Commentary

Movie Biz Survival Strategy: Focus On Home Viewer

Why are there fewer good movies each year? That’s a trick question. The truth is that there are actually fewer movies, period.

It comes down to economics. The trend is evident. The studios are investing heavily in their “tentpole” product, the proven winners. They, and independents alike, are investing less and less in movies in general. Progressive studios and distributors are spending their capital in alternative ways to create revenue. Many of the top TV shows, for example, are being financed by movie studios, who a few years ago didn’t want to be in that business.  

More and more, distributors are green-lighting and financing projects based on P&L statements instead of the old-fashioned way of taking a calculated bet on whether a film could jump out at the box office. There is no more betting! The decisions are basically being made by the accountants, not the executives.

Some of this is due to the drop-in demand of DVDs -- far from over, by the way -- but much of it has to do with the disruption of the movie distribution model in general. The home theater is clearly taking over the share of the market once controlled exclusively by the movie theater.

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Of course people still like to go to the movies, but not as often.  So how does this system continue to keep itself sustainable? As I like to say, Ray Charles could see this answer: Movie studios need to recognize that having 80% of their revenue being generated by 20% of their films is not a sustainable model. As Spielberg and Lucas have said recently, just a few major misses could take down the whole system.

The alternative is to embrace technology and go where the audience is moving: do everything possible to exponentially facilitate movies getting to the home viewer as a primary, not ancillary, revenue source. Leave the blockbusters out of the changing model if you like (for a while). Take every film that is not a potential big hit and, either simultaneously release in both the theater and pay-per-view, or on a subscription platform.

Then spend some marketing money to help drive home viewing. Following this model could lead to profit on a much bigger percentage of films, and open up the door to more production.

Eventually, the studios should follow the same model with their blockbuster box office hits. That would be a major disruption in a very good way.

For the $100 million films, the PPV viewing price is likely to have to be $29.95 or $39.95 in the first few weeks of release. But individuals and families will pay it, especially when you consider the cost of the alternative. To see a film in my hometown of New York City, it cost two people $13 each, or $26.  Nationwide, that tab is around $8 per person, or $16. That is not counting popcorn, refreshments or transportation. For a family of four, or just two couples, a $29. 95 PPV film is a good deal.    

The release windows in the movie business have been continually shrinking, as technology and consumer demands change. The business has hit a wall.

It is time now for the major studios to shorten the windows to no more than a month, and in many cases a few weeks. Fans who want to see a specific film will still line up at midnight, and those who love the theater experience will still continue to go out. But an even bigger upside is that this model will drive sales of more televisions and tablets for users eager to watch movies at home.

Movies are a national pastime. In order to continue to have more and more choices and to have more and more good movies, studios and theaters owners are going to have to take a leap of faith and finally work together to make shorter windows a reality. The biggest part of that leap involves money. Working out how the theater owners and the studios all share in the profits is the key. That is a challenge that we will leave to the Hollywood accountants.
1 comment about "Movie Biz Survival Strategy: Focus On Home Viewer".
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  1. Pete Austin from Fresh Relevance, August 21, 2013 at 5:07 a.m.

    Re: "The truth is that there are actually fewer movies, period." Citation needed. Seems to me there are many more movies each year, especially in Asia, but I've not been able to find a good summary. As you say, it comes down to economics, because the world is getting richer.

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