If you just deal with factual business reality, the factual business reality is very straightforward. The studios are losing billions of dollars a year in revenue because the DVD market has declined and has largely been replaced by much lower revenue generating options. We are owned by public companies who demand responsible business practices.
For us to continue to have enough money to make enough movies to stock all these theaters with great product, we need to be able to generate a proper return on investment, we need to claw back some of that revenue. I believe there are people who love going to the movie theaters. It is a fact that people who go to the most movies in movie theaters buy the most DVDs. It's also a fact that for years the notion of a DVD in a movie theater was impossible to comprehend because that was the enemy. It’s not the enemy.
I think there are lots of examples that suggest that viewing begets viewing and consumption begets more consumption, I think you could find it in sports, in how our company handled the Olympics this past year. NBC decided that you were going to get to see every single event live on some platform as it happened even though the massive amount of revenue they paid to get these rights was in people tuning into the prime time show. A lot of people watched on different platforms live and then more people than have in a long time watched in prime time.
Because the experience of watching the Olympics, produced by a great network in primetime, is different, the way it’s packaged, the way it’s sold -- it’s different. I’ve been in the best private screening rooms on the planet. They are not what a movie theater is. I believe movie theaters are spectacular and special and cannot be replaced and won't be replaced and all I tried to do in the famous last test as to begin. I don't know what the answer is but I know if we don't experiment we won't find out.
AT: Isn’t there some evidence that 3-D new releases show that you can have a scenario that works?
AF: I argue that it is good evidence but there are certainly exhibitors who have argued with me that it’s not...We opened "The Lion's King," the DVD was available a week later but still did not open to 100 million dollars, it’s not perfect, 3D in particular but there’s lots of evidence but all I am hoping is we find a mutually safe way of experimenting with what consumers want. I didn't even mention the piracy issue. Clearly and we can look at examples in other industries, I’m not sure the millions of people who illegally downloaded "Avatar" in the first 72 hours it was in theaters or that it damaged box office ... all did it because it was fun to do something illegal... by the way I do have great conversations... I understand the challenge, I understand the anxiety and I genuinely hope those conversations will lead to something meaningful.
DP: Let me go back to the 3D re-release issue and for me...the cinematic experience, it’s about telling the story so it really leads from an exhibitors’ standpoint that the general premise of the re-release is that you’re not telling a new story, you’re showing it in a different format. If people already have access to the story, there's less damage to the exhibitor and we as exhibitors are very selfish and defensive but from our standpoint the argument that a re-release is the same as a new release with a new story, it’s not enough evidence.
I will say it’s not enough evidence to convince the exhibitor that day-and-date works. The biggest thing we struggle with as exhibitors, if you look at the revenue stream for a feature, there’s one piece or one bite of the apple that exhibitors get, and if one, just one patron would choose not to go because of a windows or day-and-date or an alternative method, then the exhibitors and the studios are hurt. I think the difficulty in the release window issue is that it’s more than just a question of when something is released. There’s a whole bunch of things that happen in that equation, from DVD sales to the home all the rest.
The formula and the solution has to include all of those things and where the exhibitor fits in that revenue change. I think it’s an entirely new model. Adam is right, we’ve had very good discussions, and I wish all studio chiefs were as open to that kind of dialogue as Adam. I think if we could sit the top 10 exhibitors in 7 studios down and have a 2 day workshop, we actually would create a new model that would work for all our benefits. That's hard to do.
BM: I would argue that re-release 3D is an anomaly. Leveraging the huge marketing spend makes complete sense and there are some features that lend themselves to an earlier DVD download release. Today a download rather than a DVD sale, I think that moviegoers do buy content and there is no reason why we can’t be part of that process and actually sell the downloads, sell the DVDs in our theaters. The audiences will have already seen the movie, we can work through this in another window, so I think that what we need to do if we are going to change the model, we need to think about changing it entirely and we’re not talking about windows alone. There needs to be a discreet film window. What about day parks? What about day parks booking? Those kids are in school, they’re not going to the movies. It's not the same thing during the day as it is in at night or late night and we need to start as an industry figuring out how to make that work.
MJ: Facebook doesn’t have a dog in this fight but what’s happening in the digital space, a trend, is this idea of curation, that the exhibitor in the local market has an editorial point of view that could extend beyond the screening of that film. Whether it's becoming a curated place where downloads and DVS are being sold, creating demand for content that’s coming in the future and allowing people to talk about that in a meaningful way does have a ripple effect. When we started Facebook we started with bands in Boston gaining a little bit of cred, that’s how things grew and that idea of curating content. This idea of hyper-local is an important one writ large across social media, if the local exhibitor becomes the editorial point of view for our film.
DP: I want to add one more thing to this whole model question. One of the things I think would benefit us all if we figure out a way to grow the pie rather than simply argue over who gets the slices of it. Facebook could play a role in that, so could studios will play a role and I think exhibition with an open mind can play a role in that.
AT: What might the model be?
AF: We as a studio have been sort of studying the way a company studies, as any senior management team would. I don’t have answers. I knew if I came up here the conversation would end up here. And all I want to say is that people, once we were done with that conversation, I think people should go back and look at what I was proposing we do. The strategy behind it was awkward but in terms of what I’m hoping to accomplish I think that test was a good example of where we might start to learn.
My fundamental belief is this: I think there are people who love movies and love going to the movie theaters but who don’t have time -- they tend to be people of a certain age, with children, of a certain professional life that makes it hard for them to go as often, but that they would like to be part of the dialogue of movies when they are at their MOST relevant which is early in the life cycle I believe there is a price point where we can bring those people who might not go to the theater and who may not be current DVD or even media purchasers because by then because it’s not the relevant thing anymore, we could probably find a price point in the delivery method where we add to the pie by bringing them in. That was the hypothesis, "The Tower Heist," hypothetically begin to learn whether that works or not, we are open to finding other, different ways to talk about it but the basic concept was modeled around that.
AT: The other issue has to do with adult moviegoers being frequent moviegoers who aren’t being targeted for movies throughout the year. Been driven away to television, I’ve never understood why studios were always so willfully letting that happen.
MD: That’s a great loss for the industry and if that happens. Those movies, it means they have to be good to market them. We just happened to fall into a mini-slate with Sony with "The Social Network," "Moneyball," "Captain Phillips," they’re all movies that were developed and designed for that audience. Sleeper hits were our business plan, but they’re work. They’re artisinal almost. They’re hands-on, do-it-yourself, exquisite movies to put together but they require skills involving story development and sometimes in the conversation about doing them summer tentpoles, it’s hard to have both conversations at the same time for a studio. The execution dependent movies are risky, tentpoles that look like a return on paper can go spectacularly wrong when they go wrong. When the midrange movies go wrong, it’s not as impactful sometimes when they go wrong, the whole genre, the drama doesn’t work, 'oh we’re out of the drama business,' it becomes a self-perpetuating thing, and those things are dropped off the development slate.
AF: That’s all fair, but I would say from where we sit it’s certainly nuanced and in many cases far more complicated than that. People like Mike are going to continue to be able to make the kinds of movies he referenced because a) he has demonstrated an extraordinary ability to make those movies well, b) he has demonstrate willingness to create those movies brilliantly on a budget that a studio could still come up with a rational business model to justify. C) Studios are still making movies like "Les Mis" and other films targeted to adults. D: The problem is not just studios A) not wanting to make quality product which I don't believe for a second, or B) giving up on drama and letting TV viewers. The proliferation of good cable TV channels has made it possible and likely that television will be-- talk about the great TV programs that everyone is talking about, and that kind of spectacularly-created episodic television is doing a great job of satisfying audiences in the category of drama. So while there's still room for great certain types of drama in theater, we can’t ignore the reality that television is doing a great job of scratching that itch for a lot of consumers and the episodic quality of it is really compelling to people and we can’t ignore that reality as we figure out what kind of movie can get people to go to a movie theater which is the number one priority for all studios.
BM: What about thinking programmatically when you’re talking about the series on HBO or Showtime that is aimed at adults, why not a series that can play in a theaters programmatically for audiences able to go to the movies during the week, to bring empty-nesters, seniors, maybe singles back to the theater during the week which is the time that David and I have to deal with Monday through Thursday when almost no one’s in there, it would be great to see studios and distributors and people who acquire those rights could bring them into the theaters and target those audiences.
AF: The creative challenge of, what is that content that is made for a responsible price from a business standpoint, and a consumer says you know what that is the kind of content I want to leave my house for. You ask, is this an experience better had by somebody in a movie theater? The answer may well be yes, it’s hard to greenlight anything, but I do think we’re trying to wrap our minds around trying to do it. There is clearly capacity available in theaters when we give people a good experience in theaters they express their love for it. Figuring out how to use that reality in a mutually beneficial way should be a priority.
BM: The tools are there. Take the Metropolitan Opera, bringing in audiences for years and once you’re there, you can talk to them and start offering them things they would be interested in, the ballet or the symphony. Certainly that audience, the boomers, the empty-nesters, the senior citizens, need to be targeted, we need help in acquiring the content that they want to see.
AT: What can we do about small theaters not able to get quality adult fare for indie product for their theaters?
BM: What we’re doing is out there looking for alternative programming to fill the space that needs to be filled and targeting audiences that are in a position to go to movies during the week. When we talked about programming a network and that analogy that I heard before, it’s the same thing in a movie theater, who wants to go to the movies. Who is able to go to the movies during the week. I would suggest empty-nesters, senior citizens, and singles. Independent film in every theater we want to do. we just created a fourplex inside an 18-plex, different look and feel for a place to go for people interested in film culture.
AT: What can Facebook do to help with this? Do you do polling?
MJ: We work closely with the studios, some more than others. How do we use tools to inform the citizens? The way we're working with studios closely, I'll get a call on Sunday night, 'I've got my Monday morning marketing meeting, how does it look, can you run some polling against this audience for me, so I can inform?' I love that studios are using us that way. We work with studios in how they're naming a film, it's targeted to this audience, can you run some polling and give us an answer now. Pitting a movie against another movie in a quarter. We felt strongly after we polled that they should keep the movie where it was and it won the weekend. Market research has been important in tech and social prominence. People like Adam and his team and Michael Lynton got involved with us and built a relationship with us early on.
AT: Are the exhibitors taking full advantage of the marketing side of Facebook?
MJ: There's only so many hours in the day. We've created a set of tools that are easy to use that allow people to communicate with their constituencies in a meaningful way. Theater chains are using our platform to tell stories locally.
DP: We had a prohibition when I first stepped in at Carmike against our theater managers being on Facebook or putting their theaters or saying anything about Facebook. We've come a long way. Now we're posting theater managers and their staffs, particularly these high school fine arts kids, they will create skits to promote "Ted" coming to their theater. It's cool. We're still learning what we can do with Facebook and other social media forms. I'm excited about what we're finding, the number of fans and likes were getting, and the offerings we're able to do to try to pull in a little bit more incremental attendance. And the power that we see in that is enormous. Social media has a very big and fast payback.
MJ: So much decision making is being made standing in front of a theater. How can we become more part of the process at the 18plex in Grand Rapids. One thing we're seeing is experiences is what people care about, checking in places, 'what are you doing?' It's an attitude--we can work with a combination of exhibitors and distributors to solve what is that decision going to be at 8 PM, go to the theater or make a left turn and go somewhere else.? If we can be Henry Kissinger in this discussion and bring together the ten top exhibitors and studio heads, we'd like to host that.
AT: Where would you like to see things go in the future?
MJ: The theater is the last place where it's very didactic as to what you can and can't do that. 'Why do I have to put my phone away? Where is the iPad? Why is this the only place where I can't do what I normally do?' I don't want to sit next to a kid texting or using an iPad in a movie, but I like the idea of flexibility and testing, there's not as many movies being made as need to be made to support the people who are depending on it, we need to have some flexibility of what is the movie experience is, as a platform on which films are marketed as well as a fan.
BM: It's about what you do with that technology. What we need to do as an industry is we've got to think about interaction, we're starting to see evidence of studios, like Disney. The technology and tools are here, we've got to use them. Content above all, do I want to see that? I don't care what format it's in or how big the seats are, we want a shared experience, that's very different, it's not at home. And finally flexibility in scheduling and how we plan what our people are going to see and when they're going to see it.
MD: If the studios get into a business model that makes them feel healthy and secure and social media comes online as an engine for discovering new talent, it's a new era for finding filmmakers, the tools of filmmaking have never been more available or cheap and they're sophisticated, there are films being made on iphones and shown at Sundance, we're on the eve of an explosion of bringing new talent to studios and financeers and the marketplace, if everything stays on the track it's on and the umbrella is bigger and the industry able to absorb all these new voices people will show up.
DP: I deal in reality. I'm reminded every day of my responsibilities, we cannot have cleaner theaters, we have to do everything we possibly can do as exhibitors to help them moviegoers enjoy their experience. We've got to have better trained people who know the movies, who can talk to patrons when they walk up to the window and want to know about the movies, we've got to have more skilled merchandising people who understand profitability models, by upselling concession items, or dvd downloads in concert with our studio partners. At the end of the day we have to focus on the things we can change as theater owners. We can make a little more money and have a few more happy customers if we focus on them instead of some of these other things.
AF: Divine intervention to help identify high quality hits? Representing the studios, they are not all of one mind either. The future is not just from where I sit that exhibitors open their minds to new models and allow for the opportunity for us to learn together how to make this business better, it also requires the studios to do their part. I don't think all the studios are necessarily doing their part in creating an environment to make it safe either. Everyone has a pint of view. If both sides don't take responsibility for opening their minds to experimenting to find a better way to do this we're all going to suffer, large or small, some kinds of consequences.