The Big Picture

Patrick Goldstein and James Rainey
on entertainment and media

« Previous Post | The Big Picture Home | Next Post »

Studios to movie fans: How'd you like to pay $30 for a 60-day-old movie?

April 7, 2011 | 12:06 pm

Movie_theaters In the NFL, the 2011 season could be wiped out by a nasty labor battle between the owners and the players union. The NBA could end up having its own titanic labor showdown this year as well. But in Hollywood, all is quiet on the labor front. The real war is between the studios and the movie theater owners.

In recent weeks, theater owners have been fuming as word has leaked about plans by at least four studios — Sony, 20th Century Fox, Warner Bros. and Universal — to make a deal that would enable consumers to watch some of the industry's biggest hits on DirecTV just two months after their release in theaters. The new service, which could start this spring, would charge $30 for video on demand (VOD) rentals of films before they become available for sale on DVD or for rent through Netflix or Redbox.

When my colleagues Ben Fritz and Richard Verrier first reported on the existence of an initial version of the plan, they got an earful from theater owners. Gerry Lopez, chief executive of AMC Entertainment, the nation's second-largest theater chain, said, “We do not intend to screen movies released under such circumstances.”

This kind of nuclear option from exhibitors would be bad news for the four participating studios, which, according to early reports, are considering releasing such titles as Adam Sandler's “Just Go With It,” the Farrelly Brothers' “Hall Pass” and the Matt Damon-starring “The Adjustment Bureau,” though Sony is now reconsidering involving the Sandler film in the initial offering.

No one at the participating studios is talking on the record, but privately they argue that the premium VOD service would create a new window for movie consumption. They say studies have shown that only 3% of the theaters' box-office take comes after the first 60 days of a film's theatrical run, so the new service wouldn't significantly cut into any box office proceeds. They also argue that an enormous segment of the potential movie audience rarely frequents theaters at all, so having the ability to see a relatively new film in their living room would be a serious drawing card.

But I have one simple question: When would you ever pay $30 to see an Adam Sandler movie? Or, for that matter, a movie from the Farrelly Brothers, the Coen Brothers or even the Jonas Brothers? As it stands now, you can see a new film in a movie theater for roughly $10. Or you can wait 100 days or so and pay $15 for a DVD or rent the film for $3 or $4. Or wait a little longer, in some cases, to order it from Netflix. But $30? C'mon. I think I speak for many moviegoers when I say that even if you told me I could watch an Adam Sandler movie two months before it was released in theaters, I still wouldn't pay $30.

The same goes for most current Hollywood releases. In fact, that's why the studios seem willing to make such a strange, almost desperate gamble. Faced with all sorts of economic tribulations over the last several years, most moviegoers have been spending less on movies, not more. In fact, you might say that the real enemy here is Netflix, which for $9 a month gives consumers the convenience of movie ownership without having to ever buy a DVD.

The studios seem to be trying to establish an entirely new — and pricey — rental model, since this new premium service will still be a rental operation, with the right to see the movie expiring after a three-day viewing period.

Studio insiders say the $30 price tag is just a starting point, one no doubt fixed by studio lawyers who probably stared at their shrinking DVD balance sheets and said, “OMG! What if there were really a bunch of crazy people who would pay $30 for a three-day window to see ‘Hall Pass'?” But the price tag raises the question — just who do the studios expect to pay that kind of money to see a film that will be available 40 days later for $3.99?

One obvious target would be the 18- to 25-year-olds who have grown up consuming content (legally or not) through their computers and smartphones. Alas, they are the group least likely to pay $30 to see a movie, not having that kind of disposable income.

Others have argued that the DirecTV premium service would be a great deal for families with young kids who already pay $30 to schlep three kids to a theater. But as the parent of a 12-year-old, I can assure you that if all of his friends are seeing a hot new film on opening weekend, it will be small consolation to him for me to say, ‘Hey, don't worry, we'll be able to see it in 60 days on the living room couch.'” For kids, 60 days might as well be 60 years.

The biggest potential audience for this kind of service is older-than-40 moviegoers who don't like to brave the crowds, pay for parking or listen to the knucklehead in the row behind them chat on his smartphone with his buddies about where to eat later. If they've spent a fortune on a home entertainment system, why not shell out $30 more to see a movie at home?

It might be a nice little payday for the studios, but at what cost? After all, even if DirecTV doesn't announce what titles are debuting on its service until after they're already playing in theaters, exhibitors can still retaliate by pulling the movies after their fourth or fifth week of release, a move that would hardly be noticed by most moviegoers but would force studios to leave millions in potential theatrical revenue on the table.

Trying to get consumers to pay more to see a film 60 days out isn't a new window of opportunity. It's just a bad idea. With theater attendance down 20% this year, the last thing studios should be doing is creating more indecision in the minds of their customers.

It's never good for business when you encourage your core customers to start wondering — should I wait 60 days and pay more? Or wait 100 days and pay a lot less? The more time people spend thinking about the price of the product, the more time they have to realize that the product isn't worth that much in the first place.

-- Patrick Goldstein

Photo: Moviegoers gather under the marquee in 2002 to attend a new film at Universal Citywalk Theaters. Credit: George Wilhelm/Los Angeles Times