Movie studios and exhibitors in early negotiations to offer new movies on demand sooner

The movie industry is a funny old business with essentially three main players which make the whole thing go round: the movie studios who make the movies, the exhibitors who display them, and us – the audience who watches them. As times change the “old” parts of the industry need to change along with it, and there’s always resistance to change from some of those involved.

Consumer habits have certainly changed. The rise of cheap, convenient streaming services such as Netflix, Hulu and Amazon has led to audiences generally staying at home instead of venturing out to the cinemas for anything other than big blockbusters.

That’s led to declining box office attendance for exhibitors, the long-time gatekeepers of the movie industry, and subsequently rising ticket prices to counteract that decline and maintain profit margins. It’s also affected the movie studios in two ways: they receive lower immediate returns on their investment from the reduced box office attendance and the rise of streaming services has also led to a decline in the very lucrative DVD sales market.

Something’s going to have to change. We told you about cinema chains trying something different the other day, and now movie studios are looking to change things up as well.

Major movies are generally released for rental on-demand and on-disc a minimum of 90 days after they’ve completed their runs at the cinema, although sometimes as soon as 70 days, mostly for the benefit of exhibitors as they strive to attract higher audiences. However, Variety reports that six of the seven main movie studios are in very early negotiations with the major exhibitors in the US to reduce that timed window of release significantly, with studios reportedly offering to cut exhibitors into the digital profits from early on-demand rentals to counteract the inevitable decline in their audience.

Warner Bros. kicked things off by offering a 17-day rental release window for new movies for $50 a pop, which made my eyes pop. That’s very expensive seeing as the average movie price in the US is below $9, and the 90-day rental costs between $3 and $6 and a DVD around $20. Fortunately, studios recognized that and are playing with time windows and cost to find a happy medium for all three players. Warner Bros. and Fox are now eyeing a 30-45 day release at a far more reasonable $30 per rental, while Universal is targeting 20 days. Sony, Lionsgate and Paramount are also in discussions with exhibitors around the issue. The only main studio not involved is Disney, whose Marvel, Star Wars and both live-action and animated features do very well at the box office over a long time period.

What makes everything exponentially more complicated is that every studio has to negotiate individually with each exhibitor to avoid falling afoul of anti-trust laws. Negotiations between all the various parties have apparently been going for over a year, with all having their own issues around the deal, so I’d expect this to carry on for a good few years before any kind of overall consensus is arrived at, if at all.

To me even $30 sounds high for the convenience of watching a single blockbuster movie in the comfort of my home a month after release. Our local movie ticket price is approximately two thirds of what they pay in the US using direct currency conversions and not taking into account any kind of discounts. If this eventually gets rolled out locally and assuming that ratio is maintained it would cost in the region of around R250. No thanks.

What do you think though, is that a price you’d pay to avoid a crowded cinema?

Last Updated: March 22, 2017