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Studios, theaters wrangling over film release windows

Tensions rise as the gap between a film's screen debut and its DVD release narrows. Both sides recognize the need to adapt to changing consumer habits, but a solution has been elusive.

December 26, 2009|By Claudia Eller and Richard Verrier

It's not every day that movie theaters take retribution against a Hollywood studio. Exhibitors usually don't want to annoy the studios on which they rely for movies to keep filmgoers buying tickets.

Yet last month major theater chains pulled the family-friendly animated comedy "Cloudy With a Chance of Meatballs" from big screens around the country. The action was intended as a warning shot at Sony Pictures -- and Hollywood in general.

Sony said it simply wanted to make its movie available to owners of a new generation of the company's high-definition TVs a month before its release on DVD. But movie theaters weren't having any of it. They feared that moving up the date when people could watch the movie at home would discourage them from making a trip to the local multiplex.

"Cloudy With a Chance of Meatballs," whimsical title notwithstanding, is the latest flash point between Hollywood studios and theater operators over the contentious issue of so-called windows, the gaps between a film's release in theaters, on DVD and on video on demand. The friction is occurring despite a banner year at the box office, with U.S. attendance up nearly 5%, an unexpected resurgence during a recession for a part of the business that had not been growing.

For decades, the studios have reaped huge financial rewards by releasing their movies sequentially through a series of markets that force people to pay each time they want to see a film: first in theaters, months later on DVD, followed by video-on-demand and finally on cable channels such as HBO, Showtime and Starz.

Now, with consumers demanding to see movies on mobile devices when they want or in the comfort of their own homes on big-screen TVs -- or on pirated copies -- studios are tinkering with the age-old formula. Eventually, executives suggest, Hollywood may no longer get several lucrative bites of the movie apple, but instead be forced to grab as much revenue as it can from a universally timed release.

The issue is prompting extensive conversations at every studio and stepped-up huddles with theater owners as the industry grapples with the biggest change in movie industry economics since the introduction of home video more than 25 years ago.

"It's something we talk about every day," said Rick Finkelstein, vice chairman of Universal Pictures. "People want to have more control over their entertainment."

Studios are already shortening windows in an effort to squeeze revenue from movies in the face of declining sales of profitable DVDs and a surge in bargain video rental outlets such as Netflix Inc. and Redbox. Warner Bros. and other distributors, for example, have begun making films available to video-on-demand cable services the same day -- sometimes even before -- they are released on DVD (usually the gap has been a little more than a month). NBC Universal's soon-to-be new owner, cable system operator Comcast Corp., has signaled its intention to offer movies earlier to subscribers than traditionally has been the case.

Exhibitors have drawn a line in the sand, steadfastly resisting the compression of release dates that they view as a threat to their livelihood. They get nervous when a studio attempts to release a movie on DVD less than 90 days after opening in theaters. Nonetheless, theater executives now are acknowledging they may need to adapt.

"We're going to protect our side of the business," said Amy Miles, chief executive of Regal Entertainment Group, the nation's largest theater circuit. But "we'd like to think that we'd work with the studios as business models evolved."

Open to change

It's a delicate balancing act.

Theater operators want to be open to change without undercutting ticket sales, which have been remarkably strong. Above all, they hope the studios won't be oblivious to their concerns. "We want to know what's going to happen, and we want to have some input," said Tony Kerasotes, chief executive of Kerasotes Showplace Theatres and chairman of the National Assn. of Theatre Owners, a trade group.

For all their talk, however, studios say they're not ready to do away with windows entirely, fearing it could cannibalize their own business.

"People always say consumers want it all now, and Hollywood needs to change its business models," said Jim Gianopulos, co-chairman of Fox Filmed Entertainment. "But I've yet to see anyone show up with a simultaneous-release model that works.

"We need to experiment and allow consumers to take advantage of new technologies and ways to experience movies conveniently."

For example, Fox supports offering subscribers one-time video-on-demand viewings of movies in high-definition before their DVD release.

Fending off pirates

But before that can happen, the studios have to make sure their content is protected from pirates.

Their lobbying arm, the Motion Picture Assn. of America, has been pressing the Federal Communications Commission for a waiver for technology that would transmit movies through secure connections to the TV.

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