July 5, 2005

FORWARD TO THE PAST
Part III

Part I, Part II, Part III, Part IV

Delivery Systems Vs Content

The methods of delivering pre-recorded content to audiences are changing and, I suspect, will continue to change within our current field of vision for the next 20 years. Home Theater is the new media favorite, but the media's relationship with how we receive content is rather different than that of any other group, even early adapter trailblazers.

A friend pointed out, as I went on some rant about the ubiquitous nature of the iPod and digitized music, that she still sees a large percentage of people on the New York subways using CD players. If you need further proof, just look at how many ads you still see on city streets for the iPod and iPod Shuffle... still branding the thing... still not competing on any level other than a reactive one. Outside of a magazine print ad - and rarely even then - will you see any specifics on this product. And though it has reached its tipping point - a quarter to Mr. Gladwell - the cost of being the digitized music game, including the cost of having a fairly new computer with both the computing power and the hard drive space to make easy work of iPodding, is still bringing some up short.

The maturity of the pre-recorded entertainment industry has a lot to do with the new era obsession with delivery systems as "the next savior." Hand-cranking to early hand painted color to electric cranking and projection to sound to printed color to faster film to digital... all of these evolutions and the smaller steps in between have, after awkward adjustment periods, improvements to content. (And if you miss black + while, bully for you, but the freedom to choose color or black + white is an irrefutable improvement, even if the marketplace dictates against the use of one over the other.) But these changes were, in their own ways, the saviors.

With the end of the studio system in the late 60s, the recovering studios (recovering from the quality quirk of the early 70s) found that delivery systems could become the new savior.

Jaws is held up as the start of massive releases, so it might shock you to recall that the film opened on only 409 screens and never got past 675 screens. But it was the first film to ever gross more than $200 million and it didn't only do that, it beat the previous "highest domestic grossers ever," The Exorcist ($193 million as of 1975) and Gone With The Wind ($190 million as of 1975) by more than a third... about the lead that Titanic continues to hold over any worldwide grosser currently.

Two years later, Star Wars started in 43 theaters and got as wide as 1096 screens in first run, though it ran for over a year and ended up on more screens the next year in combo first and second run play. It raised the bar to over $300 million for the first time, a little better than 16% ahead of Jaws, but still a major jump. Still, Star Wars changed the business the most by expanding the notion of what associated licensing could earn.

E.T. pushed further still, with a $360 million domestic gross. It started in 1103 theaters and never got past 1778 screens.

It would be eleven more years before Jurassic Park became the third movie of all time to pass the $300 million mark domestically. There would be two more (The Lion King and Forrest Gump) the next year, 1994. Six more films, including Titanic joined the club in the next five years. And in the last four years, there have been eleven such titles in addition to the eight that managed the feat in the twenty three prior years since Star Wars.

What happened?

A few things.

As far as I can find, Beverly Hills Cop was the first film ever to turn up on 2000 screens... which it did only after being a huge success in its first two weekends of release in 1984, expanding by a full third.

It would be a dozen years (1996) before Mission: Impossible became the first film to crack the 3000 screen limit. After that one event, there were 2 such domestic releases in 1997, 9 in 1998,12 in 1999 and 21 in 2000. Seeing a pattern?

Three thousand-plus screen releases in 2001 numbered 21, 31 in 2002, 44 in 2003 and 47 in 2004. There have been 32 such releases so far in 2005.

The massive openings have led to massive opening weekend grosses... more than forty $50 million-plus opening weekends since 2001.... with fewer than 10 in all the years before. Of the dozen $300 million grossing movies since 2001, only Pirates of the Caribbean and the first Lord of the Rings film opened with less than $50 million... and both started with more than $46 million. All twelve films launched on more than 3000 screens.

That is a very high bar to start at for the New Era Blockbuster.

Of course, a $50 million start doesn't guarantee even half of the $300 million high bar. But in spite of My Big Fat Greek Wedding's great box office surprise, it and the 3000 screen mark do serve as the virtual pathway to the mega-hit level. Moreover, in the last few years, a report of 3000 screens often means a true weekend screen count of more than 4500... or as many screens as 6500.

Three other historic changes occurred in these first years of the new millennium.

First, industry-wide bankruptcies in exhibition, followed by consolidation and either major refurbishing or rebuilding of screens, created the possibility of such wide openings.

The turnover also allowed for a new concept in the exhbibtion experience, booking movies on a higher percentage of multiplex screens on opening weekend, pushing out aging titles earlier and earlier as ease of opening weekend access became ubiquitous.

Second, the deals between exhibitors and the studios stopped being the Spielberg-driven 90/10, 80/20, 70/30 revenue split progression for big movies that motivated exhibitors to hold movies that were a month or more into their runs, perhaps selling fewer tickets, but returning a higher percentage to the exhibitor. This system has quietly been replaced at every studio with a deal that returns about 55% to the studios no matter what week of the run it is. The result has helped to shorten the theatrical-to-home entertainment window, as even films that are playing quite well in their fifth week and beyond are having a hard time keeping screens.

Only thirteen films played on more than 1000 screens and earned more than $1000 per screen last weekend... seven of them coughed up more than 400 screens from their runs for this July 4 weekend. Cinderella Man's hold was one of the best of the weekend... but any recovery this summer has to be forgotten, as the film has lost more than half its screens over the last two weekends.

Third, the DVD sell-thru revolution again made the shortened theatrical-to-home entertainment window creep even shorter still, as a huge revenue boost was available in home entertainment just a couple of financial quarters after a theatrical success.

What hasn't happened is a quantifiable change in the quality of the films being delivered to the theaters. Yes, studios have increasingly looked to pre-marketed ideas in the hope that they would give their titles and edge in this stunning new business of slamming films into massive numbers of theaters then slamming them into home distribution within six months. The results, on the business side, have been decidedly mixed.

In this period of 2001-now, forty-eight films have grossed over $300 million worldwide. (I switch to worldwide figures here because historic measure of this is possible now and it's not - at least, not easily - in the past.) Only eleven (My Big Fat Greek Wedding, Signs, The Last Samurai, Bruce Almighty, Finding Nemo, Ice Age, National Treasure, Shark Tale, The Day After Tomorrow, The Incredibles, Hitch) are purely original scripts (however derivative) and three more (Catch Me If You Can, Minority Report, I, Robot) are built on somewhat obscure literary titles (if not literary figures) to earn a right not to be piled on with the sequels, remakes, comic books and other pre-sold ideas. That's less than 30%. If you take out the animated titles, it's 23%.

So, if you are an exec, how desperately are you searching for an original over a pre-sold?

Sorry if you want to argue against pre-sold titles, my fellow critics, but the three biggest films this summer will be, it appears, Star Wars 6, the fifth major WB Batman film, and the second sci-fi collaboration between Spielberg & Cruise, a remake of one of the most talked about stories ever (thanks to Orson Welles) being driven at the box office by massive effects.

The other three $100 million grossers to date? A remake of The Longest Yard starring Adam Sandler, a clever conceit sold on the backs (and fronts) of the two hottest tabloid stars of the last year, and a truly crappy DreamWorks animation that is the only animated film in the field.

Batman Begins may be the most audience-accessible and critic-accessible major release of the summer so far. There may be no other film that even merits serious consideration.

Nonetheless, as critical as the movies and their salability is to each year's box office results, the industry is still looking to delivery as the most pliable variable.

HD-DVD, Pay Per View, Video On Demand, and Digital Distribution are the primary methods being mulled over. Most of the smartest people are looking at these possibilities as a form of business expansion. But the panicked... and a lot of otherwise brilliant people are panicking... are looking at the potential of these as replacements. In the worst scenario, they are thinking of these ideas as expansion, but in real danger of creating delivery replacements that cannot expand or even equal the total revenues for filmed entertainment.

It's lovely to see major outlets finally to start to get on board the years long arguments made in this column regarding the expansion of the theatrical-to-home window. It is sad, however, that this awareness is based on the false panic over "The Slump." Expanding the window is not a quick fix to any slump, perceived or real. It is, however, a necessity if the industry hopes to expand its base in the future.

The "big film" industry must walk the fine line that allows successful theatrical - including new or old ways of encouraging the theatrical habit - as well as successful home entertainment in the way we know it now, as well as a new tier of expansion to service the customer - in fact, the majority of the public - who are not finding an easy way to give their money over to the industry now.

The greed of simple expansions of distribution models is a way to the sure death of the "big film" industry (or at least the crippling of it). Getting caught up in the rush to use the new technologies that allow these new distribution models is a disaster waiting to happen. Theatrical release still generates the highest number of dollars expended, if not the highest profit per expenditure. And people are not stopping this expenditure. They are not "staying away in droves." They are making minor adjustments due, in part, to an ever increasing set of options, both for filmed and other forms of entertainment. Exploit this.

I believe that the "big film" part of this business is close to maximizing its potential, outside of minor annual growth. (It is distinctly possible that the business peaked last summer, in terms of sheer perfection in playing the game as it now stands.) The next step is neither a major change in the delivery models or the content... but the simple maximization of profits. The most significant growth opportunity, in my opinion, will be a reduction of production and distribution costs. That is the future.

The "indie film" business, which I haven't really discussed here... that is where major changes to delivery methods can really help expand their niche business. For the big boys... focus on that is the best way to become a niche business.

I went a little long today, so items 7-10 will run tomorrow.

Tomorrow - Part 4: The Last Four Headlines

The Next Commercial Step... Content Variation

Why Hasn't PPV Worked? Why Don't People Go To Theaters To See TV Events?

How Do People Feel About Spending On Entertainment... It's More Than Numbers.

Does Simplification/Ease Of Access Actually Help Anyone… Even The Consumer?

READER OF THE DAY: THB/TFF VET writes: "Why I Go To The Movie Theater - I go to lose myself, lose my ego, to be completely engaged in the cinematic experience. For some movies, from a technology point of view, this is only possible in the movie theatre. For instance, I've seen Fast Runner and Lawrence of Arabia on both and you never get the presence of the ice and desert respectively at home even on a 56" or whatever TV. But I'm talking about more than that when I say complete engagement with the cinematic experience. It is a feeling of connection.

However, I don't get it too often at the multiplex anymore. Too many commercials, too many cell phones going off. It is getting more like the home experience, where the phone can ring and the spouse can leave the bathroom door open and flush the toilet. Unlike the fine restaurant that wants to give the the ultimate experience, the multiplex is more like fast food MacDonalds with loud musak! I mean what the fuck? Don't they get the experience that is craved.

Sorry about the language but it is very personal to me. I love movies/flicks/films. The only time now I truly achieve the old experience is at film festivals. The clutter is gone. The audiences are fantastic. One can have an out of body experience. Where I live the arthouse cinema is only marginally better, but I'll take it and go there more and more for even a marginal film. When I take trips to LA and always give some bucks up to the ArcLight, a multiplex devoted to good film experience (no commercials, assigned seats, cell phones monitored).

All this talk has me wildly anticipating Telluride Film Restival on Labor Day. Talk about a dent in the pocket book! But Ill give up going to movies the rest of the year at the multiplex before I give that up!"

E-ME. Does the shortened window and easier access on opening weekend encourage you to go to movies early or to avoid early hype?