Hollywood studios are betting that Thursday's debut of premium video-on-demand on DirecTV will help cure the ailing home entertainment market.
But as they struggle to withstand massive blowback from exhibitors and the National Association of Theater Owners (NATO) over shortened theatrical windows under the program, a cure feels very far off indeed.
There's more than enough bad blood to go around, as the four studios backing the controversial platform scramble to smooth the ruffled feathers of theater owners and prevent a rebellion among major cinema chains.
Privately, they're quick to point fingers at holdouts Paramount and Disney as the source of a leak that almost ruined CinemaCon, the annual love fest between Hollywood and theater owners.
The consortium of studios got even more heat Wednesday over the early VOD program from a slew of high-profile film directors, including tentpole titans James Cameron, Michael Bay and Peter Jackson.
“We in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry," the letter read.
Also read: Cameron, Jackson, Bay, 20 Others Join NATO in Blasting Early VOD
Against this backdrop, the usually simple process of negotiating theater screens with exhibitors has become a battlefield. “It’s been incredibly stressful,” one studio distribution executive told TheWrap.
On Tuesday, DirecTV officially unveiled Home Premiere, which will put select titles from Warner Bros., Fox, Universal and Sony on the satellite service eight weeks after their theatrical debut. Starting on Thursday, DirecTV subscribers can watch Sony’s “Just Go With It” for $30.
Overall, only three other titles were announced for the upcoming distribution platform -- Warner Brothers' “Hall Pass,” Universal’s “Adjustment Bureau” and Fox Searchlight’s “Cedar Rapids.”
But exhibitors are asking for licensing concessions from all titles originating from the four Home Premiere studios.
Studios typically take 50 to 60 percent of initial box-office revenue. Now exhibitors are demanding a larger cut for movies that may fall under the Home Premiere window.
That has made once-routine negotiations with exhibition chains to put movies into theaters “very difficult,” conceded a distribution executive.
To leverage their demands, theater chains have threatened to pull trailers -- or even pull films -- that are released early from their screens.
Also read: Theater Owners Ready to Retaliate Over Premium VOD
Yet, if premium VOD does work, the economics are sweet enough that studios are willing to withstand an exhibition firestorm.
Studios take away roughly 70 percent of the revenue from VOD and do not have the shoulder the same production and distribution costs associated with keeping a film in theaters into a third month.
And as a film's theatrical run drags on, exhibitors' cut of the profits increases from the original 50 to 60 percent, making studios less inclined to keep films in theaters longer.
