As studio lawyers played whack-a-mole with yet another Torrent streaming movie site, things wrapped up Thursday night at CinemaCon, the annual convention mounted at Caesars Palace in Las Vegas by the National Association of Theater Owners (NATO), which represents some 30,000 movie screens in the United States and cinemas in fifty countries worldwide. I devote a chapter on the battle between the studios and exhibitors amid the shift to digital in my HarperCollins book "The $11 Billion Year: From Sundance to the Oscars, an Inside Look at the Changing Hollywood System," which I excerpt a bit below:
About five thousand people—NATO exhibitors, major studio chiefs and key marketing staff, independent producers and distributors, concessionaires, agents, and trade press—congregate for four days and nights to review the past and get a glimpse of the future. Longtime partners, the majors and exhibitors have historically struggled in their symbiotic relationship, but cannot thrive without cooperating. That partnership has never been more fractured than it is now, as their mutual interests are no longer the same.
The CinemaCon annual rituals are simple: the major studios display their wares via show reels and fly a few stars into Las Vegas by company jet. The stars understand that the theater owners are their bread and butter: the work owners do to sell movies locally to moviegoers helps to build actors’ careers...
Like everyone else, theater owners and studios are dealing with the shift to digital, which has radically changed everything about how movies are produced and released. The internet gives and takes away, competing for eyeballs with so much noisy content—video games, social media, streaming, downloads, video on demand— that studios and theaters need to be smart about reaching consumers and luring them to the multiplex...
While the theater chains are unified in their mission to hang onto moviegoers for dear life, the studios have their own conflicting agendas. They are well aware that they have many more distribution options than ever before: the global theatrical market is just the most crucial and potentially lucrative.
And the studios watched the music business lose its profit margins to rampant piracy, which was about consumers wanting to consume what they wanted when they wanted, for free, mostly. The music companies ignored for too long the signs of changing demand. It took Apple chief Steve Jobs to radically alter the economic model and devise a profitable way of selling music to buyers by the download.
Luckily for the Hollywood studios, digital piracy of feature films required far more bandwidth and was more difficult to accomplish—for a while. The question was, would the studios bend to consumer demand, giving them what they wanted, or hang on to their tried-and-true—and lucrative—ancillary windows, which required movie fans to either go to theaters or wait months for video on demand and DVD?
Here’s the old paradigm: premiere a movie in theaters, then make it available three or four months later at a high premium cost via VOD, then sell and rent DVDs, then show it on pay cable, and then make it available on broadcast television all over the world.
The theaters were happy because they were the sole venue for selling movies for three to four months. They wanted a space of time so that moviegoers wouldn’t think, “Oh, I’ll just wait for cable.” The studios were happy because they could collect revenues from every stream. But piracy was growing all over the world and eating into revenues, no matter how vigilant the fight against in-theater camcorders. Hence more studios started to favor opening films in theaters around the world ahead, or at the same time as north America, to cut that risk; 3-D was another hedge against copying.
Meanwhile, studio DVD revenues continued to plateau after the 2008 recession, when consumers stopped stocking their home video libraries. And Netflix somewhat clumsily began to encourage its customers to subscribe not only to rent DVDs via their signature returnable red envelopes, but to online streaming as well. in 2012, Netflix changed the conversation entirely, competing with television directly by producing its own high-end programming. (in March 2013, after Netflix made available the entire season of David Fincher’s $60 million, thirteen-episode remake of the Brit series House of Cards—relocated to Washington, D.C., and starring Kevin Spacey, Robin Wright, and Kate Mara—the company’s stock soared and subscription services like HBO, along with the mighty networks, faced increased consumer demand for binge-viewing, the ability to watch an entire season all at once.)
Consumers, thanks to such independent companies as Magnolia Pictures and IFC Films, both owned by cable operators, were getting used to being able to download and stream via Netflix, iTunes, Hulu, TiVo, Roku, Playstation 3, and Amazon. They could even watch premium subscription VOD on their local cable system weeks before a movie hit theaters...
Clearly, it’s in the interest of the studios and exhibitors to get along. But this standoff is not going to be resolved easily. The overt hostilities have stopped. But the theaters are dependent on robust commercial product to survive, while the studios are struggling to figure out the best way to give consumers what they want. The digital wars are not over.
So what happened this week at CinemaCon 2014? Here's the studio-by-studio breakdown:
Paramount kicked things off Monday night.
Tentpoles: Two were from Michael Bay, including his reboot of Nickelodeon's "Teenage Mutant Ninja Turtles" (August 8) and 14 minutes of the fourth Hasbro "Transformers" film, "Age Of Extinction," starring Mark Wahlberg, who promised exhibs that when the picture opens June 27 it will not only be the biggest film of 2014 but will outgross the other three films combined. (Bay is also producing "Project Almanac" for Paramount for January 2015.) The third less surefire entry was MGM's "Hercules," starring Dwayne "The Rock" Johnson (let's hope it does better than Lionsgate’s "The Legend Of Hercules").