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?
More money making ploys eh.
Landmark/Magnolia of course has been doing this day and date thing for a while now. You may have a DVD BluRay int eh lobby after the movie, you have a premiere on HDNet with pay per view offerings at other times. So what may happen then is other studios being forced to follow the vertical integration method of Mark Cuban with studios coming together to run chains.
Of course its easier for Magnolia because of the smaller size of their pictures, they don't need a $100 million opening. But I can easily see Time Warner buying a theater chain and then you can watch a Warner Brothers movie, say one based on a Time Warner DC comic character, at the WB theatre, or catch its premiere on HBO. If you wait a few weeks, you can watch it on demand from your Time Warner cable system or directly from the WB films website.
60 dollar VOD is one of those ideas for which everyone involved needs to be fired.
I've been waiting for a plan like this for a while now. I for the most part hate going to the theater to see a film. I'd say about 75% of the time there is something or someone that ruins the experience for me. A person bringing their baby to a 10:00 R rated movie, that jerk who checks facebook on his bright cell phone the whole time, etc.
I'd love to be able to see "current" movies at home through some sort of VOD service. Sure there are movies that a home theater wouldn't really capture the entire experience of, your Dark Knights, etc, but I've had too many terrible theater experiences that I'm willing to give that up for a quiet, peaceful, movie watching experience in my own house.
The complicated side is the price and time frame. When I go to the theater to see a new movie it's usually within the first or second weekend. Once it's past that I almost never bother and just wait for the Blu Ray. So it's going to have to be a pretty tight window and not overtly expensive. I'd pay $60 to see a Tarantino film at home, but not much else.
I honestly just rented my first video-on-demand film a couple weeks back- Red State. Paid about $12 for a 1080p enabled version of it that I could watch in my bed. Reasonable enough, considering I didn't have to trek myself to a movie theater to watch a film that I was interested in.
The thing is, there are event films that you'd want to see in theaters and it would just take a significant, reasonably small price tag for me to stay at home to watch it, for convenience's sake. Even if I calculate the price of gas driving to & back from the movie theater, the time spent waiting in line for tickets, finding a seat, etc, I would probably endure that for a $12 ticket at peak hours than a $60 one-time rental that I'd have to invite multiple people over just to justify the cost. Granted, I feel the same way about UFC/WWE PPVS (which is why I resort to other means to watch them), but still, if there was a reasonable cost for it all, I would consider it. $25-30 sounds just about the right "impulse purchase" price for me to stream Transformers 4: Cybertron on Earth to my TV.
Yea 60 bucks for a movie isn't doing it. Maybe 20 since thats about DVD pice. Hell 50 dollar UFC PPV are getting steap even though i'lll invite friends/fam over and split the bill or go to my local sports bar. Movies aren't UFC PPV though or even WWE you expect it to be 50 bucks for a movie it should be 20 minimum.
I wonder if studios think they can play the long game to make up the money and piss off theaters. Theaters are the #1 way to see first run movies they aren't going anywhere. They need to freaking just get in bed with Netflix I don't wana have to sub to 8 different version of Netflix.
I'd pay $30 to see Avengers 2 weeks after it hits theaters, but any longer of a wait or pricier a fee and I'd just go back to the theater (dollar-kind or otherwise)
Great write up. I can't believe that anyone (even the above-mentioned $100 masturbators) would want to pay $60 for a movie. Unless you're one of those families on TLC with 90 kids.
I'm all for video-on-demand, I saw Red State and Monsters that way and was pleased.
I think it works great for independent films, since those kind of films don't really warrant a big audiovisual cinema experience. It gets the word out quicker how great the movie is, and then it's not a hassle for that recommendation from you on Facebook to them actually seeing it through iTunes or whatever readily available service.
I am willing to embrace this experience if its reasonably priced (60 is far from reasonable). The selection of movies where I live is so limited sometimes I have to choose between Dolphin Tale and Horrible Bosses. Meanwhile, I have to just accept movies like Attack the Block or Drive are never going to be released in theaters because they are not "hip" enough. Its no wonder piracy is so rampant around here...
On another note, all the options I have met of VOD are not available here, since they are blocked by IP. I haven't been able to see videos on PSN, even when I have paid for them. Because of that, I don't see with good eyes the recent movement to a model for full online delivery of content, even when I know its the present and future of movie distribution.
Great piece. I would have loved to see how this would have turned out. Maybe the studio has no faith in Tower Heist and that was why they wanted to use it for this pilot program. Although the success of a Pixar movie would undoubtedly be large on VOD markets, if this plan does bomb, they would be out a lot more money and risk tarnishing a well liked brand.
Heck if you're going to gouge the price, why not go for an even $100? Maybe $150 for the special edition?
"If the latest kerfuffle overTower 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"
Reminds me of a Frightened Rabbit lyric: "I'll cut off my foot to spite my leg." You haven't been getting into Scottish alternative music have you, Rorie?
Great article Rorie.
Like yourself, I'm definitely on the side of theatres here. As much as I've been avoiding going to the cinema over the last few years (only make the exception for places like Electric and Aubinwhich serve alcohol, don't allow children, have reclining chairs etc), it's quite obvious that the major chains are not making money - even with the inflated concession prices.
If studios do insist on closing that gap between theatre and VOD release dates (which, as a consumer, I would definitely appreciate), then they need to completely overhaul the way box office takings are split - theatres shouldn't have to compete with VOD just as a film starts becoming profitable for them. It also cannot be overstated just how important that initial theatre run is in giving a film 'weight'.
I already hate paying $60 for video games. No f**king way am I paying $60 for a movie.
Alright, Rorie... I'm calling you out, dude.
"That is, of course, a plan that only someone who wipes himself off with $100 bills after masturbating would come up with"
Really? I would expect that kind of writing from Alex, but not from the ever-classy Boss of Bosses. Not to sound like a prick, but this sort of writing really turns me off from Screened. Last week or so, Alex made a headline about some movie getting "raped" at the box office. I really enjoy this site and particularly love the movie articles and video features, but I wish you guys would embrace a more mature level of professionalism.
I imagine I'm gonna get a lot of negative feedback for this, but for the most part, I think this is a very respectable movie site. I mean no offense or disrespect, I just wish you guys would clean it up a little more. I feel like most of the content here is not indicative of that kind of sleeziness, and it seems to me you guys are trying to be a recognizable and professional site, so when I see talk like that, it makes me feel like you guys are taking a step back. That is all.
@TheGreatGuero: I kind of agree with you but you have to take the good with the bad. Since these websites have no corporate master to please, they can pretty much do what they want to. This allows them to truly be themselves so we get to really know what their likes and dislikes are even if it shows us their warts along with their great traits. However, the guys are way more in control of themselves than they are out of control with their minds so I just forgive it and move on.
EDIT: To answer Rorie's question, I would probably not watch it on VOD because it would be a movie that is on the list of Movies You Need to See in a Theater First.
Having used an HD projector and 100-inch screen plus surround sound for a few years now, the amount of movies I see in theaters has dropped drastically. Movies come out so soon on Blu-Ray and such that I don't mind waiting anymore. I used to go to the movies every single weekend, sometimes seeing even two or three, but the only thing I can remember seeing this year is the last Harry Potter movie, and that was only because I saw all the other ones in theaters, too. Besides delicious butter popcorn, theaters have nothing to offer me anymore. The next time I go to the theaters will probably be to see The Dark Knight Rises.
So I'm all for faster digital releases, provided their prices are reasonable.
I recently rented Thor and X-Men: First Class on iTunes. I waited for a few months and paid less than five dollars a movie. I personally don't understand why the shift to paid video on demand hasn't happened sooner.