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TOPIC: War of the Windows

War of the Windows 26 Jun 2005 15:36 #10558

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One side is ready to boycott. Another is making peace offerings.
The topic on everyone's mind but nobody's lips: the incredible shrinking window between a film's theatrical opening and its release on DVD.
The factions -- exhibitors, indie distribs and the major studios -- don't want to talk about it, but all sides agree: The rules are quickly changing and something needs to be done -- fast.
Last year, studios waited an average of four months and 16 days to release theatrical pics on DVD. But the window is getting shorter and shorter; one studio chief predicts it could dwindle just two months, or even fewer for box-office flops.
If the window keeps shrinking, it could rattle the foundations of the film biz
With 2005 box-office receipts trailing last year's, and consumer electronics companies making rapid inroads into the nation's home-viewing habits, there are rumblings among distribs that the traditional strategies for theatrical distribution, DVD and even PPV are no longer working.
These concerns are compounded by shifts in the market for DVDs, which now have so short a shelf life, they're disappearing from retail outlets almost as quickly as movies burn off at the box office.
Most of the rumblings are coming from the indie sector, where a handful of maverick distribs are experimenting with plans to release films simultaneously on different platforms. Earlier this year, Mark Cuban and Todd Wagner announced that their 2929 Entertainment had struck a deal with Steven Soderbergh to create six pics to be rolled out simultaneously in theaters, on cable and on DVD.
Wagner says, "Our premise is that we're trying to increase the revenue pie. It's not an attack on exhibitors, since we believe it's two different audiences (i.e., those who watch a film on the bigscreen vs. those who do so largely at home). We're trying to rethink how to divvy up that pie."
While it's easy to dismiss Wagner's plan as a maverick experiment, the majors are watching with keen interest, but keeping their opinions close to their vests. One studio flack referred to the topic as an "industry taboo."
"We have a process that works very well," says one studio exec. "Each window generates significant revenue. We have no incentive to change that, unless we see that you can significantly make more money."
Privately, studio execs and filmmakers are wrestling with the traditional strategies. Studios are murmuring that it doesn't make fiscal sense to shell out enormous marketing costs twice for one film. A closer DVD launch can ride the wave that began with the bigscreen.
Though, as with all booms, the DVD explosion seems to be coming to an end. The format is and will remain the most important source of revenue for studios, but the growth of consumer spending on DVDs is slowing -- from a 71% jump between 2001 and 2002 to a more moderate 17.5% this year, according to DVD Exclusive. Much of the new money, though, is coming from the release of TV properties, not films. Absent the tube titles hitting shelves, total DVD growth would likely be in the single digits.
One studio honcho admits that when he and his colleagues see a pay-per-view boxing match earn $55 million to $100 million in one evening, they start talking about simultaneous bigscreen and PPV launches.
For their part, exhibs have been bracing for such developments since the video explosion began, and they're not prepared to give any ground.
"It has been our policy that we do not exhibit films that are being simultaneously released on DVD, video or pay TV," says Regal Entertainment Group senior VP of marketing Dick Westerling. "And we do not anticipate changing that policy."
The major circuits are also taking steps to consolidate their power. Last week, AMC Entertainment announced plans to merge with Loews Cineplex, forming the nation's second-largest chain, with 5,936 screens. King of the hill Regal Entertainment has 6,264 screens.
Soderbergh is the perfect guinea pig for 2929, since he bridges two worlds: He has the commercial sensibility that he's shown in studio releases ("Erin Brockovich," "Ocean's Twelve") along with an indie, experimental spirit ("Full Frontal," HBO's "K Street").
But Soderbergh is also so unpredictable a filmmaker, it's anybody's guess how he'll focus his creative energies in the months to come. He's planning to direct two studio pics over the next 12 months -- "The Good German" for Warner Bros., followed by a Che Guevara biopic for Focus Features.
But the budget of "The Good German" has been a source of tension at Warners, home to Soderbergh's production shingle, Section 8. If he thumbs his nose at exhibitors with a series of low-budget projects financed by 2929, the friction with Warners could heat up.
First up under the deal with 2929 is "Bubble," a murder mystery set in Ohio that's finished lensing and is expected to be available for fests as soon as September.
Company principals say they're not being cagey when they decline to talk about budgets and subject matter: The six-pic pack is an experiment -- "Bubble" even features non-pro actors -- and budgets may increase, depending on what happens.
The centerpiece of Cuban and Wagner's plan is the high-def channel HDNet Movies. But their 2929 has a hand in production (HDNet Films), distribution (Magnolia Pictures) and exhibition (the 200-plus screen Landmark Theater chain).
There is a similar plan afoot at Film Movement, an imprint that distributes films simultaneously in theaters and on DVD through a subscription service. Larry Meistrich, co-founder of Gotham shingle Shooting Gallery, started Film Movement in 2002.
"Exhibitors are helping promote the DVD and they should at some level find ways to participate (in those profits)," says a Film Movement spokesman.
2929 Entertainment and Film Movement are planning "rebates" to exhibitors. The 2929 docu "Enron: The Smartest Guys in the Room" opened simultaneously in theaters and on a high-definition TV channel -- and the company plans to reward exhibs, as thanks for participation in this experiment, by giving them a portion of the ancillary revenue.
There are a lot of unanswered questions about these tactics.
How would it affect word-of-mouth pics that build slowly, a la "Napoleon Dynamite," "My Big Fat Greek Wedding" or "Capturing the Friedmans," which was rolled out through 2929's Magnolia arm?
"A movie like 'Napoleon Dynamite' can run eight or nine or 10 weeks in release," says one studio subsid exec. "The time that's allowed for these films to reach the windows increases value. If you collapse the windows, can you still do that?"
For 2929's "Enron" doc, the company's distrib arm first rolled out the pic in Landmark theaters while airing it simultaneously on the HDNet Movies channel, which is carried by cable providers and sat services like DirecTV.
Pic has performed solidly on the HDNet format offered by companies such as Adelphia, Charter, DirecTV, Dish Network, Insight, Mediacom, Time Warner Cable and various National Cable Television Cooperative (NCTC) affiliate.
, But the subscription base is not hefty enough to make any dent in the pic's robust theatrical take of $3.2 million.
To optimists, Cuban and Wagner embody the potential for shifts in business plans. They say they want to share the wealth with the exhibs. They see their plan as a solution to everyone's problems: The money won't be drained from exhibs but divided with them. (One studio honcho says he hadn't heard of such a plan, but found the idea intriguing.)
Like Cuban and Wagner, those who have the most to gain from such a sea change are up-and-coming entities with burgeoning cable concerns that can use the lure of day-and-date movie preems to get themselves added to more cable systems.
That benefit could far outweigh alienating theater owners and catapult a channel like burgeoning HDNet to a new level.
But there are many independent theaters that are already angry at studios and the bigger chains, feeling shut out by the big boys' deals. These indies would love to get in on the ground floor of something that has such potential -- and, as a bonus, to get back at the biggies.
Exhibs are jumpier than ever, pointing to every action as if it were an omen.
Exhibs are also irked by studios' re-releasing first- and second-quarter pics to remind Oscar voters they exist -- while the DVD version is already on store shelves.
Take the underperforming "Cinderella Man," for example. Universal is reportedly considering a re-release in the fall; the question is whether it would already be available on DVD. October, which U is said to be considering as its rollout date, is not a typically strong month for selling homevid titles and the studio could conceivably follow up the re-release with a post-Thanksgiving launch.
"(Exhibitors are looking for what sets) a bad precedent," says one distrib vet. "What says to studios that you can shrink windows and get away with it."
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