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Archive for June, 2011

For Part I, click here.

For Part II, click here.

Back in the 1960s,  a new kind of specialty movie theater gained in popularity among the movie-going public. At first there were only a handful, but within a decade or so 750 of these theaters had sprung up across the county and were doing a brisk business. Their star was quickly to fade, however, and by the time your humble blogger entered this world in the mid-80s, the burnout was nearly complete. No matter, for even if I had not already already been banned from going to regular theaters by school and parental fiat, I would still have been banned from these specialty ones by state law long after they had all but completely faded to black. They were showing porn flicks, after all.

I bring up adult movie theaters (as they’re called in polite company) because their arc gets at the heart of what bothers me about NATO’s open letter arguing against shortening the theatrical release window. As I said in Part II, NATO puts itself in an awkward position by arguing on one hand that simultaneous releases on DVD and other formats will cannibalize business, while on the other hand maintaining that theaters are the “optimum…exhibition arena.”  These two notions are not mutually exclusive, but if the former is true then the latter probably isn’t.  The mistake NATO is making is what I dub The Obscene Movie Fallacy*, which is to confuse what’s optimum with what’s really a lack of options.

*Notice how the name works on two levels, just as most summer movies aspire to do.

Adult movie theaters did well for many years because they represented the only option to see a pornographic film. But believe it or not, a public theater did not represent the optimal porn exhibition arena for most viewers. When given the option, most people preferred to watch their porn in the privacy of their home, first on VHS and now on the internet. The theaters went bust, and not because there was no ‘NAAMTO’ to defend the adult movie going experience.

In the case of adult movie theaters, the options revealed an overwhelmingly popular optimum, but when tastes are more varied, options also allow for optima (if you like). Seeing a big-budget Michael Bay-type film in an IMAX theater is best in some technical sense, but as much as NATO might like it to be, this is not the only criterion for optimality. For those who hate loud teenagers, the inability to press pause for a bathroom break, or ruptured ear drums, IMAX is hardly ideal.  They’ll take the lesser picture quality for a more intimate and convenient experience, thank you very much.

So, is a theater the optimum exhibition arena? The correct and tedious answer is that it is 1) all the time for some, 2) sometimes for others, and 3) never for the rest. NATO knows this, but evidently think they are best serving their members by denying this and preserving their privileged position. Maybe I’m just a naive outsider, but this tack seems shortsighted. Facing bracing competition is a difficult prospect, but it makes more strategic sense than relying on the dividends of a tenuous agreement.

What’s more, the key assumption behind the release window system (that different formats of a movie will compete with each other in zero-sum fashion) may not even be true.  When you stop peddling the nonsense that there is only one optimum (and thus one type of movie viewer), you’ll recognize that while Transformers 3 is the same film no matter the format, it is not the same product. A Blu-ray is not the same thing as a theater screening is not the same thing as video-on-demand. As a result, you’d expect different people to be interested in each product.

Since we’re talking about movies, let’s make it visual. Here’s how NATO implicitly imagines the movie viewing public (assuming simultaneous releases):

In this view, each movie has one audience which divvys itself up according to preferred format.  Each format competes directly with another, with one format’s loss of an audience member being another’s gain. The choice of format is one-off and final: buying a movie ticket precludes buying a DVD–FOREVER!

Here’s how I suspect things look:




Here, each format (rather than each movie) has an audience. Each audience has three sub-groups: those who consider watching in one format (e.g. the green portion), those who consider watching in two formats (e.g. the yellow portion), and those who consider watching in all three formats (e.g. the red sliver). Who knows how well I got the proportions right for any given grouping, but they exist.

There are two important things here to recognize. The first is that each format of a given movie has some dedicated audience for whom choice is irrelevant. Maybe they don’t have DVD player and hate crowds so they rent VOD, or maybe they’re NATO acolytes who think  it’s the theater or bust.  Whatever the reason, simultaneous release windows matter not a whit to them, and shouldn’t to NATO either.

The second important bit is even when there is overlap (red, purple, pink, etc), the choice of format is by no means a mutually exclusive one. A movie buff might see a film in the theater four times and still buy the Blu-ray set.  When I watched Saving Private Ryan on DVD for this first time, I pined for the chance to see the D-Day sequence in a theater. Yes, these overlaps are also where zero-sum choices occur, but it’s not obvious what the net effect is in these (probably) small areas.

I’m running late for an afternoon trip to the movies (truly), so here’s the last thing I’ll say in this meandering post of mine. I’m optimistic about the prospects of simultaneous release because it would allow for more specialized catering to movie viewers’ tastes. Some worry that only big budget tent-pole movies would survive in this environment, but I doubt that’s true. Instead, attentiveness to format would allow for a more diverse array of movies to be profitably made. Releasing in a theater is high status, but it’s high time we learned that not all movies are appropriate for theaters. For once we may be well advised to let porn be our guide.

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For Part I, click here.

For Part III, click here.

In Part I, I gave a short history of the release window system for movies and how that system nearly destroyed my childhood. Slowly but surely, the window during which a movie plays exclusively at theaters before being released to DVD and Video on Demand (VOD) has shrunk.  In the 80s the standard was six months, but now four months is the most common, with some films being released in other formats two months after, simultaneously, or even before the theatrical run. The National Association of Theatre Owners (NATO) opposes shortening the four-month window, because they believe that would lead less people to see movies in theaters. The industry as it exists would thus not be sustainable.

When DirecTV announced a VOD service that would allow users to rent HD movies two months after the theatrical release, NATO penned an open letter opposing the service and got a couple dozen famous directors to sign it. I’m no expert, but to me the letter is bad PR (all emphasis mine):

AN OPEN LETTER FROM THE CREATIVE COMMUNITY ON PROTECTING THE MOVIE-GOING EXPERIENCE

We are the artists and business professionals who help make the movie business great. We produce and direct movies. We work on the business deals that help get movies made. At the end of the day, we are also simply big movie fans.

Besides the self-congratulatory first line, this opens the letter decently. I like that they identify themselves as movie fans, but as we’ll see, they then neglect this viewpoint almost entirely for the rest of the letter.

Lately, there’s been a lot of talk by leaders at some major studios and cable companies about early-to-the-home “premium video-on-demand.” In this proposed distribution model, new movies can be shown in homes while these same films are still in their theatrical run.

In this scenario, those who own televisions with an HDMI input would be able to order a film through their cable system or an Internet provider as a digital rental. Terms and timing have yet to be made concrete, but there has been talk of windows of 60 days after theatrical release at a price of $30.

This ended up being exactly what happened. $30 for a two-day rental after two months.  No figures yet, but the speculation is that it ain’t doing so hot.

Currently, the average theatrical release window is over four months (132 days). The theatrical release window model has worked for years for everyone in the movie business. Current theatrical windows protect the exclusivity of new films showing in state-of-the-art theaters bolstered by the latest in digital projection, digital sound, and stadium seating.

This is the first big mistake. If you’re going to write an open letter (i.e. intended to be read by a wide audience), you shouldn’t be making arguments about what’s good only for the industry, but what’s good for the industry as it concerns the moviegoer. (Or more aptly: movieviewer. Too weird looking?)

As a crucial part of a business that last year grossed close to $32 billion in worldwide theatrical ticket sales, we in the creative community feel that now is the time for studios and cable companies to acknowledge that a release pattern for premium video-on-demand that invades the current theatrical window could irrevocably harm the financial model of our film industry.

Yep, this is a one-sentence paragraph, and the first half is out-of-place. I understand the desire to flash the industry’s mighty bona fides, but you shouldn’t do it while introducing a point about how a change might “harm your financial model.” Also, that last phrase is too dryly written and again offers no bone to moviegoers.

Major studios are struggling to replace the revenue lost by the declining value of DVD transactions. Low-cost rentals and subscriptions are undermining higher priced DVD sales and rentals. But the problem of declining revenue in home video will not be solved by importing into the theatrical window a distribution model that cannibalizes theatrical ticket sales.

Make no mistake: History has shown that price points cannot be maintained in the home video window. What sells for $30-a-viewing today could be blown out for $9.99 within a few years. If wiser heads do not prevail, the cannibalization of theatrical revenue in favor of a faulty, premature home video window could lead to the loss of hundreds of millions of dollars in annual revenue. Some theaters will close. The competition for those screens that remain will become that much more intense, foreclosing all but the most commercial movies from theatrical release. Specialty films whose success depends on platform releases that slowly build in awareness would be severely threatened under this new model. Careers that are built on the risks that can be taken with lower budget films may never have the chance to blossom under this cut-throat new model.

If you grant the premise that shorter or simultaneous release windows will cannibalize ticket sales (which is debatable), then this is a fair argument. This point could be made, however, without so obliviously regarding lower prices as bad. The horse is already dead I know, but flog it I will: customers like lower prices!  You could admit as much in the letter without failing to point out the negative consequences that lower revenues might have.

Further, releasing a pristine, digital copy of new movies early to the home will only increase the piracy problem—not solve it.

Giving folks an early legal option for watching pristine digital copies may offset some piracy, but no one really knows.

As leaders in the creative community, we ask for a seat at the table. We want to hear the studios’ plans for how this new distribution model will affect the future of the industry that we love.

And until that happens, we ask that our studio partners do not rashly undermine the current – and successful – system of releasing films in a sequential distribution window that encourages movie lovers to see films in the optimum, and most profitable, exhibition arena: the movie theaters of America.

This last line is as sticky as a movie theater floor after a double feature. Earlier in the letter, NATO argues that movie theaters will lose business to DVDs in a head to head competition. This leaves NATO in an awkward position: if movie theaters are so great, why would they lose business to the suboptimal DVD?

My concluding thoughts on this letter can be found after you leap over the famous directors below.

We encourage our colleagues in the creative community to join with us by calling or emailing NATO at 202-962-0054 or nato@natodc.com.

Sincerely,

Michael Bay
Kathryn Bigelow
James Cameron
Guillermo del Toro
Roland Emmerich
Antoine Fuqua
Todd Garner
Lawrence Gordon
Stephen Gyllenhaal
Gale Anne Hurd
Peter Jackson
Karyn Kusama
Jon Landau
Shawn Levy
Michael Mann
Bill Mechanic
Jamie Patricof
Todd Phillips
Brett Ratner
Robert Rodriguez
Adam Shankman
Gore Verbinski
Robert Zemeckis
Christopher Nolan
Jon Favreau
Quentin Tarantino
M. Night Shyamalan
David Dobkin
Mark Boal
Jim Cardwell

In truth, my beef with this letter isn’t its style or solipsism, but in the way it so keenly embraces an illusory status quo. This error, which I’m tentatively calling the Obscene Movie Fallacy, will be the subject of Part III.  How’s that for an after credits teaser?

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The Atlanta Journal-Constitution‘s excellent Twitter feed directed me to this story:

Electronic cigarettes don’t burn and don’t give off smoke. But they’re at the center of a social and legal debate over whether it’s OK to “light up” in places where regular smokes are banned. Despite big differences between cigarettes and their electronic cousins, several states, workplaces and localities across the country have explicitly included e-cigs in smoking bans.

Here’s a video overview for a typical e-cigarette:

The article notes that e-cigs are designed to “address both the nicotine addiction and the behavioral aspects of smoking — the holding of the cigarette, the puffing, exhaling something that looks like smoke and the hand motion — without the more than 4,000 chemicals found in cigarettes.” Since the smoke that is emitted is actually water vapor, users call the activity “vaping” instead of smoking.

So if it’s just water vapor, then how could e-cigs fall under smoking bans (about which I’ve written critically here). Well, the FDA says the liquid nicotine cartridges contain “detectable levels of known carcinogens and toxic chemicals to which users could potentially be exposed.” Not saying much really, but if even if e-cigs were toxic, smoking bans are ostensibly about second-hand effects, so what’s the harm in water vapor?

There’s no research to say if any of the ‘detectable toxins to which users could potentially be exposed’ might also potentially expose third-parties, but that’s not stopping the awesomely named American Nonsmokers’ Rights Foundation. In their view, e-cigs should be banned until it’s proven they “do no harm.” In that case, says the spokesperson with courageous unambiguity, “we’ll have to revisit” the ban.

Several days ago, Robin Hanson blogged about how the status of a risky activity seems to affect our desire to regulate it: climbing Everest is a deadly activity and no one thinks to call for a ban, but the far less dangerous lawn darts? Fuggedaboutit! This status-driven impulse might apply to smoking bans as well.  Smoking, while once considered classy and cool, has become so low-status that smokers often feel the need to apologize for their behavior every time they want to light up. Sure, there’s a defensible public health argument for smoking bans, but then how to explain this anecdote at the beginning of the article?

That’s not smoke coming out of Cliff Phillips’ mouth.

But that hasn’t stopped others from cringing, making remarks, waving their hands in their faces and coughing at the sight of the vapor from his electronic cigarette.

And:

Some e-cig users have even taken to “stealth vaping,” a method in which they hold the vapor in their mouth long enough for it to mostly dissipate or exhale the vapor discretely.

E-cigs are made to look like regular cigarettes, but functionally they are little alike.  In fact,  e-cigs are quite similar to nicotine inhalers.  If e-cigs were identical in every way except for the emission of water vapor, would they be causing such a hubbub? Or what if manufacturers agreed to model e-cigs to look like pieces of excrement? That way those who enjoy vaping can do so in peace, and restaurant and bar patrons can still look down their blissfully non-irritated noses at the habit.

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For Part II, click here.

For Part III, click here.

As a kid I wasn’t allowed to go to the movies, so I had to wait until a VHS showed up at Blockbuster before I could see a ‘new’ movie. Having to wait was frustrating, but in my naivete I figured it just took a long time to convert from film to video or something. What a silly child I was.

Now I know that agonizing waiting period was not due to some production constraint, but part of an agreement between studios and theaters. In the eighties, you see, new technologies like video and pay-per-view were allowing the masses to watch movies in their homes, not in theaters as God intended. Thankfully, a little Hollywood magic turned competition into collusion, and thus the ‘release window’ was born.  Under this arrangement,  films would undergo sequential releases: first theatrical, then video, then pay-per-view, and so on. This way, a movie wouldn’t compete with itself in different formats. If you wanted to watch a movie right away, you went to the theater. If you hated the theater or didn’t care about waiting several months, you could catch the flick at your house instead. Studios and theaters maintained their revenue streams, and except for kids like me who had no choice, everyone was happy.

For thirty years the release window system has been sacrosanct. This has been fine just fine for theater owners, but studios are having second thoughts. According to this Slate article from 2005, theater goers accounted for less than 15 percent of worldwide studio revenues, with the rest coming from DVD sales and TV rights. Understandably then, studios began to question the wisdom of delaying the real money-makin’ for several months while theaters made their money on popcorn.

As a result, studios have been monkeying around with the release window(s) since 2001. While the original theatrical release window was six months, by early last decade that window had been shortened to five months and then to four, as studios pushed out DVDs earlier for better holiday timing. The four-month window lasted for several years until Alice in Wonderland was released on DVD three (three!) weeks earlier than usual in order to beat the attention-stealing World Cup. And if that fortnight and a half body blow wasn’t enough, DirecTV introduced in April a video-on-demand service which allows users to stream HD movies into their living rooms a full eight (EIGHT!) weeks early.

Theater owners are not happy with these ill harbingers, and DirecTV’s new service prompted the National Association of Theatre Owners (or, more confusingly, NATO*), to write a letter arguing that reducing the theatrical release window below four months “could irrevocably harm” the film industry. Interestingly, this letter has been signed by numerous big name directors, who are evidently also worried about ‘protecting the movie-going experience.’ I read the letter a couple days ago, and was surprised at how little it did to clothe its naked self-interest. So amateurish is this letter, in fact, that in the next post I plan on performing an in-depth analysis of it;  I would’ve just continued with it in this post, but I thought I’d do my own sequential release.

*Before she left to do good in Rwanda (and meet me), girlfriend Thelma used to be deputy executive director at NATO, a fact I love to share.

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