The only question for him seems to be how big of a flop. The headline for his post gives you some idea: "Is DirecTV's $30 movie rental test a flop of 'Ishtar'-like proportions?" Yikes.
Why he thinks it flopped mirrors NATO's thinking on the issue precisely:
The lesson here? As long as Netflix is around the studios are never going to have any luck getting fans to spend three times what they pay for a regular theater ticket to see a movie 60 days after its release, even in the comfort of their own homes. Once you get past the initial theatrical run, the price of entertainment is heading down, not up. The DVD boom is over. We are fast becoming a nation of renters, not buyers.
Say it with me: "Once you get past the initial theatrical run, the price of entertainment is heading down, not up."
Twenty-three prominent directors and producers signed an open letter calling on the four studios involved in the early "premium video on demand" offering from DirecTV. The Hollywood Reporter covers it.
One of the letter's signers, former Fox studio chief Bill Mechanic, speaks at length with David Poland of Movie City News about the value of the theatrical release window, below:
It's a business defined by your stupidest competitor. - Bill Mechanic
Director James Cameron tells the N.Y. Times why he opposes early premium video on demand:
“I do feel it’s not wise to erode your core business,” said Mr. Cameron. The problem, he said, is not that on-demand offerings will overlap with the theatrical run, since most films are out of most theaters within a month. Rather, he said, many potential viewers might skip the theatrical experience, knowing that a movie would soon be available at home.
and, in response to the suggestion that high-grossing films like his would not be affected:
“For me, it’s enlightened self-interest,” countered Mr. Cameron, who voiced concern that early video-on-demand would weaken the theater industry, making it harder to release even films as grand as his own.
The Wrap details some of the options theater owners have in response to shortening the theatrical release window for "premium" video on demand.
What stands out for me, amidst the arguments pro and con and the throat-clearing before the main event, is the remarkable logic behind this:
Curiously, the distribution executive TheWrap spoke to Tuesday doesn't seem to have big hopes that the new window will be wildly profitable for the studios.
He said the main goal of the initiative is to "re-establish" the $30 price point for home viewing in the mind of the film-consuming public -- a price point that used to exist with DVD, the executive added, before operators like Netflix and Redbox came in and started offering a "smorgasbord" of content for well under $10.
"The value of content, to me, can easily be re-established by creating this premium window," the executive said. "Whether or not people buy the films for $30 is not important. What is important is that it puts the price at $30 for a viewing."
How, exactly, does one establish a price point at a price that customers show no signs of being willing to pay?
In a stunning suspension of disbelief, many studio executives argue that an enhanced early at-home alternative will encourage MORE people to go to the movie theater -- do people this naive really exist? It sounds exactly like the last ten years of internet gurus and solons calmly insisting that free (stolen) music would encourage higher CD sales. See how well that worked out. Fool me once ... call me a record executive; fool me twice ... what do they think, we're politicians?
Anonymous goes on to offer a truly disturbing view of the current thinking at the studios:
As for the impact on theatrical attendance, I believe it will be devastating. However, among studio execs the best case quoted to me was a 10 percent drop in attendance with the executives insisting that, "Some theaters will close, others will raise prices ... it's all good." The reality is that a 10 percent drop in total attendance, across the board and permanent, will cause 2/3 of all the theaters in the U.S. to close their doors and never open again.
When I brought this up, the response was that movie theaters were just a real estate play anyway so profits didn’t matter to the theater companies -- something which hasn't been true for 30 years. Today, virtually all theaters are in leased premises rented from mall owners with only older, outdated facilities still existing on owned property.
The lack of knowledge of the economics of the theaters is stunning – but it pales in comparison to the lack of interest in hearing any point of view other than their own.
Read the whole thing. It's some of the best analysis of the economics and value of the theatrical space I've ever read.
NATO president and CEO John Fithian lays out the case:
Despite NATO's repeated suggestions that our distribution partners discuss their potential VOD models with individual exhibitors prior to executing them, several leading studio executives appear determined to roll out early release VOD without proper consultation with exhibitors, without the input of the creative community and without market testing their proposed models to determine whether or not they work. In response to this ill-conceived attempted stampede, NATO and our members have (1) emphasized various possible responses of exhibitors; (2) reached out to the creative community to discuss shared objectives; (3) traveled to Wall Street to challenge the viability of these unworkable models; and (4) begun to educate leading reporters on the dangers of the proposals.
The L.A. Timesreports on NATO's efforts to build allies on Wall Street and in Hollywood to preserve the theatrical release window:
The nation's largest theater chains have been reaching out to investors and analysts on Wall Street, as well as directors, producers and agents, in an effort to build support for preserving so-called theatrical windows — the period of time between when a movie opens in cinemas and when it comes out on DVD or other media.
The outreach is in response to statements by media executives touting plans to offer movies in the home via video on demand at a price of $30 to $60, one to two months after they are released in theaters.
Premium-priced VOD is foreseen as a new revenue source for studios looking to offset declining DVD sales, as well as a boon for cable companies that have been stymied in their efforts to deliver movies into the home earlier in part because of concerns it could cannibalize home video sales.
But theater companies contend that the VOD plans will undercut movie ticket sales, giving consumers less incentive to trek to the theater if they can wait a few extra weeks to watch the movie in the comfort of their home.
"A 30-day window makes absolutely no sense to us whatsoever," said Gerry Lopez, chief executive of AMC Entertainment, the nation's second-largest theater operator. "We're concerned about the grave consequences this could bring."
Theater owners say Hollywood is casting about for ways to defeat piracy, and make up for plummeting DVD sales and rentals. According to Patrick Corcoran, a spokesman for the National Association of Theater Owners, the studios' PVOD plans aren't going to help solve the problems.
"We understand that the studios have a problem in the home market," Corcoran said. "It's down, like, 13 percent when you look at DVD sales and rentals. We understand they need to fix that, and we're all for them experimenting. What we're not for is their importing those problems into the theatrical window."
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