Top 10 Film Industry Stories of 2011: #7
Margin Call Proves Viability of Day and Date Video on Demand
By David Mumpower
December 27, 2011
BoxOfficeProphets.com
A few months ago, I was perusing a list of new releases available through Amazon’s rental service. The one that grabbed my attention was $7.99, over twice the price of a regular rental through the service. In spite of the price, I found myself sorely tempted to make the purchase and in this simple consumer action, I found myself mirroring the behavior of many others. As a group, we enabled Margin Call to become an engrossing small scale triumph as well as a glimpse into the not-so-distant future of independent and possibly even mainstream film distribution.
Margin Call is a strange project in and of itself. The movie stars industry icons such as Kevin Spacey, Jeremy Irons, Stanley Tucci, Mary McDonnell, Demi Moore and Paul Bettany. A project with two different Academy Award winning actors and other such luminaries should be awards bait. The producers of Margin Call, however, struggled to find domestic distribution. As BOP’s Dan Krovich aptly described it, the project was too big to be a small, outsider project and too small and arcane to be a major studio release. As recently as six months ago, this film of exceptional quality was anathema to film distributors of all kinds.
Stuck in the middle, Before the Door Pictures (co-founded by Margin Call co-star Zachary Quinto) evaluated new options in the marketplace. Eventually, they settled upon a strategy most comparable to the releases by Magnolia Pictures. The difference is that Mark Cuban’s company exhibits those titles on his HDNet cable television channel. Margin Call utilized altogether different means. They employed a daring day and date video on demand release strategy to double down on their revenue options.
Made available through cable VOD services, the Wall Street critique accidentally became the movie of the moment. Its release had been delayed to October of 2011 in order to avoid HBO’s showier piece, Too Big to Fail. By the time Margin Call was available for consumption, it had become the topic of the moment due to the nascent Occupy Wall Street movement. Through easy television access, viewers could pay roughly the same price as a theatrical experience in order to watch the film at home. Since the cast was great and the price was right, Margin Call became a huge hit on home video. Many consumers such as myself felt that a cast of such impeccable quality for a movie costing the same price as a movie ticket was a solid gamble. While it is not THE most popular day and date VOD film to date, its $4 million in revenue through this service exceeds its modest $3.4 million production cost.
The equally fascinating aspect of Margin Call’s release is that its VOD popularity in no way impinged upon its box office revenue. Effectively blackballed by major exhibitors, the title only had two avenues for theatrical release. AMC Entertainment is the only member of NATO that will even consider booking a day and date VOD title. This forced the producers of Margin Call to explore contracts with independent theater chains, a savvy strategy that has been discussed in prior Film Industry Stories of the Year topics. Oftentimes shut out by major distributors, these indie theaters are the perfect match for indie films yet the two groups do not sync up on a frequent basis.
In creating an irregular amalgam of exhibitions, Margin Call was able to debut in a modest 56 locations but eventually expanded into 199 play dates, never achieving box office higher than $562,000 in a single weekend. Over a two month period in theaters, it methodically earned $5.1 million, thereby exceeding its VOD receipts. The end result is that a movie made for $3.4 million grossed over $9 million through two very different means of exhibition. The established one was slightly more lucrative but it was effectively matched by a desperate usage of VOD in order to boost revenue. The end result is that with very little marketing and virtually no notification of its availability on VOD, Margin Call became a modest financial triumph.
I am not exaggerating when I confidently state that the novel release strategy of Margin Call could fundamentally change the way low budget movies are distributed. This corollary to the previously discussed Tower Heist story is even more significant due to what it represents. As was mentioned in that Film Industry Story, everyone in the industry accepts on some fundamental level that content creators will one day soon sell directly to their customers. Until then, they are constantly searching for ways to cut a better deal, one that keeps a larger portion of revenue in-house.
Since the inception of the movie distribution system, there was a third party involved, the movie theater. The symbiotic relationship between the distributor and the theater has evolved over the decades as emerging markets such as network television, cable television, videocassettes, DVDs and eventually video on demand all increased earning potential. None of this has weakened movie theaters significantly enough for them to stop building cinematic cathedrals. But the industry is always looking for those cracks in the foundation that may prove to be the early warning signal for cataclysmic change.
Now that the results for Margin Call are well publicized, movie executives in all phases of the industry are studiously investigating whether this model is sustainable. And if it is, the question becomes whether it is only possible for small scale titles or if the Tower Heist plan is viable. The key differences between the two titles are straightforward. Tower Heist is a major distributor’s release and if it had worked, that strategy would have become the new normal in the industry. Margin Call is made by a nascent production company who are not guaranteed to release another noteworthy movie in their existence (although based upon the splendid quality of Margin Call, this seems unlikely). Their achievement on this project is easier to dismiss since they are virtual unknowns.
The only difference is one of sticker shock. $7.99 is roughly the average movie ticket cost in North America. At that price point, anyone who wants to see a movie but doesn’t want to put on pants (I’m presuming that’s most of you) is a potential customer. At $59.99, the announced price point for Tower Heist, a person could buy half a dozen Blu-Rays at Amazon.
This isn’t accidental. As I mentioned during the Tower Heist conversation, the reason Universal chooses that number is to insure that exhibitors are not originally threatened by it just as the exhibitors threatened a boycott because they knew that $59.99 would never hold as the price. The basic foundation of movie going has started to crumble as home (and cell/tablet) streaming/downloading becomes more and more tenable. We have witnessed this with Netflix. The attempt with Tower Heist and the accomplishment of Margin Call are further data points that we are moving toward a “watch any movie, anywhere, anytime” society.