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Old 04-30-2017, 10:43 PM
 
14,612 posts, read 17,378,898 times
Reputation: 7781

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I want to use the example of a dud movie last year for discussion of business case:

Quote:
A specialized movie :"The Divergent Series: Allegiant" (Release Date: March 18, 2016) was the third movie in a trilogy designed to appeal primarily to teens was only in the theaters for 11 weeks, but it made 88% of it's revenue in the first three weeks. The movie showed in the number of theaters according to the following timeline.

week (number of theaters)
#1 3,740
#2 3,740
#3 3,018
#4 2,503
#5 1,484
...
#6 852
#7 410
#8 210
#9 160
#10 194
#11 153

The DVDs went on sale 40 days after the movie closed out in the theaters.

The movie made only 2.7% of it's total revenue in weeks #6 - #11. The theater circuit and the studio made less than $900K apiece during those weeks #6-#11.
At some point there should have been some kind of a contractual clause where the studio could pay off the theaters for the remainder of the time on their contract, so they can start the movie into streaming services. It is absolutely pointless that this movie should stay in theaters that final five weeks, and then wait an additional 40 days until the DVD is released.

Even a relatively unpopular movie still has a fan base big enough to sell 7.7 million tickets. Waiting so long means a whole new round of advertising. There should be a way to change the schedule.
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Old 05-01-2017, 05:06 AM
 
Location: Birmingham
11,787 posts, read 17,683,631 times
Reputation: 10120
Well who is to say that a buy out clause is worth it and that the studio will recoup that money on DVD and streaming? Sounds like throwing good money after bad and that they would rather just write it off and move on.

Last edited by Tourian; 05-01-2017 at 06:24 AM..
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Old 05-01-2017, 10:32 AM
 
23,559 posts, read 70,077,656 times
Reputation: 49066
As someone who worked in the industry many years, I have to say that you don't have an understanding of how and why the system works the way it does. To go into full detail would take a book. In short summary:

Ever since the studios had to divest themselves of their theatres (ever wonder why there were "Paramount" movie palaces?) there has been a symbiotic but tense relationship between the film companies and exhibition.

Prior to television, prints of a film had staggered release dates with the advertising and big releases in the large population centers, which allowed word to trickle down and smaller ad budgets as the films were circuited to different markets.

Once old movies started being marketed to television stations, movie theatres had a competition from what appeared tot he consumer as "free" movies at home. The hit was substantial and many theatres were forced out of business, and the technology used in remaining theatres was upgraded to 3D, Cinemascope, Cinerama, and better sound systems. Cost was borne by the theatres.

Television also introduced the idea of television networks, where a single network ad could cover all markets. The cost efficiency compared to newspaper ads in major papers was enough to offset the cost of having more prints of a movie made, and this led to simultaneous release dates.

Soon, it became apparent that there were sweet spots for releasing major films - shows aimed at kids and teens in early summer, art and serious films in the fall to hit around the Thanksgiving holiday, blockbusters to hit on the Christmas week when kids were out of school. Other date slots were of lesser importance until the Halloween horror films took off, and a little film called "Crocodile Dundee" showed that April was a valid release slot.

When film companies and movies started competing for the prime slots, and making demands of exhibitors, there was a legal judgment to prevent the worst abuses of "block booking." Even so, the film companies had the clout over exhibitors and terms for film rental began to be insane. On some major films, the split of the ticket price was 90% to the distributor, 10% to the exhibitor, and if lucky there was a tiny cost of operation proviso. The exhibitors had no choice but to make up revenues with increased concession pricing and on-screen advertising.

The film contracts generally had a decreasing percentage clause, where (for example) the first two weeks would be 90% to distrib, and then subsequent weeks 80%, 50%, down to about 35% on the run-outs. (Hence the anomolies of films like "E.T." running for well over a year in the same multiplex theatre.) Because of the way Hollywood works, all contracts were "squishy" and subject to adjustment after-the-fact. If a theatre was stuck with a bomb, the contract could be modified to keep from killing the theatre. The film companies recognized that killing off theatres was not in their best interest. However, any magnanimous gestures were limited to helping keep the doors open. Staffing of theatres suffered, cleanliness suffered, and presentations suffered in the struggle to keep smaller theatres alive wile their income was increasingly being siphoned off.

When video came along, the threat to exhibitors was so great that they banded together as an industry group and demanded a 90 day window between theatrical release and video release. Faced with theatres boycotting their major product, the film companies agreed.

That they did so was smart for a number of reasons, but a major one is that a film which does well at the box office can be sold for video release at much higher rates. The 90 day delay and cost of any additional advertising is insignificant compared to the advertising value of a decent theatrical run and revenues generated there prior to video release. Cutting the theatres out has never been the intent of the smart players. A few upstarts bring it up from time to time, but usually on lesser quality films and their reasoning until recently was often to avoid the cost of having prints made. ANY threat to that 90 day window - even on a crap film - is a threat to exhibitors and not tolerated.

Currently, the system works. That is not to say that at some point in the future it might not work and the window (and movie theatres) close, but the economics support the system the way it exists. The additional cost of advertising is chump change and a red herring, from the same people who ripped open their Christmas presents early because they had no patience for waiting.
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Old 05-04-2017, 07:39 AM
 
14,612 posts, read 17,378,898 times
Reputation: 7781
Quote:
Originally Posted by harry chickpea View Post
As someone who worked in the industry many years, I have to say that you don't have an understanding of how and why the system works the way it does.
I think the basic principal that the theater circuit is trying to protect it's revenue stream is obvious enough. They don't want potential patrons to skip the theater if they know that the DVD will be available in just a few weeks.

Percent of domestic boxoffice revenue made after week 5
9.99% 2014 Divergent $288.9 million worldwide
6.43% 2015 The Divergent Series: Insurgent $297.3 million worldwide
2.69% 2016 The Divergent Series: Allegiant $179.2 million worldwide
future The Divergent Series: Ascendant

I am simply talking about a clause where the studio can market their film another way when it looks like the film will not deliver much more boxoffice revenue.

I think the alternative will studios increasingly bypass the theater circuit and go straight to streaming.

Quote:
Originally Posted by harry chickpea View Post
When video came along, the threat to exhibitors was so great that they banded together as an industry group and demanded a 90 day window between theatrical release and video release. Faced with theatres boycotting their major product, the film companies agreed.

That they did so was smart for a number of reasons, but a major one is that a film which does well at the box office can be sold for video release at much higher rates. The 90 day delay and cost of any additional advertising is insignificant compared to the advertising value of a decent theatrical run and revenues generated there prior to video release.
For Paramount’s low-budget horror titlesl: “Paranormal Activity: The Ghost Dimension” (October 23,2015) and “Scout’s Guide to the Zombie Apocalypse” (October 30, 2015) the studio shortened the traditional 90-day home entertainment debut window to just 17 days after the number of screens upon which the film is screened drops below 300. In return, AMC and Cineplex, as well as other exhibitors, received a percentage of the studio’s digital revenue, including iTunes through 90 days, on top of theatrical earnings.

So applying the same rule to "The Divergent Series: Allegiant" (Release Date: March 18, 2016) the DVDs could go on sale roughly 7 weeks earlier.
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Old 05-04-2017, 04:53 PM
 
23,559 posts, read 70,077,656 times
Reputation: 49066
It makes no sense for me to argue any point of when an optimal release to streaming/Blu-ray/DVD/VHS/Betamx is. I laid out the economics of the situation as I understand it, and what will happen will do so because of the actions of people with a lot more money than me. I try not to second guess them, as I am usually disappointed.
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