Why Hollywood suddenly fears for its life
NEW YORK - Now playing in Hollywood: A battle over the future of the movie business, starring some of its most famous filmmakers.
The Screening Room, a startup backed by Napster co-founder Sean Parker and music executive Prem Akkaraju, has sent tremors through the movie industry since word of its ambitions were first reported Saturday. Parker and company are seeking to upend the theatrical model and bring first-run films, through a $150 encrypted set-box, directly into the home for $50 a pop.
The service has the support of some major filmmakers, including Steven Spielberg, Peter Jackson and J.J. Abrams, but its existence depends on the cooperation of studios and exhibitors -- and that appears unlikely.
Yet the Screening Room has thrown Hollywood into something resembling an existential crisis, with round-the-clock debate about its prospects that has pitted some of the movies' biggest names against each other. Is this the meteor headed straight for the big screen, or is it -- like previous efforts -- nothing but a storm of hype that will sail past?
"It frightens me," Tim League, chief executive of Alamo Drafthouse Cinema, the Texas-based theater chain, said of the Screening Room. "What I'm afraid of is that chasing short-term additional revenue might open up a situation where piracy really hurts the entire industry."
And the industry, he says, is thriving. "We're in the business of getting out of the house," says League.
Whether the Screening Room succeeds or not, it has added to a growing sense that the traditional theatrical model will one day fall, a casualty-in-waiting of an increasingly digital and instantaneous media world.
But such prophecy doesn't account for some economic realities: Box office in North America, alone, was a record $11 billion last year. Despite a growing horde of barbarians at the gate - Netflix (NFLX) among them -- the theatrical release window has held so far. The marketing splash of a theatrical release continues to drive the industry's revenues -- and not just at the box office, but through merchandising and subsequent windows of release.
Yet some see a chance to profit more from those who prefer to stay home. According to the Motion Picture Association, 11 percent of the U.S. population qualifies as regular moviegoers (going 18 times a year), and they make up half of box-office receipts. The Screening Room is aimed at the couches of the other 89 percent.
Jackson said the Screening Room, which is proposing to split revenues between studios, theater operators and itself, is "designed to capture an audience that does not currently go to the cinema."
But many of the filmmakers speaking out for the service (including Ron Howard and Brian Grazer) are advisers or shareholders. Others without a financial stake, such as James Cameron and Christopher Nolan, have denounced it as a misguided effort that will devalue the big-screen experience.
The six major studios declined to comment about the Screening Room. But numerous interviews with studio executives, who requested anonymity because they weren't authorized to speak publicly about the matter, described the presentation by Parker and Akkaraju (a former SFX Entertainment executive) as polished and interesting enough to warrant consideration. But they said the service was doubtful to gain studio participation.
Major theater chains, which split box-office revenue with distributors, were also courted by the Screening Room, which proposes to give them a hefty cut of each $50 rental. The two largest chains, AMC Theaters (AMC) and Regal Cinemas (RGC), declined to comment. Mark Zoradi, chief executive of the third largest chain, Cinemark (CNK), said "any day-and-date propositions must be critically evaluated to avoid the devaluation of the exhibition window and all subsequent revenue streams of our content providers."
The National Organization of Theater Owners (NATO), a trade organization, acknowledged that "more sophisticated window modeling may be needed for the growing success of a modern movie industry." But NATO added that such changes should be developed by distributors and exhibitors -- the traditional twin powers of the movie industry -- "not by a third party."
Nevertheless, the stir caused by the Screening Room promises to be the all-consuming topic at NATO's annual convention, Cinema-Con, in Las Vegas in April.
Some studios and even exhibitors may want to hedge their dependence on theaters, where all but the most prepackaged blockbusters often struggle to find audiences. Paramount Pictures has recently experimented with a shorter theatrical window (usually 90 days) for a pair of low-budget horror films: "Scouts Guide to the Zombie Apocalypse" and the fifth "Paranormal Activity." Neither performed well, however, nor did the improvised day-and-date release of Sony's "The Interview."
But for the first time, the question of theatrical release isn't just up to studios and exhibitors. Netflix has been aggressively buying up new movies for its streaming service, though it has had difficulty getting them into theaters. Many simply refuse to screen day-and-date releases. To play last year's "Beasts of No Nation" in theaters, Netflix had to "four-wall" some theaters, buying up the tickets themselves.
The latest upstart, Amazon Studios (AMZN), has taken a different tact, however. It has embraced theatrical releases for its films, happy to simply add the movies to its streaming offerings after a run in cinemas.
Even disruptors like Amazon, it turns out, still like a night out at the movies.