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Theater Chains Dive Into Distribution

With the box office way down, specialty fare dwindling and windows threatened, exhibitors take bold steps to program their own screens

With the 2011 box office down sharply and studios threatening the traditional theatrical window through new home-viewing schemes, theater owners are taking matters into their own hands.

Instead of relying on studios to offer them films, they’re screening simulcasts of the Los Angeles Philharmonic. They’re partnering with other companies to distribute genre films. And they’re becoming distributors themselves.

“They’re not satisfied with the product that they’re getting, or it’s not meeting their clientele’s needs, so they’re going to try and program it themselves," said Jeff Bock, a box office analyst with the Los Angeles firm Exhibitor Relations. "Now is the time for entrepreneurial efforts to take center stage.”

A distribution executive at a major studio told TheWrap that “initially, my gut reaction was, ‘Hey, how dare you guys!’”

But, he added, “I get the play … Ensuring product flow to your theaters. There’s nothing wrong with that. And if you buy the notion that the studios are producing few movies, OK. I wish you luck.”

But this movement into distribution could have negative impacts on the studios, as well as studio/exhibitor relations.

“It has the potential of making our relationships antagonistic,” said the studio distribution executive.

The executive explained, for example, that there’s only so much time to show trailers, and that if an exhibitor gives trailer time to its own programming, it’ll be at the detriment of studios.

“It’s going to have to come at the expense of somebody,” he said. “Most likely, us.”

But the exhibitors are charging along with the plan, anyway.

Last week, the two largest movie theater chains in the U.S., AMC Theatres and Regal Entertainment Group, formed their own distribution company, Open Road Films.

Under the direction of former Lionsgate top executive Tom Ortenberg (left), Open Road will distribute eight to 10 movies a year.

A few days later, AMC, The Collective and the horror website Bloodydisgusting.com announced another film distribution partnership for horror and thriller titles.

And on Sunday, some 450 NCM Fathom movie theaters across the nation were packed for a simulcast of, of all things, Gustavo Dudamel conducting the Los Angeles Philharmonic live from the Walt Disney Concert Hall. Tickets cost $22, a whole lot more than a film.

This year, especially, exhibitors need to do all they can to help themselves. 

So far this year, movies have grossed $1.74 billion, compared to $2.25 billion at this point in 2010, $2.06 billion in 2009 and $1.8 billion in 2008. That’s a 22.5 percent drop this year over last. (see chart)

One major studio distribution chief told TheWrap last week that he was going over the schedule for the coming two months with an exhibitor.

“I felt bad for him,” he said. “From now until summer, there’s just nothin’.”

Just as much as sour box office, threat to theatrical windows is also a motivating factor for exhibitors, especially with the major studios well on the way to establishing premium video-on-demand windows that deliver movies digitally to homes just a few weeks after their theatrical premiere.

“You’ve got to give the theater owners a lot of credit in their steps to diversify,” Jason E. Squire (right), editor of “The Movie Business Book” and a professor at the USC School of Cinematic Arts, told TheWrap.

“There are encroachments, there are pressures that impinge upon the traditional business model, and the most serious one from the theater’s point of view is the contracting windows of distribution," he added.

On top of that, Squire said there’s a parallel problem as studios including Warner and Paramount have closed — or scaled back — their specialty divisions.

“There are fewer good independent movies being distributed, so in an effort to diversify product, these two very savvy theater chains have decided to take matters into their own hands," he said. "This is good for filmmakers, this is good for audiences.”

Until the Supreme Court declared the practice illegal in 1948, the same companies owned studios, distribution companies and movie theaters. The court ruled that companies could own only two — and companies dropped the exhibitors.

“That’s why to this day in Westwood Village you can see the dignified spire of Fox that has been restored that used to be a Fox-owned theater and hasn’t been for 50 years,” Squire said.

Ortenberg was unavailable for comment Monday and Tuesday, and representatives from AMC and Regal did not return telephone calls and emails.

Gary Binkow, a partner at The Collective, told TheWrap that as people change the way they consume content, exhibitors, studios and producers all have to reach out in new ways.

That’s what he, Bloodydisgusting.com and AMC are trying to do.

They’ll be acquiring and marketing horror and thriller titles from festival and international markets and showing them at least twice a week at 32 key markets across the country, including a special Friday midnight show beginning in May.

“We’re really excited as a company to be exploring these unique ways to reach fans,” Binkow said. “That’s what The Collective is all about — how do we help the fans of different genres and artists connect in a unique way.”

Brad Miska, the co-head of Bloodydisgusting.com, told TheWrap that as a lover of horror films, he’ll ensure that theater-goers get the very best product.

“There’s something special about sitting in a theater,” he said. “The theater experience is still alive, and I like the idea of a community oming together to see a movie.”

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