ShoWest: Studios, Exibitors Make Nice … For Now

They enter ShoWest in harmony over release timelines — but that can’t last

Last Updated: March 15, 2010 @ 7:07 PM

Five years after Disney chief Bob Iger openly contemplated the end of exclusive theatrical release — a notion which NATO president John Fithian famously called a “death threat” — studios and exhibitors enter their annual ShoWest convention Monday pretty much holding hands on the issue.

Harmony over this explosive topic — however temporary — seems almost counterintuitive.

Michael Lynton, the chairman and CEO of Sony who kicks off the festivities Monday afternoon with a keynote address, found himself in the middle of the controversy when “Cloudy with a Chance of Meatballs” was pulled from theaters in November after the studio tried to simultaneously sell digital downloads of the film. Disney faced threatened exhibitor boycotts in the U.K. for shortening the theatrical window on “Alice in Wonderland” to just three months.

With U.S. spending on DVD and Blu-ray declining another 5 percent last year to $20 billion — at a time when the U.S. box office was spiking 10 percent to a record $10.6 billion – theater owners find themselves in an concilatory mood.

“I think there’s been a real understanding that comes from the weakness of the home entertainment market,” said an exhibition industry insider. “We need that to be profitable in order for the industry to be healthy. We need to understand that there needs to be some flexibility with respect to the overall release window.”

According to this official, informal accords were struck late last year, when Disney distribution chief Bob Chapek, along with studio theatrical distribution head Chuck Viane, took meetings with top U.S. exhibition-chain executives.

“Disney pretty much approached exhibition and said, “We have these types of movies you want us to do offseason, but for us to capitalize on these huge investments, once or twice a year, we’re going to come to you and ask you to shorten the windows,” explained the distribution head for a rival studio.

“They laid the groundwork instead of just charging ahead,” said the exhibition official.

The courtesy went a long way with U.S. theater owners, who didn’t raise a fuss about “Alice in Wonderland’s” truncated 12-week window — while their counterparts in the U.K, who subsequently weren’t met with well in advance, did make kerfuffle.

“It’s not like it’s something that hasn’t been done,” said a Disney executive. “The only difference is, we were polite enough to explain what we were going to do.”

Disney claims that, for the typical release, 98.9 percent of theatrical revenue is grossed in the first eight weeks at the box office. For select titles, positioning the aftermarket windows closer to the marketing dollars of their theatrical debuts would help more than keeping the film in theaters longer.

For its part, Paramount was also able to convince theater owners that a less-than-three-month window was OK for “G.I. Joe: The Rise of Cobra,” since the studio was trying to get the DVD out in November, in time for the lucrative fourth-quarter disc-selling season.

Of course, harmony won’t be this easy to maintain going forward, as the Sony “Cloudy with a Chance of Meatballs” issue proved last year.

Along with Fox and several other majors, Sony has been pondering a digital-distribution-to-the-home window that would exist in between theatrical and DVD.

For “Cloudy,” Sony – working with its consumer-electronics corporate siblings – concocted a promotion, whereby purchasers of newer Bravia TV’s could download an HD version of the film.

The low-volume promotion — which was only intended to showcase the Internet capabilities of Sony’s newer-model LCD televisions to a handful of early adopters — irked theater operators nonetheless, since it took place within the first 12 weeks of the animated title’s box office bow. The movie was pulled from a number of chains.

So officials were reportedly surprised, since they had tried something similar in 2008 with “Hancock.” Unlike Disney, however, there was apparently no agreement with studio and exhibitors ahead of time.

“You can’t just do something like this unilaterally,” said an exhibition official. “They probably lost several million dollars because they did it that way.”

For now, several factors are keeping digital distribution from being a bigger source of irritation between studios and theater owners.

For one, the Motion Picture Association of America is currently bogged down in the process of seeking a waiver that would allow it to use “selectable output technology” to control the TVs of consumers.

Essentially, in order to deliver piracy-secure downloads to individual consumers, MPAA studios need to control their TV sets to make sure secure ports are enabled, and insecure connections are not.

The National Association of Theater Owners has filed a brief to the FCC, basically stating that it’s not necessarily opposed to an early digital distribution window of some kind, but that the MPAA application doesn’t clearly explain what kind of business model the studios have in mind.

Also holding back the proposed premium digital window: HBO has exclusivity worked into its output agreements with Warner, Universal and Fox. The parties are currently in negotiations on this, but as it stands, the studios can’t distribute digital copies of movies while they’re in their pay TV window with HBO.

“I think the real play is digital and VOD,” noted one studio distribution president. “That’s going to be the area where you’re going to want to be able to shrink those windows. I just don’t think the DVD business is going to increase because you shortened the window by 30 days.

In any event, these subjects are bound come up publicly at ShoWest in Las Vegas this week, with NATO’s Fithian and Sony Pictures chairman and CEO Michael Lynton among a number of decision-maker set to make speeches.