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January 11, 2017

Cinema Owners Can’t Ignore The Rising Dominance Of Streaming

While the conversation has happened in fits and starts across the last year, movie studios haven’t ignored that audiences are increasingly favoring streaming movies at home instead of going out to the cinema. As streaming services continue to invest heavily in original programming, there are more and more reasons to stay in, and all you have to do is look at the stats to see how movie watching behaviour is changing.

While the box office had a record breaking year of $11.37 billion in receipts, attendance was actually down, with that windfall assisted by increased ticket prices. But the real eye-opening statistic comes from the Digital Entertainment Group (via Variety) who reveal that 2016 was the first year that subscription streaming outpaced disc sales, with $6.2 billion for the former and $5.4 billion for the latter. It’s alarming only if you haven’t been paying attention, and companies are already adjusting, as even the boutique The Criterion Collection has seen the future, and teamed with Turner Classic Movies, launching the service FilmStruck last fall. Even they realize sumptuous packaging of DVDs and Blu-rays won’t sustain them in the future. And studios, having likely seen their home video revenues continue to drop over the past few years, are now growing itchy to take a bigger bite out of a growing streaming market.

Early last year, reports flew that Napster and Facebook bad boy Sean Parker was gearing up The Screening Room, a premium VOD service that would offer theatrical releases to a home audiences, day-and-date, for $50 a pop. That seemed to have gone quiet, but it was just last month Bloomberg reported that Warner Bros. and Universal were already engaging theater owners in conversations about shrinking the time between theatrical release and streaming to as little as two weeks to one month.

“If you start with the consumer, they’re telling us very clearly they want it [earlier],” Warner Bros. CEO Kevin Tsujihara said. “That’s where all the pirating is occurring, right? And so we have to meet that demand with a legal solution. And so as I’ve said, we’re trying to work with our partners on the exhibition community.”

In case that statement wasn’t clear enough, studios are quickly realizing their bottom line depends on streaming.

Cinema owners have long pushed back against attempts to shrink release windows, arguing it would hurt their business model. But in an era when most blockbusters do their biggest business in the first few weeks of release, that argument is growing weaker. And for studios, giving theaters exclusivity on a title for months on end is making less sense, especially when eager to pivot to other revenue streams much sooner.

This all leaves exhibitors in a tough position, but they do have one thing in their corner: even with the most pimped out home theater system, nothing beats the moviegoing experience. That said, the singular experience of being in a dark room, with a huge screen, has been the one asset theaters have seemed to neglect most of all. You don’t have to search very far to find someone to complain about high ticket prices, high concession prices, poor projection, and dismal, tiny shoebox sized theaters to understand why theaters are seeing the numbers of tickets sold decrease.

While exhibitors will undoubtedly continue to fight shrinking release windows, it’s an inevitability that sometime in the future, audiences will have the very real option of choosing between watching Ben Affleck‘s “The Batman” (for example) in cinemas on opening weekend or four weeks later at home. So what can cinemas do to ensure they don’t see a mass exodus of customers? It’s not that complicated:

Lower prices, while doing everything to ensure the best experience possible.

If people feel the value of that ticket price reflected in every moment of the moviegoing experience, they will continue to come back, even if there’s more to choose from at home. Certainly, smaller chains such as Alamo Drafthouse base their entire business on making their customers feel pampered, and they’re successful and growing because of it. And there are pockets of arthouse cinemas across the country that are also thriving because they put a premium on making sure everything from the lobby to the projection is near perfect. But these comments are pointed toward the bigger chains who must already be seeing the ground shift in the industry. Simply put, if they aren’t prepared to be flexible and adaptive, they are going to face trouble in the years ahead. Things may not be easy, but if exhibitors want to survive, they’ll actually have to start listening to their customers, just like the studios are doing.

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