I’m pretty sure that, in 20 years or so, the year 2012 will be remembered in movie circles as the year that premium video-on-demand marked its first major foothold in the business of enhancing the profitability of major films. Sure, we’ve had pay-per-view movies for decades now, but the studios, facing an amazing loss of home video revenue over the last decade (DVD sales are supposedly down something like 50% over the last seven years, and Blu-Ray sales haven’t compensated for that downturn yet), seem to think that premium video-on-demand is the solution to all their woes. If the latest kerfuffle over Tower Heist is any indication, they’re quite willing to shoot themselves in the foot (by pissing off theater chains) if they believe it’ll help them save their leg (make more money and perhaps forestall the piracy problems that pop up as soon as a movie hits DVD).
The initial plan of Universal was to release Tower Heist on premium pay-per-view a mere three weeks after its release in theaters, at a cost of $60 dollars. That is, of course, a plan that only someone who wipes himself off with $100 bills after masturbating would come up with: to justify actually spending $60 for a film, you would need to gather around four or five people just to match what you’d spend for a night at the movies, and you’d of course want to be showing them something that doesn’t look absolutely horrible. No one would buy Tower Heist at that price.
Unfortunately, we don’t get to engage in schadenfreude over Universal’s idiocy, as they today cancelled the plan. Why? Because the National Association of Theater Owners, as well as chains like Cinemark, threatened to boycott the film, i.e. not even bother to show it in theaters, if Universal went through with their plans to release it that quickly after its release. Had they lost a significant amount of screens due to exhibitor backlash, Universal would’ve been stuck paying millions of dollars to promote a film that even people who actually wanted to see it might’ve had a hard time finding, and a lack of theatrical attention would’ve likewise directly affected the number of people who might’ve bought into their video-on-demand offering. (I.e. they would’ve had 20 people buy it nationwide instead of 40.)
It’s all a tremendously interesting affair if you care about the business side of movie-making and theatrical releases. Studios are concerned about losses in revenue, both to piracy and to a shrinking market for disc-based home video sales (and it’d be silly not to consider Netflix’s 25 million subscribers another concern for them), and wish to make up some of that shortfall with pricier, quicker premium video-on-demand offerings. The fight against piracy is one that can perhaps never be won: even if these VOD offerings are copy-protected over HDMI, the quality of someone setting up a camera and pointing it at a nice home video setup will be far greater than even the best theater cam setup would be, and enterprising pirates will be able to release them far earlier than they would be able to do their DVD rips.
And of course, the price point here is entirely wrong: $60 is fucking ridiculous for practically the entire target audience. The only people who are going to pay $60 for a movie are either very large families or people who have great home theater setups who want to invite people over for a night at the movies without having to deal with the hassle of going to the theater. In either case, I can’t see Tower Heist being the kind of film that is going to light these markets aflame. Now, if it was a Disney film like Tangled and it was being offered at 40 bucks after a month in the theaters, I think you’d have a decent shot at getting a bunch of kids begging their parents to buy it again after having seen it once. If it was a Pixar movie, well...you’d likely set some kind of VOD record.
All of these variables, though, including price and timing of the window between theatrical release and VOD availability, can be adjusted. Theaters don’t really care what the price is on VOD offerings, especially not when it’s something absurd like 60 dollars; what they do care about is that window. Exhibitors (which is a more technical term for “theater chains”) are obligated to split the box office receipts with movie studios. Most films will see 60% of the opening weekend grosses returned to the studio; the longer a film stays in theaters, the greater the percentage shifts to the theater. So theater owners have everything to gain from sustained interest in a movie that drives people back into theaters again and again over a long period of time.
Studios? They don’t particularly care that much. If they think they can make more money by releasing a film to video-on-demand within two months, they’re going to do it. They’re perfectly entitled to do so, of course (it’s their movie), but theater chains likewise have every right to say “Well, we’re not going to show this movie if you attempt to undercut our business.” With Tower Heist, a movie that hardly looks like it’ll be anything great, they can get away with that. What’ll happen when a movie studio says that they’re going to put Transformers 4 into video-on-demand within two months, though? Will theater owners really refuse to show it, and lose out on their millions of dollars of revenues? Will studios blink, or call their bluff?
All these questions are going to be answered sometime soon, probably next year. The theater-studio-home video ecology seems to be going through some major changes, and I have to admit that my sympathies are with the theater owners on this one. After locking themselves into 3D technologies, at the urging of studios, that now seem to be as much of a liability as an asset, they’re now being told that their efforts to promote movies will be undercut by studios as soon as its convenient and profitable for the studios to do so. Universal’s choices here are so bull-headed that it’s hard not to interpret them as some kind of ultimate bargaining tactic: they’re pushing the theater owner’s buttons hard right now, but probably always planned on capitulating. The next time they announce a scheme like this, they’ll lower the stakes a bit, and proceed from there until they wind up precisely at the window that they probably always wanted. After recoiling in horror at a three week window, theater owners will likely give in at a six- or eight-week timeframe for letting go of movies. In return, I’m guessing they’ll simply just remove those movies from theaters when they do to VOD. Can’t have your cake and eat it, too, after all.
No matter how all this shakes out, it’s likely that these little squabbles signal something larger, a change in the way we watch movies that will play out over the next decade or two. As TVs get bigger and bigger and cheaper and cheaper, the impetus to go to a theater will likely dim a bit. There is the thrill of watching a film in a crowd full of hushed strangers, or laughing along with everyone else at a good joke, but there’s also traffic and expense and overpriced popcorn and the guy who won’t turn off his cell phone. The problem is that VOD is somewhat worthless without some kind of theatrical release to give a film value, unless the future rapidly changes the prestige of straight-to-video releases, which are now dominated by more obscure films that were never going to make huge amounts of money in theaters anyway. I can eventually see VOD becoming the largest moneymaker for adult dramas and anything that skews towards an older audience, while theatrical exhibitioning remains the major player for effects movies and anything that resembles an event or tentpole release.
Either way, with the Tower Heist plans put on hold, we will at least not have to write our textbooks and say that Brett Ratner was the man who wound up changing the way films were released forever. And that’s a sigh of relief.
How about you, though? If the window on video-on-demand is small enough, and the price reasonable, would you skip going to the theater and simply wait until you can watch a movie you’ve been anticipating at home? How short does that window need to be? Let’s get a bit more concrete: how soon would The Avengers have to come out on VOD, and how much would it have to cost, for you to skip it in theaters?