Is Day and Date the Death of Theaters?

September 26, 2015

Most exhibitors have refused to distribute movies with a "day-and-date" release - where they are available on demand at the same time they are in theaters. The concern is that it will reduce theater traffic and profitability, ultimately cannabalizing the industry. Filmmakers, who dream of seeing their films on the big screen (the gold standard of viewing experiences), have rallied in defense of exhibitors. Nevertheless, consumers are increasingly desirous of flexible viewing choices and when accessing a new release is not convenient, more and more of them resort to piracy. The MPAA estimates that more than $10B is lost to piracy each year. 

 

In the early days of digital, piracy required some hacking skills and a higher degree of risk. Pirates recorded "Bootleg" copies from theaters or screeners and burned to DVDs and VCDs (Video CDs). This is still relatively common - particularly in urban shopping centers and mom-and-pop vendor shops around the world. However, sophistication has gone up as people discovered Handbreak and other tools for ripping DVDs from Redbox and retailers. In addition, bit-torrent sites like Popcorn Time have been on the rise, making piracy user-friendly for anyone with internet access.

 

When the industry realized the impact of piracy, the responses ranged from warnings on DVDs to prosecuting offenders. A multidute of Digital Rights Managment (DRM) techniques rolled out. While risks to consumers has gone up, nothing has led to a decline in piracy. Overall, there is a failure to understand the underlying drivers and respond to them effectively. It would seem that little has been learned from piracy and digitization in the music industry. 

 

The audiences have spoken. Most of them still enjoy the experience of going to the theater. But sometimes it is not convenient or titles aren't available in their geography. Then, there's rising ticket prices. In these cases, they want to access content on demand - and they don't want to wait months and years for convenient access. They want to share content they love, and when they discover content shared with them, they don't want to jump through hoops to find it. 

 

Many are perfectly satisfied with streaming, but in areas with developing infrastructure (including vast expanses of rural America), streaming is not as desireable. In China, for example, many users prefer to download content at hotspots for later viewing. Overall, consumers want the choices that are most convenient for them. Why should they be punished for the ineffieciencies of distribution?

 

So, are theaters hold content hostage by resisting day-and-date releases? Why do studios acquiese to them when vast majority of a film's revenue (revenue that is increasingly lost to piracy)? Becasue US theatrical releases and the marketing campaigns that support them still drives foreign sales. In other words, the performance and publicity generated by theatrical distribution de-risks overseas acquisitions. This is what gives theatrical distributors so much influence. Yet waning theater attentence can only be propped up with rising ticket prices for so long, and US distributors don't benefit financially from their power unless they use it to protect their model. At least that is the current state of affairs. But it doesn't have to be.

 

Innovative services like Moviepass are allowing theaters to better capture their audiences. Experiments day-and-date collaborations are underway, but still business models are precarious. As theaters move away from cash-and-carry methods of doing business and embrace technology, they can use their influence to modernize their business models. In doing so, they will capture revenues both inside and outside of their walls, increase customer loyalty, and create more incentives for theater attendence. When theaters stop trying to fight the inevitable and  give consumers what they want, they will no longer have to fear death. In fact, it will breath new life into the movie-going experience that we all know and love. 

 

 

 

 

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