Monday Morning Quarterback Part III

By BOP Staff

January 31, 2006

The most under-rated receiver in the game.

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Has the cineplex Bubble burst?

Kim Hollis: Bubble, the $1.6 million Steven Soderbergh experimented funded by Mark Cuban and Todd Wagner at Magnolia Pictures, earned only $72,000 from 32 exhibitions. This is a paltry per-venue average of only $2,250. Magnolia reports that 100,000 DVDs will be available for purchase in the title's first week and also notes that it has earned $250,000 for distribution through HDNet. They expect a $5 million first week take for the project despite its $24,000 a day performance thus far. This is an entirely new economic model for the industry and as such merits discussion. How would you gauge its performance thus far?

Tim Briody: Don't get me started on this. If somebody is really serious about a simultaneous release, then it needs to go in quite a bit more than 32 theaters.

Reagen Sulewski: I doubt anyone that's not seriously into the scene has even heard about this film.

Joel Corcoran: I think Bubble pretty much nails the "performed according to expectations" category. It followed the predictions of simultaneous release being great for studios and producers and terrible for theater owners.

Kim Hollis: Tim, you have to keep in mind that the majority of major distribution chains "refused" to release the film and that they will never do so with day and date releases. Regal being the prime example.

David Mumpower: Exactly, Kim. Regal has flat out stated it's their policy to never exhibit a film which has day and date DVD or PPV release.

Doesn't Regal realize resistance is futile?

Reagen Sulewski: I'm now imagining the head of Regal making a Picard-esque "The line must be drawn here!" pronouncement.

Kim Hollis: Oh, he has, Reagen. I've got the Knoxville News Sentinel Business Journal article right next to me to prove it. They are *freaked out*.

Tim Briody: Right, which is why I don't think this is the model that's going to work. A DVD/PPV release say, a month after theatrical release with certain films is something that I can see being successful.

David Mumpower: I just could not disagree with you more on the point. Magnolia Pictures has seen the future and they are embracing it rather than running from it. Simultaneous release is the way to go. Consumers should have the option of purchasing a film in whatever medium pleases them. Period.

Kim Hollis: An example given is that they could purchase the film on the way out of the theater, assuming they liked it enough. Theater chains are desperately hanging out to an outdated distribution model. It's one thing when they refuse to distribute a Magnolia Pictures release. It's a different thing entirely when it's Disney.

Tim Briody: Then we're going to see magnificent failures at the theatrical level, at which point they're better off abandoning the theaters and just going straight-to-DVD.

Reagen Sulewski: I think you're saying the same thing in two different ways. You might disagree with their decision, but Regal gains nothing from this development.

People in glass - no, wait - plastic houses...

Joel Corcoran: I think this is where idealism meets pragmatism, David. The difference between "what should be" and "what is" couldn't be more starkly defined. Simultaneous release should be the norm, but it won't be possible until the theater chains are fully brought on board. If I was a theater owner, I wouldn't participate in a business model guaranteed to cost me revenue.

Kim Hollis: You would if the studios started cutting you out of the equation altogether.

Joel Corcoran: Is that really going to happen, though?

Kim Hollis: They already accepted decreased revenues as they agreed to the ridiculous split in the first two weeks of a film's release. What makes you think they won't adapt in a desperate attempt to stay in business?

David Mumpower: Joel, I agree that a theater owner gains little from the exhibition. What matters, though, is that they are irrelevant to the equation. They are the guy selling the glass bottle when everyone else has figured out that plastic is cheaper and more durable.

Joel Corcoran: I just have the sense that the studios and production houses are really pushing theater owners up against the wall on the simultaneous release issue. I don't see theaters backing down any further.

David Mumpower: I couldn't care less what a theater owner has to say about the process. As a consumer, I'm the end-user of the product. It's up to me, not the middle man, to determine how I want to use it.

Joel Corcoran: But simultaneous release is not "simultaneous" without theater participation. I think Tim is right - 32 theaters is not "simultaneous release," it's just a token viewing.

What do movie theaters offer? 700% markup in the price of popcorn and sticky floors.

Kim Hollis: What theaters are going to have to start considering is alternatives to movies. That's the long and short of it. And they really already are.

Joel Corcoran: Or they're going to have to split up the larger multi-plex theaters into much smaller, more intimate viewing spaces.

Tim Briody: Exactly. If you can't see the movie in the theater, how exactly does someone have a choice?

Kim Hollis: *Or* they could accept the fact that what they are offering is not necessarily something that consumers are demanding anymore. Their concessions are overpriced. People talk during the movies and bring their kids. Cell phones ring. What exactly are movie theaters doing to encourage patrons to continue visiting? Nothing.




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Joel Corcoran: It's not really a choice if I have to choose between watching the movie over Comcast OnDemand or driving to some art house 100 miles away.

Kim Hollis: *But* you do have the option to see the film, whereas with a typical art house release, you wouldn't be able to see it for weeks.

Joel Corcoran: Precisely, Kim. As long as theaters offer some type of viewing experience for good movies that differs from home theater, they'll remain successful.

David Mumpower: Kim makes a great point here. Arthouse platformers are particularly affected by the new model. People no longer have to wait for availability in their area. Any product is available anywhere on demand. That's the beauty of the process. It fundamentally alters the current nature of supply and demand for smaller films.

The only way you can get an Xbox 360 is to import it from Japan

Kim Hollis: Rather than having to wait for two or three months to see Miyazaki, I can get the DVD!

Joel Corcoran: It's not much of an option, though, Kim. I think a more appropriate choice would be seeing the film in a smaller movie theater with great sound and projection versus staying at home and watching the DVD. I think many people would pay a premium for a premium experience if it was offered.

Reagen Sulewski: There's something I wonder about with that, though. Brokeback Mountain was able to succeed so well because it was allowed to build momentum in friendly venues. I don't think a national on-demand release suits it well in that regard.

David Mumpower: See, Joel, this is where we're disagreeing on a basic level. You're saying it's not much of an option. Kim and I are both stating in no uncertain terms we would vastly prefer to stay home and see these same movies. We see the day and date DVD option as superlative. Prior to the Magnolia Pictures experiment, consumers did not have that option (save for one obscure National Lampoon attempt). In the future, this is the way the consumer behavior is moving.

Kim Hollis: I would choose viewing DVD at home versus going to the theater in almost every single instance, Joel. I'm sick of people talking on their phones and talking to each other and chewing their food too loudly while I'm trying to watch a film. The only films i would choose to see in the theater would be stuff like Kong and the Lion, the Witch and the Wardrobe, which is big and pretty and sort of lends itself to a more "special" experience. If it's Sideways or Junebug or Me and You and Everyone We Know, I might as well just watch it in the comfort of my home, where I can press the pause button if I need to or I can turn on closed-captioning and I can sit on my cushy sofa with a couple of kitty cats in my lap.

Tim Briody: If March of the Penguins were released on DVD alongside its theatrical release, not only does it not become the second highest grossing documentary of all time, but very few people would be aware of the penguins' sinister plot to take over the world that will be executed at some point later this year.

David Mumpower: Reagen and Tim, I think you offer an interesting point. Were I to ascribe a current behavior to your example, it would be the Xbox 360. More demand is (theoretically) created due to lack of supply. Studios would still have some flexibility in this regard if so inclined since they determine day and date. It's just a double-edged sword in that limiting available may foster ill will.

Is "the theater experience" what got Pee-Wee Herman in trouble?

Tim Briody: There's still something to be said for word-of-mouth, which translates into theatrical dollars, but not necessarily DVD sales.

David Mumpower: That's right and the money is more immediate. From a simple Econ 101 perspective, this is why the movie distribution model has to change to this format and everyone, even exhibitors, know it. Getting the most possible money at the earliest possible point in the release pattern is the goal. A dollar today is better than a dollar four months from now. It's that simple. It's why Day and Date is going to happen.

Kim Hollis: Yeah, but you can get word-of-mouth with DVD sales. People don't have to buy them on day one.

Joel Corcoran: I think we're illustrating a broader divide, too, David. I simply don't have the technology at home to even come close to a theater experience, and I'm willing to pay for a theater experience for good movies. I also like the sense of community a theater provides and the sort of "special event" feeling that goes with a night out at the movies.

David Mumpower: Joel, we're also discussing a fundamental difference in movie viewing characteristics. I don't care about quality video projections. We don't own an HDTV and I haven't been in a hurry to get one. Conversely, we own a 400 DVD jukebox and it's filled up completely. I want to control my movie-viewing patterns. If I have to sacrifice picture quality in the process, it's a no-brainer for me to do so. I love the dialogue in films much more than the special effects. Off my head, the only project in 2005 I felt was noteworthy from a visual perspective was Harry Potter 4. Out of 150 titles, one stood out for me visually. I'll take those odds with my lousy home theater set-up.

Kim Hollis: I think it's important to note once again that I don't have anything special with regard to home movie set-up. I just don't care about the "theater experience" for smaller scale movies that don't rely much on special effects. Honestly, if I want to get a "special event" experience, I'll drive a couple hundred miles for IMAX. The regular theater doesn't do it for me anymore.

Reagen Sulewski: The bottom line is that we're talking about breaking 100 years of movie-going tradition. It's natural that you'd have some resistance.


     


 
 

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