Deadline Disruptors: Why Peter Jackson Sees Screening Room As Cinema’s Savior That Can Put $8B Into Film Ecosystem

Illustration by Bram Vanhaeren

What does a master disruptor like Peter Jackson do after he stares down the possibility of failure that would have bankrupted a studio, and instead finds that gambling on his vision for JRR Tolkien’s Middle-earth bore six blockbuster films that grossed nearly $6 billion, won 17 Oscars and left behind a pile of VFX, 3D and frame-rate innovations that will forever inform the look and manner in which fantasy films are made? This despite long odds that favored Jackson failing at an historic level, odds that didn’t begin to change until Cannes in 2001, when New Line unveiled a half-hour of footage from The Fellowship Of The Ring. 

Cate Blanchett and Elijah Wood in Jackson’s The Lord of the Rings: The Fellowship of the Ring.

After following The Lord Of The Rings trilogy with King Kong, The Lovely Bones, and then three installments of The Hobbit, Jackson has no interest in attempting to outdo himself the way his disruptor pal director James Cameron is doing by making four Avatar sequels in succession at Jackson’s Wellington, New Zealand facilities. Jackson and partner Fran Walsh are content to push the envelope, mostly out of the limelight. But when they return to films, Jackson and Walsh will likely tell modest stories that involve their native Kiwi origins.

Aside from presiding over the world-class facilities — Weta Digital and Stone Street Studios — built with Rings and Hobbit money (the Scarlett Johansson film Ghost In The Shell is shooting at Stone Street presently), Jackson has spent much of his time working for free to help design a war museum in Wellington to commemorate the thousands of Kiwis who fought and died during World War I. Weta has colorized all the black-and-white photographs, he said, “so when you walk through this exhibition, people are emotionally affected because they recognize these were people just like the ones they work with and went to school with. They’re not 100 years old anymore; they’re us.”
Scarlett Johansson plays the Major in Ghost in the Shell from Paramount Pictures and DreamWorks Pictures in theaters March 31, 2017.

Jackson will throw the same energy in another venture that will likely be a loss leader, and that is a permanent museum to house his vast collection of movie memorabilia that goes back to the first films ever made. It also encompasses every stitch of Middle-earth wardrobe and the detailed miniatures that took months to craft and formed the architecture of the Rings films, before such work was abandoned and done entirely on computers. I toured those warehouses full of his collections last summer, following the perpetually barefoot Jackson as we tripped over the models for epic places like Minas Tirith and Sauron’s Castle, the latter so big it had to be broken down into four pieces.

Because Wellington has a modest flow of tourists, he expects the museum to break even at best, but at least a collection that Guillermo del Toro told me was the most important Hollywood memorabilia stash of any single collector will be put to good use.

Jackson is also housing Magic Leap, an innovative company making strides in both virtual reality and augmented reality.

These gestures to enhance Kiwi pride and continue to push the visual envelope led Jackson to Screening Room, the service hatched by Sean Parker, the Napster/Facebook/Spotify genius, and music executive Prem Akkaraju that involves the manufacture of set-top boxes that will let customers view new films at home the moment they open in theaters; the $50 charge being split between exhibitors and studios, with the upstart service taking a taste.

Initially as wary as filmmakers like Cameron that the service would hasten the eroding crowds that fill theaters, Jackson dove in headlong into every facet of the proposed technology. And he came away with the staunch belief that Screening Room offers the best lifeline to the moviemaking ecosystem since the advent of home video.

The fact that Parker and Akkaraju aren’t talking, and those who’ve become advisors (they are also shareholders) signed NDAs, positioned Screening Room to become a polarizing proposition when it was clumsily leaked earlier this year, before it got the necessary blessing from theater chains and studios. This led filmmakers to feel they had to choose a side, and NATO and other exhibitors to pick up their pitchforks and lighted torches in outrage, even as Steven Spielberg, JJ Abrams, Martin Scorsese and others pledged their support.

empty movie theaterJackson is so convinced that Screening Room will help exhibitors and studios rake in a windfall that could exceed $10 billion — by engaging 25- to 39-year-old customers who’ve almost completely bypassed cinemas — that he is the first major filmmaker to go public with a detailed rationale, with the blessing of the Screening Room brain trust that put several years into the anti-piracy technology and other R&D in the prototype set-top boxes.

Jackson isn’t cowed by the negative press narrative. First of all, he said the conversations going on behind closed doors are different than the volatile press reports. Second, until New Line showed 30 minutes of The Fellowship Of The Ring footage at Cannes in 2001, with Howard Shore conducting his soaring soundtrack, Jackson, New Line and Middle-earth were treated as a joke by media certain it would end Bob Shaye’s upstart film studio.

This is the thing about Jackson, after he came out on the right side of one of the most daring bets in movie history. He doesn’t get rattled, but he also doesn’t forget the ulcer-causing stress bath that was every moment of that Lord Of The Rings journey. It’s easy to look at the money generated from box office and ancillaries and forget how close Jackson came to losing the property, after Harvey Weinstein was told by Michael Eisner that Disney wouldn’t make the two movies Jackson scripted with Walsh and Philippa Boyens. If Jackson hadn’t gotten a yes from New Line’s Bob Shaye, he would have left the project behind.

Even then, the massive production commitment to shoot a trilogy in succession (which hadn’t been tried before) created hardships and escalating budgets as they tried to develop the technology needed for visuals that had never been seen in a movie before. Jackson recalls a particularly low moment, when it appeared his gutsy backers at New Line had had enough.

“Everybody had put everything on the line,” he says. “Not that we had a lot to put on the line at that moment, but doing three movies at once, if the first failed, then certainly it would not have done our burgeoning careers any good whatsoever. Until Cannes in 2001, all the stories were about how this would most likely fail: The Lord Of The Rings was un-filmable; Ralph Bakshi intended to make a two-part movie but stopped at one because it didn’t do well; and the history of fantasy films wasn’t good. The odds were on this being the end of New Line rather than a new phase.”

Jackson remembers shooting the Helm’s Deep sequence for The Two Towers. The production took place in a quarry outside of Wellington, where they’d built a full-scale Helm’s Deep set. “You couldn’t drive to the top,” the director recalls. “You had to walk up these long quarry roads.”

Things at the time were tense with New Line, because of the budget, with Weta pouring huge amounts of money into the conception of Gollum, a computer-generated principal character that had been completely unprecedented at that point. “Our producer, Barrie Osborne arrives. I’m in the middle of shooting, but I can see down the hill and he’s half a mile away as he gets out of his car carrying this giant box. It takes him 40 minutes to walk up the hill, and I’m peeking at Barrie’s progress now and then, thinking, ‘Now what does he want?’ So he gets there, panting and out of breath, and he plops this box down, and says, ‘Peter, I brought a satellite phone,’ because we didn’t have cell phone reception in this quarry. ‘Michael Lynne wants to tell you they’re going to sue you if some budget thing doesn’t happen, and you’ve got to talk with him.’ I just said, ‘Barrie, tell him to sod off because I’m trying to direct this movie.’ ”

Back went Osborne, down the hill with his oversized suitcase, as Jackson resumed shooting Helm’s Deep and what we now know was one of the most stirring full-scale war scenes ever put on film.

Helm's Deep“Now, that wasn’t very gracious of me, looking back; but I was on edge, Michael Lynne was on edge, everyone was on edge,” Jackson says. “We are just human beings trying to do the right thing, and looking back now you can see everyone’s point of view. That type of thing was going on all the time, and everyone was stressed, and all these press stories were saying how stupid this was; how it was guaranteed to fail with this unknown filmmaker who’s never done anything and whose last film, The Frighteners, was a failure. ‘Why the hell would they give three films to him?’ ”

Hindsight is 20-20, “and in a way, all this was good because it fuels you,” says Jackson. “There’s something about adversity that makes you think, ‘Hey, I’m going to prove all of you wrong.’ Everybody involved in the film felt that, from the crew, to the cast, to the studio. They were all driven to prove the naysayers wrong. It wasn’t much fun at the time, but it provided us with a bit of juice, that’s for sure.“

All of this brings the conversation back to Screening Room, and the steady erosion of moviegoers in a digital age where, from TV shows to Internet and video games, consumers get what they want, when they want it. Movies are the only exception, where consumers must go to the theater or wait 90 days for an alternative, legal way to view a movie.

“It’s pretty frightening when you look at what the real health of the industry is,” Jackson insists. “Do you think any one of us — from Steven Spielberg, to JJ Abrams or Martin Scorsese — wants the moviegoing experience to die? Of course we don’t. But it is dying, slowly. We want to inject health into it, to give the cinemas money they can use to improve the experience, and to give the studios money to get more films made. The only way you can do that is to somehow get those people who are stuck at home, who can’t actually see the movies but want to, and can pay 50 bucks, so that all that money can go to the exhibitors and the studios. I am a film guy, and if I didn’t believe in Screening Room’s positive impact on the exhibition industry and the studios, I would not have anything to do with it.”

In fact, Jackson went in with that mind-set when first approached by Parker and Akkaraju. “When I first got introduced to the notion of this, and they gave me a presentation, I went dubious, thinking it sounded like a really dumb idea. I kicked the tires relentlessly, and stayed involved, and have constantly talked to their security guys about my issues, trying to help this be what I think it needs to be: a positive thing for the cinema industry, the exhibitors and the studios.”

As we spoke, Jackson built his case:

— “Of all the cinema seats available on any day in the year in America, from the first to last screenings, 82% of those seats go unsold, and are empty. So the question becomes, how do we sell more cinema seats?”

— “From 2014 to 2015, the number of frequent moviegoers — those who see more than three films a year — dropped 10%. We get told about last year’s record box office grosses, but the wool is being pulled over people’s eyes. For the health of the cinemas, you have to concentrate not on the gross but on the admissions; the number of people who actually go to the cinema. In 2002, there were 1.57 billion people who went to the cinema. Jump to 2014 and it’s 1.27 billion. So 300 million fewer tickets were sold. They’re losing the audience and keeping the dollars up artificially by raising ticket prices.”

— “Screening Room will allow studios to make more films, and I do think the only way to get more people into cinemas really is to have more films, and a wider diversity of films. To do that, you’ve got to allow the studios to be able to make more films. They’re making as many as they can now and the industry is right on the knife edge. Back in 2002, 205 films were made and released by studios; in 2014, it was 136 films. There has to be a correlation between people not going to the cinema as much anymore, and that there is not enough diversity in films for people to want to go see.”

So how does a service that doesn’t fix the numbers of people seeing movies in theaters help stop that slide? Jackson is glad I asked.

— “The cinema chains themselves are not in great financial health; they’re operating on the smell of an oily rag, as we say in New Zealand. Right now, I don’t think anybody can present a case to say that the exhibition industry is in a healthy stage. We want it to be; that’s the whole point. We want to make it better. Screening Room is designed to sell movie tickets to people that want to buy them but can’t. That is critical. Who are those people? The frequent moviegoers — the ones that go to three films or more and generate over 50% of box office — are only 11% of the moviegoing audience. So 89% of everyone that goes in the theater only sees one or two films a year and those are the ones you need buying more tickets.”

— “Here’s the key to Screening Room: In 2014, people aged up to 24 went to the cinema 15 million times. People 40 and over, 15 million. Then look at the key age group — 25-39 — there was only 6.7 million people. That’s because a lot of those people are bringing up young families, concentrating on their careers. Most of them were frequent moviegoers when they were younger, but not now, because they cannot get out. The people we don’t want to sell Screening Room to necessarily are the up to 24s and the over 40s. The 30 million. The people we want to try to sell this to, because it involves buying cinema tickets, is the age between 25 and 39. If you look at the high income officials in that group with young families they number approximately 35 million of 115 million households in North America. Every time someone watches a film for 50 bucks on Screening Room, they’re buying two theater tickets, plus like six bucks of concessions, and even if they don’t use the voucher, it’s bought and that money goes to exhibitors and studios. There’s also a separate direct payment to the studios.”

— “Screening Room did surveys, and the non-target audience was asked if they’d pay $50 to see a film at home. 83% of that non-target audience said no. That’s what we want, for those people to continue seeing movies in cinemas. We asked the same question to our target audience; the people stuck at home, the 25-39 year olds. And 70% said yes they would spend $50. This is what persuaded me.” A follow-up indicated that the same audience would see many more films if they could watch that way, Jackson said.

Cutting to the chase, Jackson says the research showed that if those people, now buying one or two tickets a year, instead bought the hardware, they would likely use it 12 times per year.

“That means 24 tickets—probably more—and if we can get Screening Room into 20 million households, and they rent 12 movies a year, then the exhibitors and the studios will get over $8.5 billion dollars a year.”

And if the audience winds up using the service more than once a week on average, that figure multiplies. “You can’t tell me that all that extra money isn’t going to allow more films to get made each year,” Jackson insists. “Studios suddenly won’t just be able to make 137 films a year, but they’ll be able to make 200 films, that will bring more people back into the theater again, generating more interest in this whole industry. I just don’t believe for a second this is going to kill interest in cinema; I think it’s going to invigorate it.”

Jackson also says that Screening Room has employed extraordinary safeguards against piracy. He notes that right now, without Screening Room, the MPAA issues 27 million takedown orders a year to websites pirating movies. Most of those are done by shadowy anonymous people aiming cameras at multiplex screens. “None of those pirates can be identified. If someone tries filming a Screening Room transmission, the result would be different. You’ll get caught.”

There are three levels of security built into Screening Room, Jackson explains. “Screening Room is only going to be sold as a membership from a Screening Room website, and there will be thorough security checks done where you’ll provide all your information, including social networks. Screening Room is being sold to an individual person, not to anonymous people who walk into Walmart and walk out with a box. We’re selling it to an individual whose name and details we know. If the address is a club or bar where they plan to show patrons, we’ll know; every address will be checked. We can remotely shut these boxes down, anytime we want. Every time you rent a movie for 48 hours and pay your $50, it’s going to be invisibly watermarked with your identity. Somebody points a camera at that screen and it goes online, we will know exactly what Screening Room member allowed that to occur. That will have legal repercussions—hopefully jail or fines—and we will report them to authorities, straight away.”

When a film is purchased for viewing, the member will first receive an email notification of the transaction, and must approve it. “So if you happen to be out of the house and the babysitter or someone thinks they’re going to look at a movie and pirate it, you’ll say no, you are not home. We’re not going to allow anyone but the member to confirm that rental. There are other security measures I can’t discuss because they’re confidential, but a lot of thought has gone into this.”

I tell Jackson I’ve heard cynicism from some who look at the star-director proponents that stand to gain financially if the service becomes an IPO, and that others have questioned why studio owners that already make cable TV set-top boxes would need a third party.

“Screening Room can only be done by a third party, because there are laws that prevent the studios and exhibitors from doing it,” Jackson says. “Can Regal and Fox talk about setting up their own screening room system and having Fox films streamed by Regal to people in their homes? Sure. But can Warner Bros. and Fox discuss it, or can the six studios and the five or six exhibition chains go off to a hotel somewhere for the weekend and figure out a version for themselves? They can’t, because it’s breaking the law. The whole thing of resentment of a third party coming in and injecting themselves into this? Well, whether it’s Screening Room or another one, it is going to have to be somebody from outside that performs this function because it cannot be done legally between the exhibitors and the studios, under current law.”

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