Tension High at CinemaCon – NATO Explodes Over Premium VOD

Tension at the annual Las Vegas lovefest exploded on Thursday over a new studio premium VOD plan; exhibitors stressed over drop in box office revenue

The annual Las Vegas convention for exhibitors and studios was already rife with tension when exhibitors exploded on Thursday at the news that three major studios had decided to launch a new video-on-demand service without consulting them.

"Theater operators were not consulted or informed of the substance, details or timing of this announcement," read a statement from the National Association of Theater Owners (NATO).

"It's particularly disappointing to confront this issue today, while we are celebrating our industry partnerships at our annual convention — CinemaCon — in Las Vegas."

Read also: NATO Explodes at Studio Premium VOD: 'We Were Not Consulted'

CinemaCon is meant to be a lovefest, a bonding ritual in which the glamourous Hollywood movie moguls show their devotion to the working folks at movie houses across America.

But this year tension is high over a lot of things, especially the precipitous drop in box-office revenue.

That tension over the news that Warner Brothers, Universal and Fox three were launching a premium VOD service to become available two months after a theatrical release.

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Variety reported Thursday morning that the three studios had set a date to roll out a new premium VOD service at a $30 price point starting next month on DirectTV. One major studio confirmed that the service was in the works, but cautioned that some of the reported details were not accurate.

According to Variety, the service would offer subscribers movies for home viewing two months after their theatrical release and before DVD release, creating a new source of competition for theater owners.

The news lit a match to dry tinder. To tell the truth, exhibitors at this year's convention are pissed. They feel pressured to spend money to convert their theaters to digital and 3D but betrayed by the squeezing of release windows and the open pursuit by the studios of video on demand and streaming options.

Though they don’t say it openly to the moguls, they are nervous at the more than 20 percent drop in box office since January. In the corridors, they tell you that the movies aren’t good enough, there aren’t enough of them, and they’re tired of being evangelized over 3D.

That’s understandable.

The mantra to “go digital” is drummed into exhibitors here with cultish repetitiveness. RealD and its CEO Michael Lewis are ubiquitious. They're sponsoring every other dinner and hosting a panel with superstars George Lucas, James Cameron and Jeffrey Katzenberg where the gospel of 3D – which requires the investment of 3D and digital projection systems – has become the new Hollywood catechism.

Exhibitors have mostly been converted. There are now 17,000 theaters across the country that are 3D ready, a many-fold increase from just a couple of years ago. And thousands more are expected to go that way.

But the problem is, exhibitors have noticed that 3D has not expanded the moviegoing audience as promised. Revenues may be up in 2010, but that’s because ticket prices for 3D are higher. Attendance is down and, worse, the trend shows audiences choosing 2D versions over 3D in the weeks beyond opening. Duh; it’s cheaper.

I happened by a cocktail party for Cinedigm Wednesday. Cinedigm provides digital packages to movie theaters, and Chris McGurk, formerly of MGM and Overture, became the CEO there three months ago. I could hardly believe my ears as I walked in on the toast being given; they were celebrating the expansion of alternative content for movie theaters.

In other words, here in the heart of the annual celebration of movie blockbusters, was a company planning expansion into non-movie content in a theatrical network — whether sports events, NASCAR races or, as Cinedigm is doing imminently, a Foo Fighters concert.

Hollywood needs to know that exhibitors under pressure are already dating other partners. We need good movies, folks, and stat.