• Windows Talks: Distributors & Exhibitors are Discussing Release Models Together as NATO has Long Suggested

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    By John Fithian, President & CEO, National Association of Theatre Owners

    According to many recent press reports, several leading distributors and exhibitors have engaged in one-on-one discussions about the future of movie release windows models. After those reports were first published, many NATO members contacted the association with their questions and concerns.  Inquiries were also received from friends in the creative community who support the theatrical experience as the best platform for their art form. Given the paramount importance of theatrical exclusivity to the future of cinema, and NATO’s long history of support for that exclusivity, this column offers some thoughts in response to the many inquiries.


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  • IndieWire: Netflix Keeps Buying Great Movies, So It’s a Shame They’re Getting Buried

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    Here’s an excerpt from IndieWire writer David Ehrlich’s excellent column about the impact of Netflix on independent film:

    Netflix doesn’t help movies find an audience any more than it helps audiences find a movie (not that filmmakers ever have any idea how many people are watching their work on Netflix — the company refuses to share data with its content suppliers, meaning that Leon [Adam Leon, director of Tramps] will have to trawl social media to glean even a vague idea of whether or not Tramps is being seen). The streaming service is a volatile sea of content that likes to measure itself in terms of dimension rather than depth; pull up the homepage, and the first thing you’ll see is text boasting about the sheer number of new shows that have been added to the site in the past week. It’s an all-you-can-eat buffet that stretches further than the eye can see, and most people are likely to lose their appetite before they discover the good stuff.

    In fact, Netflix recently took steps to make it even more difficult for customers to find what they crave or stumble upon new delights, as the company made the myopic decision to replace its somewhat worthless star ratings with a completely worthless “thumbs up / thumbs down” approach. Good luck finding your way around that buffet when all of the food is divided into “good” and “rotten.”

    Read the full article here. 

  • You’re Hired: Confirming the President’s Cabinet

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    A new Congress has been sworn in, a new president has taken the oath of office, and all eyes in Washington are turning to the confirmation process for Donald J. Trump’s cabinet nominees.  Senate committees are in the midst of holding hearings to fulfill their constitutional duty to advise and consent, but the rules are different this time around.  Because of a procedural change instituted in 2013 by then-Senate Majority Leader Harry Reid, cabinet nominees can be confirmed by a simple majority vote of 51 senators.  Senators cannot threaten a filibuster on the nominees, thus gumming up the process and requiring at least 60 votes in order to proceed with a nomination vote.  With Republicans holding a 52-seat majority, unless some GOP senators defect, most—if not all—of Trump’s nominees will be confirmed to their positions.

    This article explores some of the cabinet nominees and the impact their tenure may have on exhibition.

    Andy Puzder, Department of Labor

    Andy Puzder, the CEO of CKE Restaurants, is Trump’s choice to lead the Labor Department.  Puzder is one of Trump’s most polarizing nominees:  While his supporters claim that his leadership of a major restaurant company is appropriate experience for leading the department, his detractors worry that Puzder won’t act to protect workers and will roll back reforms instituted by the Obama administration.

    Restaurant industry groups welcomed Puzder’s nomination.  The International Franchise Association (Puzder is a board member) hailed him as “an exceptional choice,” and the National Restaurant Association said in a statement that he would “help foster an environment for job creation.”  Worker groups, by contrast, blasted his record.  “The WORST fast-food CEO!” Fight for $15 wrote in its petition asking the Senate to vote against his confirmation.  The Service Employees International Union—the union representing, among other employment sectors, food service workers—called Puzder “dead wrong for America’s working families.”

    Puzder’s restaurant experience could prove a boon to exhibitors.  As a restaurateur, he is deeply familiar with the labor issues facing business establishments employing a primarily part-time workforce.  One area in which Puzder could have immediate impact is eliminating the Obama administration’s rule raising the salary threshold for overtime-exempt employees.  Puzder is a vocal opponent of the rule.  When it was released in May 2016, Puzder predicted in an op-ed that the rule would drive many employers to reclassify their salaried employees as hourly, thereby negatively impacting employee morale.  The overtime rule is currently in litigation:  Business groups and a number of state attorneys general sued the Obama administration for overreach, and in November a district court judge issued a temporary injunction that prevented the rule from going into effect on December 1.  The Obama administration is appealing that decision.  Presumably, if he is confirmed as Labor Secretary, Puzder will withdraw the U.S. government as a defendant from the case.  Puzder is also likely to support Congressional efforts to overturn the rule.

    Puzder is unequivocal about repealing the Affordable Care Act (ACA).  In an industry speech delivered after the presidential election, Puzder said higher insurance premiums and increased labor costs have left people with less discretionary income, causing a “government-mandated restaurant recession.”  Aside from opposing the labor elements of the ACA, Puzder has also argued against the government’s interpretation of onerous menu labeling regulations.  In 2012, Puzder testified before the House Energy and Commerce Subcommittee on Oversight and Investigations on overregulation.  In his testimony, Puzder suggested that legislators and retailers compromise by allowing restaurants and similar establishments to post calorie counts online or adjacent to menu boards, which would give customers the information they seek and reduce the burden on covered entities.

    On minimum wage, Puzder has been less clear in his position.  Puzder has warned that increasing minimum wage to $15 an hour would shut entry-level works out of the workforce, but he has also acknowledged estimates that a minimum wage increase to about $9 would not have as drastic an impact on jobs.  Even if he does eventually declare a position openly supporting a wage increase, Puzder is not likely to find many Republicans in Congress willing to take on this issue.

    Jeff Sessions, Department of Justice

    Trump has nominated Senator Jeff Sessions (R-AL) to be Attorney General.  In this capacity, Sessions will impact many operational issues facing exhibitors, including compliance with the Americans with Disabilities Act and antitrust matters.

    Sessions does not have a strong track record on disabilities issues, although disabilities groups have blasted him for his record on education inclusion.  A coalition of 145 civil rights organizations, including the National Council on Independent Living and the Disability Rights Education and Defense Fund, signed an open letter to the Senate protesting Senator Sessions’ nomination.  In the letter, they included Sessions’ opposition to the ratification of the Convention on the Rights of Persons with Disabilities as a reason to disqualify him as Attorney General.  Democrats have vowed to focus on Sessions’ record on civil rights during his confirmation hearings.

    On antitrust issues, his record is also less clear, although his detractors worry he would be lax on antitrust enforcement.  In 1998, Sessions wrote to Attorney General Janet Reno expressing concerns that U.S. antitrust officials were encouraging foreign countries to take legal action against American companies potentially in violation of antitrust laws.

    Tom Price, Department of Health and Human Services

    Rep. Tom Price (R-GA), nominated as Secretary of Health and Human Services, is a former orthopedic surgeon and served as Chairman of the House Budget Committee in the 114th Congress.  Price can be expected to be an energetic proponent of health care reforms supported by exhibitors.  His nomination is not expected to face significant backlash.

    Price opposed the ACA when it was enacted, and has introduced repeal-and-replace legislation in the past few Congresses.  Price’s health care bill does not include an employer mandate or a provision requiring calorie counts to be displayed on menu boards, the two biggest ACA issues impacting exhibitors.  While in Congress, Price supported legislation reforming aspects of the law.  He voted in favor of legislation reducing the burden of menu labeling and in favor of legislation redefining full-time employment under the ACA as 40 hours per week.  Price was also a cosponsor of legislation defining seasonal employees as employees who work for six months or less.

    Price does not have a robust record on obesity or soda taxes; however, Price has been vocally opposed to raising taxes.  As is typical for many in leadership positions in Congress, Price has received campaign contributions from competing interests:  Both Coca-Cola and the American Medical Association have supported him.

    Steven Mnuchin, Department of Treasury

    Steven Mnuchin, a former investment banker and hedge fund manager, is Trump’s nominee to lead the Department of Treasury.  Aside from Andy Puzder, Mnuchin has the resume most closely linked to exhibition:  In 2006, Mnuchin formed a production company called Dune Entertainment, which in 2013 merged with Brett Ratner and James Packer’s production company to become RatPac-Dune Entertainment.  Mnuchin has partnered with 20th Century Fox and Warner Bros. to finance nearly 200 films, including hits like American Sniper, Avatar, Life of Pi, and The Lego Movie.  His Hollywood connections may come under scrutiny in his confirmation hearing.  Lawmakers may focus on Mnuchin’s relationship with the studio Relativity Media.  Mnuchin was a member of Relativity’s board and also ran the bank that lent tens of millions of dollars to Relativity.  Mnuchin resigned from the Relativity board on May 29, 2015; Relativity declared bankruptcy a couple months later.

    Mnuchin has listed reform of the Dodd-Frank Wall Street Reform and Consumer Protection Act as one of his major priorities, particularly rolling back regulations that hamper bank lending to businesses.  Loans are the “engine of growth to small- and medium-sized businesses,” Mnuchin said in a CNBC interview.  He has not commented on whether he would support Congressional efforts to do away with the Durbin Amendment, which capped debit card swipe fees at 21 cents plus five basis points per transaction.  He has also vowed to lower the corporate tax rate and to enact an income tax cut for the middle class.

    As Treasury Secretary, Mnuchin will have oversight of foreign acquisitions of American companies.  Within the Treasury Department is the Committee on Foreign Investment in the United States, a multi-agency body that investigates acquisitions of U.S. companies by foreign entities; much of CFIUS’ activities in recent years have been devoted to examining acquisitions by Chinese companies.  Mnuchin has not commented on Trump’s China stance, except to say that he wouldn’t necessarily deem China a currency manipulator.

  • Virtual Reality Point Counterpoint

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    Virtual reality (“VR”) is the new, hot thing in entertainment. Both major content and technology companies have developed VR applications and are devoting significant R and D to the space. Consumers are buying VR headsets for Christmas presents. And movie theaters are evolving to include the VR experience. But in the end, will the advent of VR be a good or bad thing for the exhibition industry? In this column two NATO colleagues square off on the topic. Phil Contrino, the millennial, serves as NATO’s Manager of Research and Data. And John Fithian, the old guy, is NATO’s President.

    Phil – VR will create intense competition in the gaming world, but it won’t directly compete with feature-length films.

    People like to leave their homes and do stuff together. It’s that simple. That’s why theatres continue to prosper despite an overwhelming amount of entertainment options in the home. It’s important to view VR as something that will take time away from in-home options and not necessarily out-of-home options. Video games that use VR in engaging and innovative ways will steal attention from those that don’t use it well/or don’t use it all, but gamers will still love going to theatres—even if they are coming in rapidly growing numbers to watch other people play games instead of Hollywood’s latest efforts. VR is simply a different experience—and different really is the key word here. It’s important not to use “better” and “worse” when comparing VR to theatrical releases. Sometimes people will crave the visceral experience that VR provides, and at other times they will crave the experience of being completely engrossed in a theatrical release over the course of two hours.

    John – VR may become a direct competitor – for the consumers’ leisure time. Let’s hope VR stays limited to shorter length content.

    Though going out to the movies will always be different than entertainment in the home, consumers only have so much available leisure time. Before the advent of television, Americans went to the movies thirty times a year or more, now it is less than four. Movie theaters remain profitable by continually improving the offering, including sight and sound, so that the home experience remains inferior. But the VR experience in the home will be very similar to the VR experience in the cinema. As consumers dedicate a greater percentage of their leisure time to VR, that time will be spent mainly in the home. Hopefully feature length movies will never be commercially viable in VR!

    Phil – The side effects of virtual reality will limit it as a platform that can match the duration of feature-length films.

    In its current form, virtual reality is best for quick bursts of content and not a sustained narrative. Some people who try out VR experience a wide range of drawbacks such as seizures, headaches, nausea, dizziness, or trouble with hand-eye coordination—in these cases using VR for an hour and a half would be impossible. Even people who have no physical problems with VR in short bursts may end up having problems if they use it for too long. As the technology improves, these side effects will likely be reduced, but there will always be a portion of the population that just doesn’t enjoy VR because of physical reasons.

    John – VR could become a transformative way to experience content. But ultimately that experience will occur in the home.

    One can watch movies (or television programs) at home, or watch movies in the cinema. The cinema offers the superior experience in sight and sound, and it is social. Video games started as a social experience in arcades, then migrated to the home, and are now being experienced in cinemas too. Video games can be a solitary or a social experience. VR, however, is completely solitary. Headsets transport the viewer/gamer to a different world where they cannot see anyone standing or sitting next to them in the real world. VR may only exist in the cinema as long as the technology is considered novel, and the device price points remain high. Once VR content is widely available, and headsets relatively affordable, why would anyone leave their home to experience VR?

    Phil – There are plenty of ways for movie theatres and VR creators to come together in order to make money.

    Imagine that a big-name director—Michael Bay and Steven Spielberg are already embracing this technology—wants to create a VR experience that really stands out and has all the qualities of a polished studio movie. Creating something like that wouldn’t be cheap. Releasing it to only people with VR headsets at home would limit its potential even when penetration of the technology reaches the bullish expectations placed on it. What kind of price point could VR creators working in a narrative format rather than gaming expect to ask for? Certainly not the same amount—north of $50—that the gaming industry can snag for new content. If Steven Spielberg makes a VR experience it will still be labeled as a movie and consumers will react accordingly. Would people want to own these VR experiences or just rent them? If the answer from most is “rent,” then the price point narrative content can expect drops again. It’s easier to justify the expense of creating quality VR if it spurs consumers to go to theatres for a continuation of the world they just enjoyed. This strategy has already been put in place with such successful titles as Interstellar, The Martian and Goosebumps and plenty more movies will be using it in the months and years to come. A theatrical release adds a pedigree to any film, and that pedigree comes with real financial value. Putting certain VR content into theatres will give it that pedigree.

    VR also has the potential to create a new type of programming for theatres. “VR Theatres” are already popping up all over the globe that allow people to sit in a chair for a given amount of time and consume a couple of VR experiences. If this format continues to gain popularity, it’s not hard to imagine multiplexes devoting space to cater to it. An expansion of VR options in theatres with strong grosses may spur more filmmakers to work in the format. If VR is still enjoyed in short bursts, imagine the drawing power of three major filmmakers producing 10-minute shorts that are sold together for the price of a movie ticket. There would be no complaints about the amount of showings that can fit into a day!

    John – Full-length, theatrical movies, remain the bread and butter of the exhibition industry even with alternative content and now VR in cinemas. Maybe the millennial is right. Maybe VR isn’t a big threat after all, but it probably isn’t a big win for exhibition either.

    With the advent of digital cinema, some industry observers heralded the coming growth of alternative programming in cinemas with a belief that such programming could produce substantial revenues. And to be fair, there have been some surprising successes – such as opera. Nonetheless, digital cinema has now enabled alternative programming for many years, but non-theatrical content still constitutes low single digit percentage revenues compared to movies. Cinemas are now experimenting with gaming in theaters, and also VR short programs. Yet I can’t imagine that VR will ever grow in the theatrical space to be much more than lobby programming or small, short programs in a designated auditorium. Even if VR does not pose much of a threat, I don’t see it as a big win either.

    Let us know what YOU think!


  • Unlimited Options

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    France’s UGC helps pioneer a new program to strengthen the diversity of programming at the movies.

    Ideally situated on the Avenue Champs-Élysées in Paris, just west of the famous Arc de Triomphe, sits the business offices for UGC, one of the country’s leading exhibition and distribution companies. The view from the top floor, suffice to say, is remarkable. It also symbolizes a philosophy now inherent within the company. A glance from one office window reveals a mesmerizing panorama spanning from the Eiffel Tower to the iconic arch at Place de l’Étoile. It’s old Paris in its purest vista. The view from the opposite office window faces towards La Défence, a modern business district full of glass high-rises and steel skyscrapers. It’s new Paris in shimmering glory. This visual dichotomy epitomizes UGC’s focus on maintaining tradition while also looking towards the future. And that variety manifests itself at the multiplex.

    It only takes a casual glance at the show times in Paris to notice the array of options available for moviegoers in the French capital. With 206 million tickets sold in 2015, France is the largest movie-going market in Europe in terms of admissions and a close second next to the UK in terms of box office. What makes this movie-going figure intriguing is that it is nearly 80 percent higher than it was 25 years ago, when France bottomed out by hitting a historically low level of admissions. The market’s rebound has been achieved, in part, by collaboration between the film industry’s segments in establishing admission-driving policies. Another such example occurred this May, when trade bodies representing production, distribution, and exhibition signed an agreement with production and distribution companies to help strengthen the market by putting in place best practices to support wider diversity in programming.

    For Alain Sussfeld, co-CEO of UGC, the right mix to optimize movie-going in France should ideally be 50 percent of the box office coming from U.S. movies, 40 percent from French movies and the remaining 10 percent from other European and non-European productions. “This is hard to create,” Sussfeld shared in an interview with Boxoffice Media CEO Julien Marcel. “Even harder to maintain but this is essential to offer the type of quality and diversity our audience expects.”

    According to Sussfeld, one should not consider diversity as a challenge to the success of Hollywood or domestic blockbusters. All movies benefit from a good momentum on the market. Rather than representing a conflict of interest, Sussfeld calls it an “addition of interests.”

    “The goal of movie theatres should be to make sure that, any point in time, all types of audiences can be offered a movie that matches their interests, tastes, or simply their mood of the day. Let’s not be obsessed with blockbusters targeting the teenagers, let’s focus on the complete range of moviegoers from 5 to 75!”

    The agreement signed in May between the industry’s trade bodies suggests that UGC’s philosophy on diversity is shared by others in the industry. The two principal dimensions to the agreement that affect exhibition aim to optimize screen counts and showtimes for all films on the market. Firstly, all stakeholders agreed to limit the number of screens dedicated to any given film on any given day.  The underlying idea is that it is not good to overexpose a movie in a short period of time. “Cinema cannot be summarized as ‘Take the money and run,’” explains Sussfeld. “A movie needs time in theatres, it is part of its value. Putting a blockbuster in too many screens and then getting rid of it two weeks later is not good for anyone!” Additionally, exhibitors take a commitment to offer a pre-defined number of show times for limited release movies that would otherwise have a hard time to make it to the big screen. The strategy seeks to limit the overexposure of blockbusters and applies equally to French and U.S. movies alike.

    Behind this approach is the idea that a solid theatrical market requires a long term strategy that includes diversity of content rather than the maximization of box office week after week. According to Sussfeld, there is no successful diversity strategy without a consistent commercial policy. In UGC’s case, this policy is based on a strong loyalty program and an unlimited subscription pass that aims to help viewers discover new films. UGC’s unlimited pass is particularly designed to reinforce the likelihood that moviegoers will try different types of movies and adopt an attitude of discovery in future cinema visits. As a result, UGC is able to retain their fair share of blockbuster admissions while over-performing on limited release movies, helping them balance low attendance periods.

    Sussfeld’s main concern is that this model hasn’t yet been adopted outside France, making it fragile by definition. With the support of other markets through a similar approach, Sussfeld believes there would be a better understanding of the specificities of movie-going in each market. Leave it to the French to teach us a thing or two about maintaining a cultural commodity.

    At the end of the day, however, the model’s long term sustainability cannot exist without a solid slate of releases. Year-to-Date admissions in France, +4.1 percent at the end of August, suggest the market hasn’t encountered any difficulty adopting this new model. The question moving forward now becomes, will any other markets venture to attempt something similar?