Latest Hollywood Blockbusters Will Come Faster to TV

Latest Hollywood Blockbusters Will Come Faster to TV
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The span between a movie’s theatrical debut and home-video release is likely to get shorter as soon as this year, according to Bloomberg. Theater chains have long resisted the idea of letting studios release movies direct to consumers any sooner than 90 days after the films arrive in the cinemaplex, but reality is starting to set in.

In 2016, DVD sales fell nearly 10 percent to $5.49 billion, according to the Digital Entertainment Group, but the overall home-entertainment industry grew 1.4 percent, thanks to streaming and digital sales. Studios get a higher profit margin from digital sales and would rather make their films available sooner rather than letting them linger in theaters for weeks making diminishing returns. A shorter window could also help save on advertising spending, eliminating the need for a separate campaign for home rentals.

One answer is charging viewers a higher fee for a chance to see a movie at home just a few weeks after its theatrical release in so-called a premium on-demand window. Among the major studios, Universal, Warner and 20th Century Fox have been the most publicly vocal about this approach. Executives have floated rental prices from $25 to $50, according to people familiar with the matter.

“Our stance here is that we believe theatrical windows are set to change in 2017,“  Robert Fishman, senior associate at MoffettNathanson said in an interview. “We’re just waiting for the announcement at this point.“ He estimates the parties will eventually settle on a $30 rental fee.

AMC, Regal and Cinemark, the largest theater owners in the U.S., have said publicly in recent months that they are open to talks with studios about creating a PVOD window. In previous years, exhibitors have thwarted experimentation by studios by boycotting their movies. But the theater chains recognize the pressure on studios is too great and are now trying to cut the best deal they can for themselves, Fishman said.

The discussions about a shorter window have been going on for a while. Bloomberg reported in December that studios were pushing for digital rentals from $25 to $50 as soon as two weeks after a theatrical debut. Apple has also been pressing for earlier access for movies, which could help its iTunes download store stand out in a crowded online market.

Several obstacles still stand in the way of the PVOD window. In addition to price, studios and theater chains have to work out the length of the wait for home video. While Universal executives are among those aggressively pursuing a possible deal that could bring movies into the home as early as 17 days after release, some other studios like Warner are considering waiting a month or more for some of its movies, said people familiar with the situation.

Complicating matters, the studios and theaters have to work out deals one-on-one because neither industry can negotiate as a group under antitrust rules. The most successful studio of the past year, Disney, doesn’t even want to experiment with windows, Fishman said in a note. Sony is interested in shorter windows, and Paramount has dabbled in bringing movies home sooner with some of its smaller films.

Another consideration is long-term arrangements studios have with premium subscription cable channels like HBO and Starz to show new movies several months after opening in theaters. Adding a new premium video-on-demand offering could affect the pay-TV window.

And there are differing views over whether or not deals would give movie-theater owners a share of revenue from premium digital rentals in exchange for their cooperation. That would help make up for revenue they would miss out on. Fishman estimates the theater chains would lose out on $7 million to $22 million for the average $100 million domestic box office movie, depending on when the new premium window is created. The closer to release, the costlier to exhibitors.