The Fracture of the Theatrical Release Window, PART II

For Part I, click here. For Part III, click here.

In Part I, I gave a short history of the release window system for movies and how that system nearly destroyed my childhood. Slowly but surely, the window during which a movie plays exclusively at theaters before being released to DVD and Video on Demand (VOD) has shrunk.  In the 80s the standard was six months, but now four months is the most common, with some films being released in other formats two months after, simultaneously, or even before the theatrical run. The National Association of Theatre Owners (NATO) opposes shortening the four-month window, because they believe that would lead less people to see movies in theaters. The industry as it exists would thus not be sustainable.

When DirecTV announced a VOD service that would allow users to rent HD movies two months after the theatrical release, NATO penned an open letter opposing the service and got a couple dozen famous directors to sign it. I'm no expert, but to me the letter is bad PR (all emphasis mine):

AN OPEN LETTER FROM THE CREATIVE COMMUNITY ON PROTECTING THE MOVIE-GOING EXPERIENCE

We are the artists and business professionals who help make the movie business great. We produce and direct movies. We work on the business deals that help get movies made. At the end of the day, we are also simply big movie fans.

Besides the self-congratulatory first line, this opens the letter decently. I like that they identify themselves as movie fans, but as we'll see, they then neglect this viewpoint almost entirely for the rest of the letter.

Lately, there’s been a lot of talk by leaders at some major studios and cable companies about early-to-the-home “premium video-on-demand.” In this proposed distribution model, new movies can be shown in homes while these same films are still in their theatrical run.

In this scenario, those who own televisions with an HDMI input would be able to order a film through their cable system or an Internet provider as a digital rental. Terms and timing have yet to be made concrete, but there has been talk of windows of 60 days after theatrical release at a price of $30.

This ended up being exactly what happened. $30 for a two-day rental after two months.  No figures yet, but the speculation is that it ain't doing so hot.

Currently, the average theatrical release window is over four months (132 days). The theatrical release window model has worked for years for everyone in the movie business. Current theatrical windows protect the exclusivity of new films showing in state-of-the-art theaters bolstered by the latest in digital projection, digital sound, and stadium seating.

This is the first big mistake. If you're going to write an open letter (i.e. intended to be read by a wide audience), you shouldn't be making arguments about what's good only for the industry, but what's good for the industry as it concerns the moviegoer. (Or more aptly: movieviewer. Too weird looking?)

As a crucial part of a business that last year grossed close to $32 billion in worldwide theatrical ticket sales, we in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry.

Yep, this is a one-sentence paragraph, and the first half is out-of-place. I understand the desire to flash the industry's mighty bona fides, but you shouldn't do it while introducing a point about how a change might "harm your financial model." Also, that last phrase is too dryly written and again offers no bone to moviegoers.

Major studios are struggling to replace the revenue lost by the declining value of DVD transactions. Low-cost rentals and subscriptions are undermining higher priced DVD sales and rentals. But the problem of declining revenue in home video will not be solved by importing into the theatrical window a distribution model that cannibalizes theatrical ticket sales.

Make no mistake: History has shown that price points cannot be maintained in the home video window. What sells for $30-a-viewing today could be blown out for $9.99 within a few years. If wiser heads do not prevail, the cannibalization of theatrical revenue in favor of a faulty, premature home video window could lead to the loss of hundreds of millions of dollars in annual revenue. Some theaters will close. The competition for those screens that remain will become that much more intense, foreclosing all but the most commercial movies from theatrical release. Specialty films whose success depends on platform releases that slowly build in awareness would be severely threatened under this new model. Careers that are built on the risks that can be taken with lower budget films may never have the chance to blossom under this cut-throat new model.

If you grant the premise that shorter or simultaneous release windows will cannibalize ticket sales (which is debatable), then this is a fair argument. This point could be made, however, without so obliviously regarding lower prices as bad. The horse is already dead I know, but flog it I will: customers like lower prices!  You could admit as much in the letter without failing to point out the negative consequences that lower revenues might have.

Further, releasing a pristine, digital copy of new movies early to the home will only increase the piracy problem—not solve it.

Giving folks an early legal option for watching pristine digital copies may offset some piracy, but no one really knows.

As leaders in the creative community, we ask for a seat at the table. We want to hear the studios’ plans for how this new distribution model will affect the future of the industry that we love.

And until that happens, we ask that our studio partners do not rashly undermine the current – and successful – system of releasing films in a sequential distribution window that encourages movie lovers to see films in the optimum, and most profitable, exhibition arena: the movie theaters of America.

This last line is as sticky as a movie theater floor after a double feature. Earlier in the letter, NATO argues that movie theaters will lose business to DVDs in a head to head competition. This leaves NATO in an awkward position: if movie theaters are so great, why would they lose business to the suboptimal DVD?

My concluding thoughts on this letter can be found after you leap over the famous directors below.

We encourage our colleagues in the creative community to join with us by calling or emailing NATO at 202-962-0054 or nato@natodc.com.

Sincerely,

Michael Bay Kathryn Bigelow James Cameron Guillermo del Toro Roland Emmerich Antoine Fuqua Todd Garner Lawrence Gordon Stephen Gyllenhaal Gale Anne Hurd Peter Jackson Karyn Kusama Jon Landau Shawn Levy Michael Mann Bill Mechanic Jamie Patricof Todd Phillips Brett Ratner Robert Rodriguez Adam Shankman Gore Verbinski Robert Zemeckis Christopher Nolan Jon Favreau Quentin Tarantino M. Night Shyamalan David Dobkin Mark Boal Jim Cardwell

In truth, my beef with this letter isn't its style or solipsism, but in the way it so keenly embraces an illusory status quo. This error, which I'm tentatively calling the Obscene Movie Fallacy, will be the subject of Part III.  How's that for an after credits teaser?