Turnaround story

Heading into the second CinemaCon (April 23-26) — the successor to ShoWest — US theatre owners have a different outlook than they did this time last year. Their mood is boosted after a mighty start to the year at the box office. Official figures to be released this spring will confirm that ticket receipts for 2011 trailed the preceding year by around 3.7% and admissions dropped by around 4.7%, but 2012 already looks to be in rude health with big hitters including Sony’s The Vow and Universal’s Safe House.

An explosive series of January and February weekends has consistently beaten results from a year before and at time of writing the first quarter was acting as the perfect cue for a mighty summer season with The Avengers, The Dark Knight Rises, Men In Black 3, The Amazing Spider-Man, Brave, Madagascar 3: Europe’s Most Wanted, Battleship and The Dictator on the runway.

“It looks to be a very strong convention, which I think is a realisation of the fact the studios are confident about their product,” says National Association of Theatre Owners (NATO) president and CEO John Fithian. “They show up at these things when they believe they have something to sell.

“Our first quarter of 2012 looks to be quite strong — for two or three months we have numbers that are way up there and the schedule for March looks incredibly strong, so we’re hoping to come into the convention with this turnaround story.”

In early 2011, box office was not in line with 2010’s Avatar-led highs, and there were ominous noises about a new threat, premium VoD, rumbling towards exhibition. The topic was not on the official agenda of CinemaCon alongside areas such as digital conversion, 3D and piracy, but it became the conference’s hot topic.

The VoD debate

Famously, Time Warner chief Jeff Bewkes set the cat among the pigeons when he said Warner Bros was gearing up for a service that would allow customers to order new releases from the comfort of their homes just 60 days after theatrical release.

Fithian and the group’s members enlisted the support of film-makers to speak against the move and in the end, after a few hairy months, the whole thing fell apart.

Viewers did not warm to the limited and expensive ($30-$60) premium VoD offerings of 2011, and there was never a hint that any studio would throw a tentpole into the mix.

At a time when technology is enabling new ways of distributing and watching content, premium VoD had posed a serious threat to the cherished theatrical window. The last time the platform came under attack in such a substantive way had been in early 2010 when Disney mooted moving forward the DVD release of Alice In Wonderland.

‘You are seeing a change in the way studios are dealing with theatre owners’

Patrick Corcoran, NATO

The topic is not likely to spearhead the agenda this year. Fithian says: “Our sense from the major studios is not only that there are no plans in the short term but what they are talking about to our members is how can we work together and partner up to better sell the entire industry. How can we use the theatrical footprint to better sell movies and figure out the entire pie.”

“I think the studio experiment back in the summer and the exhibition reaction taught us a couple of things,” NATO director of media and research Patrick Corcoran adds. “There isn’t really much of an appetite for a premium VoD service that’s earlier than you can get it in the home. It wasn’t successful at all and there was almost zero uptake by consumers. Realising this, you are starting to see a change in the way the studios are dealing with theatre owners.”

Corcoran cites the example of Tower Heist, when Universal reached out to theatre owners to discuss their release strategy and as a result abandoned their plans to release the film on VoD three weeks after it hit theatres. “As far as we know, no studio has imminent plans to go forward with premium VoD.”

Fithian continues: “VoD generally is a good thing — it’s just a question of when and at what price point. Lionsgate put Abduction out on VoD substantially before DVD and they used the concept of VoD as a premium release prior to DVD, but they had it in a window that’s much more consistent with other home-entertainment releases. They moved VoD to the beginning of the DVD window, so that kind of experiment where you find ways to release movies into the home without damaging the theatrical is the way we want to go.”

So now the issue appears to have died down, at least for the foreseeable future, NATO and its members can look forward to engaging with the studios on a variety of issues ranging from alternative programming to frame rates, and digital roll-out to copyright infringement.

‘We’ve gone past the tipping point. We are only now going to find out how successful alternative content can be’

John Fithian, NATO

“Digital cinema is at a crucial stage,” Fithian says. “The timeline is running out on most of the virtual print fee [VPF] deals and people have to get signed up to make the deadlines, so that will be a big talking point in the week.”

Corcoran adds that in North America, where digital conversion is about two-thirds complete, almost all the deadlines for equipment installation are set to expire by early 2013. Globally it will inevitably take longer to wrap up implementation. While some territories have earlier deadlines than North America, others will take longer.

Digital brings fresh opportunities and resurrects old issues. Alternative content is gaining traction slowly and the latest projection techniques have enabled the smooth broadcast of world-class concerts. “[Alternative programming] is a small percentage of our overall revenues now,” Fithian says. “We have gone past that tipping point where it’s the norm to have digital technologies, so we are only now going to find out how successful it can be.

“No-one would have known that opera could have been so huge. We are still struggling with the marketing barrier and letting people know the cinema is more than a moviehouse.”

Meanwhile theatres are trying to secure rights to more sports programming. “Sport has been a challenge because of the way the leagues market their product, so we’re doing some strategic outreach,” says Fithian.

Smarter moves on piracy

Like the war on drugs, the fight against piracy is not going away, but smarter detection and surveillance and tougher enforcement are producing results. “Containment is worth a lot,” Fithian says. “If we delay a really good camcorder recording for 10 days, it can slow them down. It’s worthwhile. We continue to execute programmes of employee training and rewards campaigns… If we continue to improve our enforcement and buy ourselves a few days, it’s worth millions.”

Co-operation across the board remains the key. “We are very hopeful this is a convention of partnerships. Last year we thought we had a convention lined up to promote common interests and the premium VoD story leaked and it was a damper at the end of a good week. The sense is this year we’re going to have a much more productive week of getting the industry together.”