ConvergenceAugust 13, 2005
This past week, Robert Iger became the latest voice to join a growing chorus advocating a major overhaul of the current movie distribution system. With DVD sales outstripping ticket sales, the time has come to stop thinking of home video as a "secondary market." In a limited sense, studios have begun recognizing that - DVD advertisements are more prominent now, with tens of millions put into the DVD release campaign (comparable in some cases to the amount spent on the theatrical launch). But there's still a six-month lag between theatrical release and video release, and this is irksome to some of those who don't visit multiplexes.
Iger's belief: that in the not-too-distant future, movies will be released simultaneously into theaters and on DVD. Maybe not all movies, but some of them. That way, those who prefer to avoid the crowds and bustle of multiplexes can stay home and watch a movie without being penalized by the six-month waiting period. Meanwhile, those who cherish the "theatrical experience" of seeing a movie in a communal environment on a big screen or those who like the social nature of attending a multiplex (teenagers) can continue to keep the 'plexes alive.
The potential negative is evident. Revenue, especially for theaters, could drop. But it's not a sure thing. I suspect that kids are still going to go to theaters once or twice a week. When you're that age, it's all about getting out - the destination is almost irrelevant. Staying home to watch a movie isn't a big draw. Teenagers want to be with their friends, and, since malls became passe, theaters have taken over as a weekend hang-out. That isn't likely to change. And, because teenagers make up a significant percentage of a multiplex's revenue stream, the fall-off won't be catastrophic. Where the theater/DVD convergence could hurt is with family films - moms and dads with young children may prefer to buy the DVD and watch it at home rather than go through the challenges of attending a theater.
The upside is that the home video market gets a major boost. And there's a greater chance to increase revenue by double-dipping: release a bare-bones $15 DVD on opening weekend, then add a deluxe special edition six or nine months later. It's difficult to determine whether the decrease in theater revenue will be offset by the increase in home video.
Simultaneous theater/DVD releases will also address, at least in part, one of the MPAA's chief concerns: piracy. The most desirable titles to acquire via illegal means (either downloading or buying on the street) are those not available in stores. That's not to say there isn't a black market for DVD titles, but (at least in the United States) it's smaller. DVDs are cheap enough here that most consumers will opt for legal copies. Releasing movie titles on DVD at the same time as their theatrical opening would cut the legs out from under many of the domestic pirating operations.
Another benefit would be that studios could save money by mounting only one advertising campaign. Rather than having to spend to promote a film for its theatrical opening, then re-loading for the DVD release, everything could be done in one fell swoop. For major releases, this could save millions of dollars. Advertising is no longer a minor line-item on the budget sheet. For some movies, advertising costs can equal 50% of what's spent making the film.
The pioneer for the theatrical/DVD convergence is likely to be Steven Soderbergh, who has a deal in place with 2929 Entertainment. This deal calls for Soderbergh to produce six digital films for the company that will be targeted for DVD and theatrical release on the same date. The first of these, Bubble, is due next year, and its performance (both on DVD and in theaters) will be watched with great interest by the industry.
If convergence occurs, it will likely start slowly with select titles. Smaller, independent films will be the first to cross over, since the DVD release would widen their potential audience, while family films and blockbusters would lag. It's possible that a compromise could be considered for big-budget films whereby they might have a one or two month theatrical run prior to the DVD release.
One factor that will impact any transition is the emergence of digital projection. If this becomes prominent (something likely to occur, although the time table is uncertain), it will in all likelihood speed the move toward convergence. Once film has been taken out of the equation, it makes more sense to produce DVDs early in the process. High Definition DVD is another issue, but it's unclear how that will play out with the looming potential for a format war.
Will this happen? Will at least a percentage of titles be released in theaters and on DVD at the same time? The answer is almost certainly "yes." But it's not clear how long it will take this idea to gather steam - although it's apparent that a number of Hollywood executives are becoming converts.
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