.  Some exhibitors may recall the early idea in digital cinema when live on-line verification of the projection system was proposed.  Understandably, no exhibitor liked the idea of a failed internet connection causing refunds.  But it could be an acceptable idea for a very high-end home cinema.

There is no shortage of entrepreneurs who believe they have the answer for delivery of first release movies to the home.  The problem, of course, is who is asking the question.  Finding the mythical third party entity that has reason to be sensitive to the brick-and-mortar investments of exhibitors is, well, mythical.  But it would seem possible for industry players to engage in the opportunity, as IMAX already has.  And the technology may be there to support a very high-end home theater that’s a tier below that which IMAX offers.  This is a space to keep one’s eyes on.