D-Day for US studio model

That is a new technology scenario being touted to the major studios as they struggle to cope with the fast-collapsing distribution windows that have been the bedrock of their business models for decades.

Then there’s a premium VoD option that could come in just four weeks after theatrical release in the $30-$50 price bracket.

“US films still dominate, but within a very short period, studios won’t be able to monetise their expensive product the way they are used to”

Exhibitors may not be thrilled to hear of these developments but with the contraction of the DVD market and the dramatic erosion of income from pay-TV deals, the studios are desperately trying to carve out new windows and revenue streams.

Ultimately, new windows might just be a stopgap before the studios’ movies are released day and date in all media and all markets. That sounds like an option with terrifying consequences if the film doesn’t work - ie, it is immediately dead in the water with no chance of compensation from ancillary platforms - yet some would argue that we are already at that place. If a film disappoints in its opening day in the US, the global industry has decreed whether it is a flop by weekend’s end.

The studio film business is in crisis, there is no question. This week alone we have seen management changes at two studios, and, as Todd Wagner explained at a Screen townhall meeting in Toronto last month, “People are going to rethink their business models from the ground up or there will be carnage.” This is not about the recession, which just served to exacerbate existing problems; it is about the emergence of the internet, iPods and digital technology which is changing the way audiences consume movies.

The Los Angeles business has already seen plenty of the carnage Wagner talks about, and more is to come. Seasoned studio veteran Bill Mechanic’s recent speech at the IFTA Production Conference predicted two of the majors would be sold or consolidated within the next five years. That means the probable loss of tens of thousands of jobs. Producer overhead deals and astronomical star salaries, already in decline, will become a thing of the past.

Wagner insists that “nobody knows” how distribution will look in 10 years’ time, but he is optimistic the absurdly lucrative pay-TV deals which have driven up studio marketing spends around the world are coming to an end and a new level of sanity will arrive in the business.

Curiously, the European and Asian film industries look sunny in comparison.

In Asia, the mainland China market is providing a rich new audience base for local product while in Europe, government and pan-European subsidies continue to buoy the production sector which has already cut its reliance on the fast-shrinking US distribution community.

‘Monetise’ is the byword as the industry changes. How will producers be able to monetise their film in an environment in which their traditional buyers have run out of cash? Sales agent Stuart Ford mused at the same Toronto panel that telecom companies and iTunes could help replace presales in the financing puzzle. Local distributors will remain as marketing vehicles to reach the audience.

Then again, speculation at this point is just that. We don’t know what the worldwide ripple effect of the studio meltdown will be. US films still dominate audience share in virtually every country. But the fact remains, within a very short period, studios won’t be able to monetise their expensive product the way they are used to. The question is, will a new revenue source emerge to renew their model?