nScreenMedia OTT multiscreen media analysis

Without PVOD, movie industry treads dangerous path

US-Canada theatrical ticket sales are falling

There has been a lot discussion in the movie industry around the idea of early release windows for movies to the home. So-called “premium VOD” (PVOD) would charge $30-$50 to watch a movie before it is available on disk. In some cases, the movie might even appear in theaters and PVOD homes at the same time.

Movie producers are not convinced

Disney remains unconvinced. Christine McCarthy, Disney’s CFO, reaffirmed the company’s commitment to theaters at the fourth annual MoffettNathanson Media & Communications Summit. She pointed out Disney’s various studios released 33 movies that generated an average of $800M each at the global box office. She went on to say:

“Because of that, we don’t feel that we should be moving our movies off of the big screen any sooner than they currently are. So, while premium VOD is probably a strategy that does work for other studios, given their films and genres, for the kinds of films that we do … we’re not engaged in conversations on premium VOD.”

Movie screeners are against it

Those other studios have been in discussions with theater owners about establishing a PVOD window for almost a year-and-a-half. It doesn’t look like those talks are going anywhere fast. AMC Entertainment CFO Craig Ramsey, commented:

“After 14, 16 months of talking, I don’t see movement towards a solution.”

What’s the hold up on negotiations? Theater owners remain concerned about the threats posed by day-and-date releases and from home entertainment. They are right to be concerned about home entertainment.

Binge watching replaces movie time

Over the last 10 years consumer video viewing habits have shifted dramatically. For example, 70% of Americans binge watch TV shows, with 31% doing it on a weekly basis. And they watch a remarkable 5 episodes per marathon viewing session. This behavior is particularly prevalent in the 40+M U.S. households with a connected TV, where people are watching 2 hours and 23 minutes a day on the device.

These marathon viewing sessions exceed the time required to watch a movie. In many cases, they exceed the time it takes to get in the car, drive to the movie theater, watch the movie, and drive home again. This should be a great source of concern for Ms. McCarthy and Mr. Ramsey for several reasons:

  • Television shows are now good enough to totally absorbed viewers for hours on end. Traditionally, only movies have commanded this level of attention from viewers.
  • Viewers can watch TV shows back-to-back without interruption as often as they like in services like Netflix or HBO Now. And it costs about the same each month as just one movie theater ticket.
  • The quality of the in-home experience has caught up to, and in some cases, exceed the movie theater experience. 1080p video with surround sound is the norm in many homes. Some homes, with UltraHD TVs with HDR, exceed even the best movie theater experience.

Consumers are expanding the amount of time they devote to watching video, partly driven by this binge viewing habit. Yet movie theater attendance is not benefiting from this expansion in any way. The average number of theater admissions per person in the U.S. and Canada has declined 14% since 2007.

While the movie industry fusses over PVOD, consumers are filling their “movie time” with binge viewing TV shows.

Why it matters

The movie industry cannot agree on how to implement a premium viewing window for movies.

Meanwhile, movie attendance continues to fall while consumers watch television shows in movie-like fashion.

Without a premium home viewing window for movies, the theater owners and studios risk losing their audience altogether.

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