Film Studios Considering Rental Option 2 Weeks After Theatrical Release

Home theater

Though blockbuster films like Star Wars: Episode VII -- The Force Awakens have raked in worldwide box office receipts in the billions, the big news from Hollywood often revolves around the decline in attendance at movie theaters. This is largely blamed on the rise of viewing options at home, with former theatergoers often choosing to wait to see new films on their 40-inch TVs rather than that 6-story tall IMAX screen.

Changing technologies and social habits are often hard to predict. MTV did not, in fact, kill the radio star, but the market has evolved and expanded with online music streaming, digital downloads, YouTube videos, and more. The new story for home viewing is that the studios' lucrative DVD sales have taken a hit in recent years, due to the exponential growth of both free and pay cable and streaming options.

Studios are now hoping to combat this loss in DVD revenue by capitalizing on new home video choices and getting new movies into that audience's hands faster. According to a new report from Bloomberg Markets, studio heads like Warner Bros.' Kevin Tsujihara have had "constructive" talks with exhibitors about offering high-priced rentals as soon as 2 weeks after they open in theaters. Tsujihara stressed that this was an idea they'd continue to pursue:

"We’re working with them to try and create a new window. But regardless of whether it happens or not -- whether we are able to reach that agreement with them, we have to offer consumers more choices earlier."

This isn't a new idea. Earlier this year, Napster co-founder Sean Parker -- with backing from big name filmmakers like Steven Spielberg and J.J. Abrams -- proposed a $50 rental for new movies through a $150 set-top box a mere 48 hours after their theater release. The new proposals are cheaper for consumers, with talks currently in the $25-$50 range. Considering the rising price of theater tickets, that's in the neighborhood of a 2-ticket purchase in pricier markets.

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Parker's idea reportedly didn't get a lot of traction since it would introduce a third party into the food chain. In contrast, these latest talks have been directly between exhibitors and studios like Comcast Corp.'s Universal pictures. Cinemark Holdings Inc., the third-largest theater chain in the U.S., had previously boycotted Paramount Pictures for releasing films to home video within seven weeks. Now Cinemark has admitted it held preliminary talks in early November with studios about a "premium video-on-demand window."

Studios still get close to half their revenue from theater sales, so any program that could reduce ticket sales could harm them just as much as theater owners. While the once 6-month gap between theater and home release has continued to shrink, it will be a challenge to find that perfect window to maintain theater attendance while boosting home sales. A further wrench in the works is that the fees that cable and subscription services pay for movies are based on box-office sales, so any reduction in theater revenue could impact the home market in another way.

Part of the solution may be in limiting the number and type of films that get quickly offered to home viewers. Spectacle films like Doctor Strange that make additional bank on superior 3D viewing could linger in theaters longer, while the arthouse films and/or late-December Oscar bait could quickly capitalize on positive buzz in the home market. Before studios possibly deliver a deadly blow to theater viewing, however, they should look into more of the reasons movie fans often prefer to stay home -- specifically the recent decline in quality and variety of films hitting the local multiplex.

Source: Bloomberg Markets

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