In the past week, a new startup from Napster co-founder and Facebook catalyzer Sean Parker has found its way into the not-so-rosy limelight. Screening Room would reportedly let you stream new releases to your home the same day they hit theaters. Not surprisingly, theater owners are pissed. Meanwhile, some of Hollywood’s most powerful directors think it’s a great idea…
In the past week, a new startup from Napster co-founder and Facebook catalyzer Sean Parker has found its way into the not-so-rosy limelight. Screening Room would reportedly let you stream new releases to your home the same day they hit theaters. Not surprisingly, theater owners are pissed. Meanwhile, some of Hollywood’s most powerful directors think it’s a great idea.
But for all the kerfuffle, people might be getting upset about not too much. First-run movies at home could have a cataclysmic effect on the way the film industry works. And that’s the reason it probably won’t happen.
So far Screening Room has tried to keep a low profile. Its website offers nothing more than a few addresses, a bizarre logo, and some slightly ominous music. The startup is still in its R&D phase, according to Deadline, but appears to already be in talks with Hollywood execs.
But here is reportedly the idea: Instead of heading to a theater to catch, say, the newly released Star Wars: Episode VIII, the Screening Room would offer it to you at home for $50 bucks, and you’d have 48 hours to watch it. The company has proposed charging a one-time fee of $150 for a cable box-like piece of hardware fitted with tech to prevent piracy, according to Variety. (Screening Room did not respond to WIRED’s questions by deadline.)
For Hollywood, such a change would register as an industry-wide earthquake, and the fault lines are already appearing. In letters this week, the National Association of Theater Owners practically called for a cease-and-desist from the outsider, and indie theaters group, Art House Convergence, warned of the potential for piracy. Steven Spielberg, Peter Jackson, and J.J. Abrams, who are reportedly shareholders, appear to support the idea, while James Cameron and Christopher Nolan have publicly opposed it.
Either way, the current system seems ripe for change. Theater ticket sales are flat. DVD sales are dwindling. Studios are looking for ways to bolster their bottom lines. At the same time, movie lovers have become accustomed to an on-demand world; we want what we want when we want it, especially when it comes to entertainment. Big theatrical releases feel like the old way of doing things, like the last stronghold of old Hollywood.
And yet, theaters are probably the way we’re going to keep seeing major new releases—at least for now. Sure, the technology to make at-home streaming work is already here. It’s something customers want. Some big-name directors are into it. There’s just one big thing standing in the way: the billions of dollars we still pay to see movies in theaters.
A California Wildfire
Three major constituencies are involved when it comes to seeing movies: distributors (Sony, 20th Century Fox, Universal), exhibitors (AMC, Regal, Cinemark), and you. To work, a company like Screening Room needs the support of all three.
That’s going to be tough to come by. For exhibitors, a successful day-and-date home service could kill their businesses—or, at the very least, shrink them. But Screening Room apparently wants to cushion the blow. It’s reportedly proposing to pay exhibitors $20 of every $50 spent on new movies and offering users two free movie tickets.
Why? To work, Screening Room, or a company like it, needs to hatch deals with distributors to show their movies. And Wharton marketing professor Jehoshua Eliashberg says Warner Bros., Universal, and others can’t afford to alienate theater owners—that is, the folks who help them reap billions of dollars not only in the US, but also around the world by screening their movies in theaters.
But even if theater owners were to agree to get that $20 out of every $50 spent, the deal still wouldn’t make sense for them. After all, theaters make a whole lot of money from the popcorn, soda, and candy they sell you too.
Here’s how the basic math plays out. Let’s say a company like the Screening Room pays theaters $20 per release. As it stands now, theater owners tend to split the ticket sales with distributors, Eliashberg says, though the exact split depends on the specific film and theater. Meanwhile, the average ticket price last year was $8.42, according to the National Association of Theater Owners. So if you go to see Deadpool for $8.42 at your local AMC, the theater might get around $4.21 and the distributor might get around $4.21. Suddenly $20 looks great! But you probably aren’t going to pay $50 to see Deadpool at home alone (and you might be paying more than $8.41 at the theater). So, if you go with a group of friends (some of whom buy popcorn!), then the chain makes more money if you come to the theater.
Even so, the biggest fear is that the number of moviegoers who would take the time to go to the theater would begin to slow. Why would you go see a film like Joy in theaters if you could see it the same day at home? Once the floodgates open to watching movies at home, you might stop going to theaters. Indie theaters could suffer from closures, but even larger theaters could find it increasingly challenging to sell enough tickets for certain films.
Theater owners concur. Not only is it unclear who would be paying for those extra free movie tickets the Screening Room offers, says Barbara Twist, managing director of the Art House Convergence, but any time the idea of releasing a movie online simultaneously with theaters has come up, the major chains have pushed back negatively. And the success of theaters overall helps the indies. “The films that try to do it end up doing very poorly.”
Exhibitors are also concerned that an at-home system could lead to more piracy, à la Parker’s better-known startup Napster. In an open letter, the Art House Convergence said, “We strongly believe if the studios, distributors, and major chains adopt this model, we will see a wildfire spread of pirated content, and consequently, a decline in overall film profitability through the cannibalization of theatrical revenue.” In other words, piracy will beget more piracy.
For its part, sources told Variety that the Screening Room’s tech will work to prevent piracy. Twist responds that if there’s a will, there’s a way—and home streaming would invariably make piracy easier.
Just Not Enough
Distributors, meanwhile, are in a more complicated position. After all, 2oth Century Fox and Universal want you to see their films. They also want to get paid for them. Variety reports that Screening Room would pay distributors a portion of the $50, too. So, an at-home streaming service could mean that more people see and pay for their movies. Great! But at what cost?
First of all, you, the movie lover, probably aren’t willing to pay $50 for most movies alone. You may invite your entire family over to make it worth your while, or have a viewing party with friends to watch Deadpool. At that point, however, not only are theater owners missing out, but so are the studios. In the meantime, a competitor to Screening Room would inevitably crop up, leading to a price war, which would drive that $50 even lower.
“This is unambiguously bad for theater owners,” says William Greene, an economics professor at the NYU Stern School of Business, who studies the media and entertainment industries. “But I do not see much of an upside for studios.”
In the end, at-home streaming could mean distributors end up making less money than they would with a box office debut. Let’s say a company like the Screening Room pays distributors $20 per release. As we’ve already seen, distributors get around half of the ticket sale. That means a distributor could make more money if one or two moviegoers paid $50 a release at home instead of going to theaters. But a large group or family streaming the movie would cost the distributor (as would the risk of damaging their relationships with theater owners).
“Star Wars made $2 billion worldwide in theaters alone,” Paul Dergarabedian, a senior media analyst at comScore, says. “How are you going to make $2 billion on-demand? I don’t know how that could even happen.”
But What About Me?
You, however, probably would love to have the choice to watch new movies when you want to, where you want to. Sure, you want to see Star Wars: The Force Awakens and 10 Cloverfield Lane in theaters on a big screen, but Zootopia would work just fine at home. For you, the current system, with its 90-day window between theatrical release and streaming, feels like an antiquated, inefficient waste of everyone’s time.
“We have to look at the changing landscape of the moviegoer,” says David Weitzner, a lecturer at USC School of Cinematic Arts and a former marketing executive at 20th Century Fox. “I have always likened the delivery of the same-day theatrical and the same day on video as the choice you have at a sporting event. It didn’t kill baseball, it didn’t kill football, it hasn’t killed sports. If you want to go to the game, you have the right to go. If you want to watch it on television, watch it on television.”
Theater owners and studios are aware of your concerns too. For you, it’s expensive to get a babysitter, drive to a theater, buy two $15 tickets, and then spend $20 bucks on concessions. It’s a lot cheaper (and easier) to just try out Netflix’s latest show. That hurts studios and theater owners too. As marketing and film production costs have continued to rise, DVD sales have slowed. Weitzner sees the Screening Room as “the first intelligent approach to solving the problem” of dwindling home movie sales for the industry while adapting to what you want.
But theaters and studios are already in talks to shorten the window of time before a film can come to your home, and have tried to experiment with releasing films shortly after their theatrical release. Netflix too has toyed with this model, by releasing Beasts of No Nation in theaters and on-demand on the same day (much to the chagrin of some theater chains). To some in the industry, it’s not clear that it makes economic sense to blow up one of the things that still seems to work. And, if anyone is going to change it, the National Association of Theater Owners says it should come from the inside, not a third-party.
“There’s no question that the world is changing,” Dergarabedian says. “At the end of the day, the consumer will decide if they’re willing to pay. But it won’t be the same experience as seeing the movie in a theater… That’s a singular experience.”
In other words, Hollywood hears you, and it may one day give you what you want. But, for now, you still seem willing to go to the theaters. And the big screen with smiling moviegoers all around you is the way some filmmakers would rather you see their movies anyway.
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