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This is why Netflix must go to war with movie theater owners

Mark Sullivan | Nov. 7, 2013
Sarandos argues that Hollywood studios, already plowing so much money into production and marketing, are leaving serious revenue on the table by not distributing movies in the ways modern people watch cinema

Sarandos believes this schedule of release windows doesn't match with current consumers want, and that clinging to it might eventually sink the theaters and the moviemakers, full stop. "I'm concerned that as theater owners try to strangle innovation and distribution, not only are they going to kill theaters--they might kill movies," Sarandos said during his October 26 speech.

Sarandos argues that Hollywood studios, already plowing so much money into production and marketing, are leaving serious revenue on the table by not distributing movies in the ways modern people watch cinema. "Why not follow with the consumer's desire to watch things when they want, instead of spending tens of millions of dollars to advertise to people who may not live near a theater, and then make them wait for four or five months before they can even see it?" Sarandos asks.

This rings true. Sure, there are times when I get so swept up in pre-release buzz, I make the effort to see movies in the theater, within a few days of their premieres. But there are even more times when I never make it to the theater, either because I don't have time, or eventually forget about my interest. And later on, when the movie becomes available for rental or streaming, all the opening day buzz and excitement has long since worn off--and I just don't care anymore. After all, there's plenty of good (streaming) TV to watch.

The bottom line is that the current "windows" system has kept me from watching some movies I would have otherwise paid for. And that's money out of the studios' pockets.

IDC entertainment industry analyst Greg Ireland says Sarandos' comments come at a time of flux in the way video is being consumed. "We're in the midst of a transformation in the way we access content, with new technologies like tablets, smartphones, gaming consoles and smart TVs. We expect content to be available across all of these," Ireland says.

On the other hand, there are offices full of marketing people at the movie studios who obviously believe that the biggest return on the studios' investment still comes from theater box office receipts.

"There are legacy business models in place that still generate a lot of money," Ireland says. "Any attempt to make money using new technology channels needs to be done while being cognizant of the established business models."

As Hollywood protects the status quo, some numbers suggest that the current system isn't working very well. Citing Box Office Mojo numbers, Hollywood released far more movies this summer than in any other, Sarandos said, yet realized only a 6 percent gain in income over last summer. A far larger investment yielding only a slightly larger return? That can't be good business.

 

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