Redstone Sees A Window Of Opportunity Closing For Hollywood

by David Goetzl, Mar 30, 2006, 8:00 AM

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Shari Redstone thinks her media-mogul brethren have the wrong idea about how fast films should go from the theater to DVDs. While both Disney's Bob Iger and Time Warner's Richard Parsons have suggested the time gap between theatrical and DVD releases may soon collapse significantly--Iger has even touted a simultaneous release plan--Redstone argued forcibly yesterday for maintaining the current tiered structure of distribution windows.

"Shrinking the windows is bad for business," she said at a Bank of America investor conference in New York. The result, she said, would be reducing four or five revenue streams--from theater to DVD to pay-per-view to television--into one.

Redstone is president of National Amusements, which operates movie theaters and serves as the parent company for both Viacom and CBS Corp.

The case for collapsing the distribution windows has picked up steam as U.S. box-office revenues have been on the decline. Meanwhile, technology is ushering in a new era of possibilities, and consumers are clamoring for more on-demand content consumption.

Redstone's solution to the lagging box office is to reinvigorate the theater-going experience. National Amusements, for example, is trying to turn the old multiplexes into "community entertainment destinations" with vodka bars, gaming lounges, and other amenities.

"We need to protect our windows and bring back the 'wow' of going to the movies," said Redstone, whose family has been in the exhibition business since 1936.

Her argument that the traditional release schedule represents the best economic model is bolstered by a recent Bank of America report. The report suggested that the DVD market--which demonstrated slowing growth in 2005--is fueled by strong theatrical performances. Analyst Michael Savner wrote: "we believe that the declines in the domestic box office only helped to exacerbate DVD's growth slide."

Domestic box office fell 4.8 percent in 2005, while the DVD market cooled to 5 percent growth (it was 37 percent as recently as 2003), according to the report.

One of the arguments for the simultaneous release of films on multiple platforms is that studios could save marketing dollars by mounting one massive blitz upon release, rather than rolling out various campaigns as a film works through its life cycle.

While content creators are intrigued by the possibilities that exist by unleashing a film to as many people--by as many means--as possible all at once, traditional theater owners have railed against the prospect. Add Redstone to the list.

However, unlike Iger and Parsons, Redstone has dogs on both sides of the fight--she's both president of National Amusements, which has 1,500 screens around the world, and vice chairman of Viacom, which includes Paramount Pictures. (She's also vice chairman of CBS, which owns Showtime, a pay-cable network that has a place in the distribution chain.)

Iger caused a stir last summer when he suggested that Disney would pursue a simultaneous theater and DVD release plan. Several months later, Parsons joined the fray by suggesting he'd like to shorten the gap between silver screen and DVD, although he said it was important to work with theater owners in the process.

Several smaller operations (compared to Disney and Warner Bros.) have already experimented with potentially transformative release structures. IFC Entertainment several weeks ago began releasing two independent films a month simultaneously on video-on-demand and in theaters. In January, a Steven Soderbergh film--"Bubble"--debuted in theaters and on the HDNet Movies cable channel on the same night, while the DVD came out four days later.

It's unclear how much "Bubble" garnered in DVD sales or from its run on HDNet, but it didn't set the box-office ablaze. It grossed only $146,000--well below its $1.6 million production budget, according to Box Office Mojo. However, it failed to secure wide distribution, as large theater chains protested the business model it represented by declining to offer it. Five more Soderbergh films are scheduled to be distributed in a same-time-multi-platform fashion.

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