At a New Yorker TechFest conversation today, Netflix CEO Reed Hastings told the magazine’s editor David Remnick that “Movie theaters are strangling the movie business. There’s been no innovation in the movie business in the last 50 years.” In Hasting’s opinion, the looming threat from “an oligopoly” of movie theaters are preventing the studios from experimenting with theatrical windows.
Hastings’ remarks come after Netflix’s 10-pic pact with 105-screen luxury exhibitor iPic earlier this week. That deal calls for Netflix movies to play on iPic’s screens when they drop day-and-date on the streaming service. News of the deal triggered a prompt response from the National Association of Theater Owners who warned “The theatrical window is a longstanding industry practice that has benefited studios, theaters and moviegoers…Simultaneous release, in practice, has reduced both theatrical and home revenues when it has been tried.”
Hastings’ comments today jive with 21st Century Fox CEO James Murdoch’s rant approximately two weeks ago when he told an investor gathering that studios “have to think about these crazy hold-backs that theater owners put in place — these blackout periods” while raising the possibility of offering premium electronic sell-through, noting that “a customer really doesn’t care that there’s this National Association of Theatre Owners”. NATO swiftly bashed Murdoch, which prompted mega exhibitor AMC Theatres to wag a finger back at NATO for their rebuke. AMC and Canada’s Cineplex Odeon are two major exhibition chains that worked with Paramount last October on experimenting with a shortened theatrical-to-SVOD window for Paranormal Activity: The Ghost Dimension and Scouts Guide to the Zombie Apocalypse (both titles died at the B.O. because most exhibitors didn’t buy into Paramount’s SVOD revenue sharing plan).
Nonetheless, while Sean Parker’s Screening Room premium SVOD service was all the talk at March’s CinemaCon, many insiders feel that shortened theatrical windows will be a topic that’s front and center at the industry’s second exhibitor-distributor confab, ShowEast in Miami Beach from Oct. 17-20. By and large if distributors have an argument to make for shortened theatrical windows, it’s for low-budget and genre releases as well as titles that tank at the B.O. If studios can segue short-lived fare quickly from the big screens to VOD, then they’ll save marketing cash and keep the films’ alive in consumers’ minds so that there’s not a huge gap in between the theatrical and home release. The counterpoint to this argument is if consumers don’t want to watch debris in the theater in droves, then they certainly won’t want to watch it at home.
If you ask movie exhibitors and distributors: They’re doing just fine. The 2016 domestic box office for the period of Jan. 1-Oct. 2 is at $8.6B, running close to 5% ahead of last year which turned out to be a record year with $11.1B per ComScore…and Disney/Marvel’s Doctor Strange, Warner Bros.’ Harry Potter spinoff Fantastic Beasts and Where to Find Them, and Rogue One: A Star Wars Story haven’t even opened yet.
But here’s the reality when it comes to Netflix per certain exhibitors who went along with their Beasts of No Nation release plans last year. These day-and-date Netflix releases only stand to benefit the streaming service and the potential uptick in their subscriber base; they really don’t do any favors theatrically for these films at the B.O. Further to the point, with Netflix being on the hook for P&A, most of the one-sheets advertising these movie titles are encouraging people to watch them on Netflix (there was a small line of print on the bottom of Beasts of No Nation posters stating that the film was in theaters simultaneously). In general, most same day-and-date theatrical-SVOD title contracts insist on a one week 10-city exhibition run. In such cases these titles are usually being four-walled at theaters, meaning a distributor such as Netflix would pay a flat out weekend theater rental vs. the exhibitor earning a percent share of the B.O. In reality, that’s the only way an exhibitor stands to make money off these same-day deals when most people prefer to sit and watch the film at home on Netflix. Beasts of No Nation failed at the domestic B.O. making $91K from a 31 venue release. However, Netflix Chief Content Officer asserted that the movie was seen by more than 3M people after two weeks of release. The one upside for these Netflix titles is that a week’s run in theaters automatically qualifies for Oscar consideration. Beasts of No Nation earned a Golden Globe nom for Idris Elba’s supporting turn, but won him a Screen Actors’ Guild award along with an ensemble nod.
At CinemaCon, many filmmakers during the studio presentations took the mic to rally the sanctity of the theatrical experience: Why would anyone want to sit at home alone watching a movie like Stars Wars: The Force Awakens when it can be enjoyed on the big screen with a community of moviegoers?
This weekend, iPic and Netflix will debut respectively The Siege of Jadotville. Consumers have two choices: They can pay $25 per ticket (because that’s the average iPic admission price) to watch the movie, or if you’re a Netflix subscriber you can stay at home, forego parking and babysitting costs and also watch Luke Cage, Stranger Things and a multitude of other titles because Netflix costs between $8-$10 a month.