A window to the future

The ultimate showdown between distribution and exhibition may have begun in earnest this week as Odeon & UCI Cinemas initially announced it would not play Disney’s 3D movie Alice In Wonderland in its UK, Ireland and Italy cinemas because Disney plans to release the film on DVD 12 weeks after the theatrical opening, rather than the traditional 17 weeks.

But this might was not a battle that Odeon & UCI could win. The major studios’ revenues model is changing so swiftly that experimentation with windows is inevitable and in this instance, Disney wants the flexibility to get the Alice DVD into the market before World Cup fever takes hold of the UK on June 11.

The problem with the existing windows model is that revenues for distributors are dwindling at the second window (DVD) and, while theatrical is remarkably robust in most territories, they need a new ancillary window. That could mean they will attempt to carve out a VoD window before the DVD release, which could eat even further into a 12-week theatrical exploitation period.

At present in the UK studios release their films on VoD after DVD at a price of around $6.20 (£4) to the consumer. What nobody yet knows is how that market could change if VoD was shunted forward before DVD at a price of, say, $12.40 (£8).

What’s certain is that the status quo is not delivering the returns distributors need, and they will continue to push exhibition to adapt with them. The UK is perhaps not an appropriate battleground for exhibitors anyway, bearing in mind that the lucrative theatrical market delivers one of the lowest rentals in the world to the distributor (on average about 30%-35%). If distributors are expected to make up their costs in a deteriorating DVD market, they literally cannot sustain their businesses.

Besides, while UK exhibitors have paid for the initial capital outlay in converting to digital projection, distributors are paying that back with interest through a virtual print fee system over the next 10 years.

A VoD window could come as early as eight weeks into a theatrical run, and in the US some have even posited a day-and-date, all-media, all-territory release where a film is available on DVD and VoD the day it opens in theatres.

Exhibition is key to any new model, undeniably. The out-of-home experience remains essential. But it is also a business that needs to adapt to a new world. The theatres themselves perhaps need to move on from the multiplex model to an entertainment and retail complex where sports and music events are available on screen as well as movies. It’s no secret that studio movie outputs are going to start dropping fairly steeply anyway from 2011.

At a Screen panel in Toronto last year, Mike Kennedy, executive vice-president at Canadian exhibitor Cineplex, mused that exhibitors had fought any technology that came along to threaten the big screen and popcorn business. That business didn¹t die when TV came along, nor VHS or DVD. But he added that the time had come for exhibition to rethink its entrenched position.

“As a smart exhibitor, we have to look at the business and ask, ‘Where is it going and how do we position ourselves to be part of it?’I can’t speak to my brothers in the US but I get the sense that they are not doing that, they are trying to hang on to that window for as long as they can. I believe that could be a fail model.”

It might have survived TV, VHS and DVD but exhibition’s real battle is not about Alice In Wonderland or theatrical windows. It is with a generation which demands movies instantly and might not care about whether they watch them on a big screen or an iPod.