The major Hollywood studios’ flirtation with Premium VOD and their talks with exhibitors has been akin to “tip-toeing up to the edge of the ocean water, and tip-toeing back” Los Angeles film czar Ken Ziffren said today at his ninth annual state of the entertainment industry address before the Beverly Hills Bar Association.
“It’s one thing you don’t do with the major (theater) circuits,” advised Ziffren.
“If it happens,” said Ziffren about studios’ yearning for PVOD, “it’s not going to be one or two or three studios, it’s going to be five and Disney won’t (participate) at the onset because they don’t need to, they’d rather get 63% of the box office.”
“If this (PVOD) does happen, in the anti-trust sphere it’s called conscious parallelism, meaning that they can’t go into a room and agree to it, they’ll go out and do it, and the other guy will say ‘That’s interesting’,” explained Ziffren about how the majors will come to terms with exhibitors over pricing and dating. Studios have been proposing to deliver films via PVOD during “the black period” following a film’s release into the home — a time span that at a minimum is 70 days and goes until 90 days, with a per-title fee of around $30.
Should PVOD become a reality, Ziffren said it would impact how much studios get from a film’s premium pay window. “If you’re potentially, let’s call it shifting $2 billon-$3 billion from theaters to homes, your pay TV license is going to go down. That will be interesting (to see). The majors will all sit on HBO, Starz and Epix and say we need to move the needle a little bit. That will be interesting.”
Studios are proposing a PVOD window in an attempt to make up for losses occurring in the home entertainment sphere. Ziffren noted today that for the six months of this year vs. 2016, physical sell-through is down 10%, physical rental is off 18%, VOD transactions are down 4%, and electronic sell-through is up 8% — though the later remains a very nascent part of the post-theatrical sector. However, the so-called black period is a danger zone for studios, as “what survives in that world is piracy and lack of interest,” warned Ziffren.
While many have wondered what will happen for the greater entertainment industry as Disney unplugs itself from Netflix and starts its own streaming service, Ziffren wasn’t that wowed: “It was a three-year deal with a two-year option and Disney declined to exercise the option to their new terms.” Disney’s deal with Netflix was akin to what the studio would have with a pay-TV channel whereby films became available seven to nine months following theatrical on the streaming service. Marvel and Star Wars movies are now up for auction. “Disney has informed four to eight potential buyers that they’re ready to do business on those pictures in that pay window,” said Ziffren.
What could happen for the greater industry moving forward is that there might be some imitators whereby other studios engage with putting their own libraries on either a genre streaming service or pay TV/ad-supported channel.