How Screening Room Is Challenging the Way Hollywood Works

Sean Parker’s Screening Room project is creating real hullabaloo in Hollywood. The service offers the possibility of watching major releases at home on the day they come out in theatre. Exhibitors are up in arms about it. In the filmmakers’ camp, news of the service has polarized directors with big names perched on either side of the fence.

We’ve analyzed all of the available information as well as the arguments as they evolved. What follows are the pros and cons of Screening Room as a concept as well as our take on the matter.

What we know…

The information about Screening Room broke on Variety, which described the service as being available through a set top box (priced at $150) and subject to an additional cost of $50 per film (available during a 48-hour viewing window).

The founders expected that exhibitors would resist and therefore proposed a compensation scheme. The revenue split is as follows: 10% goes to Screening Room, 20% goes to participating exhibitors (20%), while the remaining 70% goes to distributors and the studios/producers. What’s more, users will also receive 2 tickets for admission to a nearby cinema per viewing. This is supposed to serve as an incentive to convince consumers and exhibitors to get onboard.

Discussions are continuing with Universal, Fox and Sony, while Disney apparently has already refused to partner up with the venture. Reports also suggest that Screening Room is close to enlisting support from a major exhibitor, i.e., AMC. Let us recall that the chain recently acquired Carmike Cinemas.

While the project’s initiators have had yet to make a public statement, there are plenty of industry heavyweights that are weighing in on the argument.

Who’s for it and what are the arguments?

Parker and Akkaraju have already enlisted a powerful advisor in Sony’s former chairman of worldwide marketing and distribution, Jeff Blake. Since the first announcement made to the press, a series of high-profile filmmakers—including Peter Jackson, Steven Spielberg, Martin Scorsese and J.J. Abrams—have voiced their support for the initiative.

The main benefits they find in Screening Room is that it offers the possibility of developing a strong antipiracy system and that it will attract audiences who don’t or can’t go to the movies.

Arguments in favour include:

  • Attracting audiences that don’t go to the movies: Cinema attendance is stage-of-life dependent, as per the main finding of Stradella Road’s insightful 2010 report. The odds of movie attendance are heavily stacked against those with children and a difficult work/life balance to the point where going to the cinema requires careful planning and additional costs such as babysitting, etc.


    Source

“The price point we’re going for is to target people who are working adults and young adults who used to go to the movies but no longer can because of kids or other obligations […]. This is an incredibly large group, according to statistics compiled by the Motion Picture Association of America.” (In What’s So Great About Screening Room? The Inside Story of Sean Parker’s Day and Date System)

  • Combating piracy :  A key finding of a recent EAC report is that 55% of people interviewed, downloaded or streamed films illegally. Several of the main reasons provided were related to access and availability. The same study found that people with the best home entertainment setups were those who were most likely to pirate films . Indeed, the percentage of “pirates” (55%) rises in households who own a smart TV (61%), a home-cinema system (66%), and a VOD subscription (69%).” So, households that are technologically equipped to do so are the ones that download the most. Based on these facts, if the industry could reorganize and solve the cost, convenience and access issues, then piracy levels would probably decrease.

  • Getting more bang for your buck:  Traditionally, marketing budgets are blown over opening weekends. Then there is a pause before the next wave of money is spent on home entertainment. It’s tremendously wasteful and subject to many outside variables (such as weather) that can have a real impact on the bottom line. For mid-sized original screenplays to be successful, there is just too much chance involved for a rugged methodology. Screening Room offers distributors time to understand the nuances of their campaign and optimize to extend their marketing budgets.

Who’s against and what are their arguments?

Opponents include successful filmmakers such as James Cameron, Christopher Nolan and Roland Emmerich among others. Cinema chains and exhibitor associations have also expressed disapproval.

“Some exhibitors worry that they would essentially be midwifing their demise by agreeing to shrink the windows.” (Brent Lang, Variety)

Public statements have been issued by the National Association of Theatre Owners as well as Art House Convergence (representing smaller chains and art house venues) and UNIC (International Union of Cinemas). The statement of the National Association of Theatre Owners suggests that they may be more keen to review the sanctity of release windows and negotiate with studios and distributors just as long as it does not involve day and date for the big releases that are their bread and butter.

Arguments against include:

  • Putting cinemas out of business: If viewers can see a film at home on the same day it premiers in cinema, cinema attendance will soon become a thing of the past.

  • High price: At $50 per viewing, there would need to be 5 people contributing to cover the cost for it to be as low as the price of a movie ticket. The price seems high especially since this would involve just rentals, not ownership.

  • Piracy threat: Quality is not that important for many people, and many who pirate content focus on seeing it first rather than seeing it in the best conditions and optimal quality.

  • Shifting focus from theatrical releases (and opening weekends): Right now, a lot of the movie marketing efforts are focused on release weekends because of their perceived potential in terms of generating word of mouth. Some argue that taking the theatrical experience out of the equation will kill the potential for this. (We have previously shown how this myth is partially debunked in the current landscape, but it’s no secret that it is still a widely held belief in the industry.)

  • Alienating audiences:  Screening Room would not only cater to families with children, it would further diminish audiences made up of singles and childless couples who currently represent a majority of cinemagoers.

  • Perpetuating franchises: Such an initiative would only perpetuate the proliferation of franchises and sequels to the detriment of original and interesting film offerings.

“There can’t be an exhibitor worth anything that doesn’t know this is where we’re headed. Short of surrendering and sticking their head in the sand, this is something both sides need to work on.” (David Weitzner, former studio marketing chief)

What’s Gruvi’s take?

I think it’s important to put this into perspective. The movie industry just set another revenue record in 2015, despite piracy and all of the other factors that rallied against it.

Back in the early years, when VHS tapes proliferated, cinemas had a chance to have a better place at the table. They instead chose to hold on to their monopolistic position. VHS eventually won, yet cinemas and film companies continued to make more money than ever before.

So we’re going to see panic, vitriol and mounting tension, and probably more arguments like this delightful jewel:

“I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone….” (Jack Valentii on behalf of the MPAA from the 1982 Congressional hearing)

Which leads to this: “Disruption is better when it’s other people’s jobs” (as DHH aptly puts it). If the cinemas could, they would be the ones launching an initiative like Screening Room and they would have done so years ago. But they can’t, because too much is vested in political interests and relationships which are not conducive to the sudden breakthroughs and changes that technology can often provide.

Smashing the windows and reorganizing the economics of exhibition

If it goes through, Screening Room will have a major impact on release windows as well as on the way exhibitors conduct business. As we predicted a couple of months back, in our review of 10 trends that will influence the entertainment industry, cinemas that are not focusing on creating great user experiences will suffer. This is a point that has been shared by others in the entertainment industry.

“The window will inevitably shrink. Cinemas need to understand that it is as much about the quality of the venue and the experience delivered as it is about content.” (John Sullivan, founding director of Cinema Next)

Pricing flexibility

Such an initiative is likely to accelerate the development of flexible pricing, for example, seeing as certain titles are cheaper than mainstream blockbusters. Yet again, viewing content in certain territories is less expensive: Netflix is now blocking VPNs so it would be possible to do the same to avoid VPN-related piracy.

All this will be great for getting more films seen and making more money off content. We are talking about a global audience now, one that has access to the latest technology and that is in danger of falling out of the habit of ‘legal viewing.’ The main reason why pirates win is because they offer better access.

“The sooner you stop fighting the present, the sooner you can get to work on figuring out the future.” (Thanks again, DHH)

The bottom line is that if we really want to save this industry, movies should be seen! If we want diversity in filmmaking and if we want risks to be taken on new talents (whether they be directors, actors, writers or so forth), then movies should be easily accessible to all and it should be easy for people to pay and watch them legally—whether in a movie theatre or at home.

You want more? Watch Gruvi’s vlog on the same topic!  

This article was originally published on Gruvi and is presented here as part of the editorial partnership between CMF Trends and Gruvi.  © [2016] [Gruvi]. All rights reserved.

Posted in: Business Practices

Tags: distribution, gruvi, movie, set top box, windowing



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