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Hello everyone.

I've been reading the boards here and find that this is a very well-informed group of posters. I'd like to make an argument and then ask some hypothetical questions about an online theater concept. Suppose that an online theater went into business that runs first run feature films in standard definition quality on a full screen display. It operates just like a traditional theater in that it has scheduled showtimes and people pay an admission to enter and watch. Viewers must have a broadband internet connection.

The theater is not limited in any way by physical space constraints: It can show as many movies as it wants each at high frequencies, say every 15 minutes, and an unlimited number of viewers can watch. It does not sell advertising but gives exclusive coming attraction time to the distributor.

The theater can easily protect piracy of the digital content itself, but can obviously not prevent anyone from filming their computer screen, etc.

Suppose further that it charges some price not significantly below the average admission price at theaters. In 2006 I believe the average ticket price was $6.55, so let's say this online theater charged $5.55 per admission.

Argument:

I believe that this would not significantly impact attendance at traditional theaters. By significantly I mean that I would expect that less than 2% of people who would have gone to a theater in the past would choose to watch it online instead. People value the traditional theater experience, the big screen, and getting out of the house with friends, and an online viewing experience is hardly a pure substitute. The idea of the online theater is to capture demand that isn't being met in the current market place, because there are a lot of people that either cannot make an "event" of going to the theater, can't get someone to go with them, don't have a car, are too lazy or whatever. Whereas I think a good argument could be made that simultaneous release of DVD's or on-demand from a cable provider might cannibalize studios' revenue streams from the traditional theater, I do not believe the same argument could be made for an online theater. Besides the fact that it doesn't give the customer possession of the content and that it wouldn't be at all convenient or very enjoyable to watch in groups, there is just a different dynamic to it. Lastly, by not offering much of a price incentive to watch it online (which is an inferior product - all it offers is convenience), no one will stop going to theaters to save $1.

Questions:

1) Do you buy this argument?

2) Is it conceivable that an online theater such as this could get simultaneous release rights (hypothetically, suppose the distributor received a 90% fixed take of receipts)? If not, why?

3) What recourse do traditional theaters have to prevent this? Is it likely?

4) If not simultaneous release, could you conceive of a release window that is 2 weeks after the theatrical release? 4 weeks?

I believe these are relevant questions that distributors and exhibitors will have to face in the near future, and appreciate any feedback greatly.




Good day

That is one of the least feasible business models for releasing a movie that I have ever heard of.
Studios have no way of knowing if 1 or 100 people will view each movie download, so they will not jump at the chance to cannibalize their lucrative theatrical first-run for the home viewing alternative market that is infested with movie theft concerns.

No major cinema circuit would ever commit any of their screens to a movie released simultaneously for the home and theatrical markets.

Legitimate filmmakers would never agree to allow their movie be released to the home market at the same time it is in first-run theatres.

Consumers prefer to see first-run movies in theatres, on the big screen, with digital surround sound. Not on a tiny monitor, or even to a home theatre system. If they are going to pay a first run ticket price, they might as well wait for DVD so they can watch the movie in their home at their own leisure. No major studio is going to support this type of distribution using first-run movies.

Ultimately, consumers will determine where they prefer to see their movies. My conclusion is that their answer will be the same in the future that it is today. There is no more exciting environment to watch a newly released movie than on the big screen in a movie theatre filled with people sharing the same experience. All other release platforms or distribution windows are an inferior experience to the theatrical exhibition of a movie. That fact will not change, no matter how many neat gadgets they invent to deliver movies direct to the home market.

Rick Cohen
Transit Drive-in Theatre
Lockport, New York

[This message has been edited by Transit Drive in (edited October 03, 2007).]

A VERY BIG DITTO

Thanks for your feedback. A few comments...

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by Transit Drive in:
<B>That is one of the least feasible business models for releasing a movie that I have ever heard of.
Studios have no way of knowing if 1 or 100 people will view each movie download, so they will not jump at the chance to cannibalize their lucrative theatrical first-run for the home viewing alternative market that is infested with movie theft concerns. </B><HR></BLOCKQUOTE>

It would not be an issue for studios to know the number of viewers. They could easily be satisfied in this regard. Also, cooperative businesses get around information-sharing and revenue-sharing issues all the time, worst case scenario requiring a 3rd party audit. How do studios know how many tickets you sold at your theater? Irregardless, this would be a non-issue.

Theft would be a concern as it is with all intellectual property, but let's face it, it's quite easy to get a bootlegged movie right now. It would be nearly impossible, meaning that it would require huge corporate-like amounts of resources, time and investment, that people in the bootlegging business presumably don't have, to acquire the actual digital content itself. Someone could videotape the computer screen itself with their own camera, of course, but I would argue that this wouldn't change the current bootleg market significantly. It's just the same thing that's already out there.

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR><B>
No major cinema circuit would ever commit any of their screens to a movie released simultaneously for the home and theatrical markets.</B><HR></BLOCKQUOTE>

Doesn't this contradict the points you make below, that there would not be significant demand for an online theater because people prefer the big screen? Why would theaters boycott a film because it is released to a distribution outlet that they don't compete with?

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR><B>
Legitimate filmmakers would never agree to allow their movie be released to the home market at the same time it is in first-run theatres. </B><HR></BLOCKQUOTE>

Why? I would think that filmmakers would like the idea of more paying customers seeing their movies. What am I missing?

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR><B>
Consumers prefer to see first-run movies in theatres, on the big screen, with digital surround sound. Not on a tiny monitor, or even to a home theatre system. If they are going to pay a first run ticket price, they might as well wait for DVD so they can watch the movie in their home at their own leisure. No major studio is going to support this type of distribution using first-run movies. </B><HR></BLOCKQUOTE>

MOST consumers, including myself, absolutely prefer the big screen. I acknowledged that in my first post. But that doesn't mean there isn't a smaller market for online distribution.

One reason they might "not as well" wait for the DVD is that a lot of people don't want to pay $20 for something they'll watch once, and not everyone wants a living room full of DVD's. Additionally, people need to be able to see it when they're actually conscious of it, i.e. when it first comes out and is being advertised. I think that studios throw mountains of cash at promotion and don't maximize their return because, as I said originally, there are any variety of reasons a person who might like to see a movie simply doesn't make it to the theater. And a few weeks later a lot of them have already moved on to something else.

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR><B>
Ultimately, consumers will determine where they prefer to see their movies. My conclusion is that their answer will be the same in the future that it is today. There is no more exciting environment to watch a newly released movie than on the big screen in a movie theatre filled with people sharing the same experience. All other release platforms or distribution windows are an inferior experience to the theatrical exhibition of a movie. That fact will not change, no matter how many neat gadgets they invent to deliver movies direct to the home market. </B><HR></BLOCKQUOTE>

Actually, consumers won't determine where they prefer to see their movies because they don't have any choice. I agree with all of your conclusions about the superiority of the traditional theater experience, but I think you're dismissing the fact that there can exist a separate, smaller market that I described, and that it would have minimal impact on the current theatrical exhibition market. Your line of reasoning more or less suggests that theaters should be indifferent to a simultaneous online distribution outlet.

Thanks again for you comments.

Windows and platforms exist for a reason, to maximize the return on investment by the studio for their film. Filmmakers want their movies to be seen in theatres first, before DVD, before cable, and before digital downloads. Providing digital downloads earlier will not slow the effect of movie theft, in fact it will increase it. How much easier will it be to record a digital download in the privacy of a home theatre than in a public theatre?

Good luck with selling your business model to the studios. They are the ones you will need to convince, not us. If you are looking for allies in the theatrical exhibition industry, you are looking in the wrong place.

Rick Cohen

Transit Drive-in Theatre
Lockport, New York

Dittoes to everything Rick said.

Regarding payment for the numbers shown: You miss the point that the studios are able to receive payment for each patron viewing a film because the theatrical window allows for an enclosed experience. In any televised or DVD model you have the ability to fill you home with viewers, while only paying the studios for one. In a sense, that's much like the old $5 carloads at our drive-ins... a practice that's pretty much out of the question for first-run theatres now.

As for piracy: promoting the notion that "bootleg is immediately available, so why bother" is absurd. The studios may not be able to eliminate the practice, but they do a pretty good job of keeping it from becoming mainstream. Giving up because of the percentage that remains is a defeatist attitude that won't convince anyone.

Landmark Cinemas owner, Mark Cuban, and film producer, Steven Soderburgh have been fans of the combined release window for some time. Cuban has already promoted the practice at theatres and cable channels he already owns... with film product that Soderburgh produced last year. The response was mediocre from the paying public, and the combined release pretty much limited the film to those two venues. As far as I know, no "big" release has fallen on its sword by pulling the same stunt.

The problem with the idea is the simple fact of the chicken and the egg. Films are expensive to make and no two ways about it. Even the cheapest of films can cost hundreds of thousands of $ and real films with name actors and spec effects are in the 10's of millions at least. Upon having spent the money to make the film the film maker and / or distributor are anxious to try and recover at least and hopefully make money. For any real recovery you need a lot of ticket buyers or web viewers or whatever method they will see the film. For anyone to know about it.... add millions of dollars. I think I recall somewhere the average cost of a film pre opening, including marketing: was over 40 million. Once you have 40 million on the table, and I should know! , you better believe they want to get it right and not screw up as is done regularly resulting in the littered corpses of distributors and film co's. who guessed wrong. Maybe your idea has merit. But if anyone is to know about the thing you expect they'll be downloading / viewing it's gonna be a very hefty chunk of change. Would you pay 7-8-9-10-12.00 to view the thing at home? Good question. Anyway...and we could talk about this forever: the reason people pay for gold and diamonds is they are scarce. There is something mysterious about films and movie stars and the people who make films and movie theatres. It looks easy: just do this and pull this out over here and stick it over there. Guess what: it ain't been done yet. Sometime a house of cards is a tough little building.

---

Michael Hurley
Impresario

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by Transit Drive in:
<B>Windows and platforms exist for a reason, to maximize the return on investment by the studio for their film. Filmmakers want their movies to be seen in theatres first, before DVD, before cable, and before digital downloads. Providing digital downloads earlier will not slow the effect of movie theft, in fact it will increase it. How much easier will it be to record a digital download in the privacy of a home theatre than in a public theatre?

Good luck with selling your business model to the studios. They are the ones you will need to convince, not us. If you are looking for allies in the theatrical exhibition industry, you are looking in the wrong place.

Rick Cohen

Transit Drive-in Theatre
Lockport, New York</B><HR></BLOCKQUOTE>


I’m not looking for allies in your industry, just trying to understand an issue from people in your industry’s perspective. From what I’m hearing and what I know, the belief that this online theater concept would grow piracy is the primary, if not the only, reason for it not to be accepted within the broader movie industry.

I am researching this and already finding numerous ways that piracy could actually be less of a threat from home-viewers than at a theater.






[This message has been edited by neokast (edited October 05, 2007).]

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by rodeojack:
<B>Dittoes to everything Rick said.

Regarding payment for the numbers shown: You miss the point that the studios are able to receive payment for each patron viewing a film because the theatrical window allows for an enclosed experience. In any televised or DVD model you have the ability to fill you home with viewers, while only paying the studios for one. In a sense, that's much like the old $5 carloads at our drive-ins... a practice that's pretty much out of the question for first-run theatres now.

As for piracy: promoting the notion that "bootleg is immediately available, so why bother" is absurd. The studios may not be able to eliminate the practice, but they do a pretty good job of keeping it from becoming mainstream. Giving up because of the percentage that remains is a defeatist attitude that won't convince anyone.

Landmark Cinemas owner, Mark Cuban, and film producer, Steven Soderburgh have been fans of the combined release window for some time. Cuban has already promoted the practice at theatres and cable channels he already owns... with film product that Soderburgh produced last year. The response was mediocre from the paying public, and the combined release pretty much limited the film to those two venues. As far as I know, no "big" release has fallen on its sword by pulling the same stunt.</B><HR></BLOCKQUOTE>

It's possible, but I'm not buying that a people are going to actually "gather" to watch a film on a small screen.


I read about the Cuban/Soderburgh film, but never saw it. Simultaneous DVD is much different though than a simultaneous Internet theater distribution, and much more of a threat to theaters in my opinion. It will be interesting to see what Landmark does going forward.


[This message has been edited by neokast (edited October 05, 2007).]

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by Mike:
<B>The problem with the idea is the simple fact of the chicken and the egg. Films are expensive to make and no two ways about it. Even the cheapest of films can cost hundreds of thousands of $ and real films with name actors and spec effects are in the 10's of millions at least. Upon having spent the money to make the film the film maker and / or distributor are anxious to try and recover at least and hopefully make money. For any real recovery you need a lot of ticket buyers or web viewers or whatever method they will see the film. For anyone to know about it.... add millions of dollars. I think I recall somewhere the average cost of a film pre opening, including marketing: was over 40 million. Once you have 40 million on the table, and I should know! , you better believe they want to get it right and not screw up as is done regularly resulting in the littered corpses of distributors and film co's. who guessed wrong. Maybe your idea has merit. But if anyone is to know about the thing you expect they'll be downloading / viewing it's gonna be a very hefty chunk of change. Would you pay 7-8-9-10-12.00 to view the thing at home? Good question. Anyway...and we could talk about this forever: the reason people pay for gold and diamonds is they are scarce. There is something mysterious about films and movie stars and the people who make films and movie theatres. It looks easy: just do this and pull this out over here and stick it over there. Guess what: it ain't been done yet. Sometime a house of cards is a tough little building.

</B><HR></BLOCKQUOTE>

It's a good point that theaters aren't likely to take huge gambles on new distribution knowing that all their costs are already sunk. It couldn't happen all at once, and would have to evolve like most businesses.

I think the lifecycle of movies is shortening as more and more people get the capability to produce them, due to new digital and other technologies. The challenge of recovering their sunk costs in the soonest fashion possible is only going to get more difficult for studios in this sense.

[This message has been edited by neokast (edited October 05, 2007).]

q\
It would not be an issue for studios to know the number of viewers. They could easily be satisfied in this regard. Also, cooperative businesses get around information-sharing and revenue-sharing issues all the time, worst case scenario requiring a 3rd party audit. How do studios know how many tickets you sold at your theater? Irregardless, this would be a non-issue. q\

I'm not sure how to do quotes on this site. FYI, there are people called "checkers" that work for movie studios that get paid to go to theatres and do a head count to make sure the theatre's numbers match with what they reporting to the studio. I know people who have done this. So you are a little naive in assuming numbers are all done on trust and faith.


q\Legitimate filmmakers would never agree to allow their movie be released to the home market at the same time it is in first-run theatres.
Why? I would think that filmmakers would like the idea of more paying customers seeing their movies. What am I missing? q\

The fact is, FEWER people see movies when they are released simultaneously on to the cinemas and DVD. Direct to Video movies have a stigma as being not as "legitimate" as movies with a theatrical release. Can't explain it, it's just the way it is. Theatrical films have some "mystique" about them.

Hey - anyone reading - I'm terrible on computers. How do I quote someone else on this site? Do I have to turn the HTML on?

BigE said it right about the "checkers". At my little 2 screen drive-in here in Tennessee, we had a studio checker here almost every weekend the first season we were open.

The big issue against this idea I see from the studios perspective is the "one ticket per viewer" aspect that would be impossible to verify in this scenerio.

This guy's idea is why we independent theatres need a better way of sticking together