Hollywood may want to brace itself for another epic fight. At least two major studios — Warner Bros. and Universal Pictures — are expected to reignite discussions about early video-on-demand, sources tell Variety, a move that could lead to a protracted standoff with theater chains.
For the past decade, no issue has incited bigger battles than that of theatrical windowing, the industry term for the length of time a movie appears exclusively in cinemas. Studios argue that they need to be able to release films on home entertainment platforms earlier as a way to combat piracy and capitalize on expensive advertising campaigns publicizing a picture’s debut in theaters. Exhibitors counter that a shorter window could cannibalize ticket sales and encourage consumers to skip the multiplexes, and wait to see a movie when they can rent or buy it. As it currently stands, most theatrical releases are not available in the home until roughly 90 days after they premiere in multiplexes.
In 2017, studios and major theater chains were close to reaching a grand bargain, one that would enable distributors to release movies on-demand within weeks of their theatrical debuts. As a carrot, exhibitors were promised a percentage of the profits from films rented or sold during this period. At the time, every major studio except Disney was engaged in some form of talks. However, negotiations stalled out and were abandoned when Disney announced plans to buy the bulk of 21st Century Fox’s film and television assets. That took one major advocate for collapsing windows off the board, weakening studios’ leverage. Compounding issues, Warner Bros., another supporter of shorter windows, had to deal with larger corporate issues as it waited for its former parent company, Time Warner, to be sold to AT&T.
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However, the AT&T-owned Warner Bros. remains intent on releasing movies in homes earlier and is expected to re-engage theater owners in discussions at some point in 2019. The same scenario is expected to take place with the Comcast-owned Universal Filmed Entertainment Group whose chairman Jeff Shell is an outspoken proponent of a shorter window. Other studios may follow suit if Warner Bros. or Universal look to be making headway.
John Fithian, the head of exhibition industry trade group the National Association of Theatre Owners said no talks are currently taking place.
“This does not jive with anything I’ve heard,” he told Variety.
Theater owners believe that if windowing becomes an issue, they have the upper hand. Once Disney owns Fox, they will have gained an outspoken defender of traditional release strategies. The combined studios will boast the “X-Men,” “Star Wars,” “Avatar,” and “Avengers” franchises, and were responsible for over 40% of the domestic market share. Disney has yet to announce how it plans to integrate Fox into its operations, but it has signaled to theater owners that Fox Searchlight, the company’s indie label, will continue to release movies in theaters. Past Searchlight releases include Oscar winners “The Shape of Water” and “Birdman.” Without Fox pushing to trim the windows, Universal and Warner Bros. may find that they don’t have enough product to push exhibitors to compromise.
Publicly, Disney CEO Bob Iger has been a vociferous ally of the exhibition business. “We have a studio that is doing extremely well and a [release window] formula that is serving us really well in terms of its bottom line,” he said on the company’s most recent earnings call.
However, rival studios feel that Disney is being somewhat disingenuous. As the company prepares to launch its streaming service, Disney+, it is lining up several movies with healthy budgets that will forgo a theatrical release. They include a live action remake of “Lady and the Tramp,” the Anna Kendrick comedy “Noelle,” and another version of “The Sword in the Stone.” These are the kinds of movies that other studios would welcome on their slate, even though they lack the heft of an “Avengers” or “Star Wars” sequel. These studios privately gripe that Disney is ignoring the windows when it suits them.
Fithian disagrees. “Straight-to-video meant something back in the day and straight-to-streaming means the same thing today,” he said. “It’s fine to release movies to the home, but we hope that quality movies that have the chance of doing substantial box office will continue to be released in theaters. We have confidence that Disney is going to respect the theatrical window.”
Universal and Warner Bros. have their own reasons for wanting shorter windows. WarnerMedia, the new name for AT&T’s entertainment assets, is launching its own streaming service in 2019, and Comcast is widely expected to delve more deeply into the world of digital video. To be successful, these companies will need to offer premium content to customers and making theatrical releases available earlier to subscribers could be critical.
Spokespeople for Warner Bros., Universal, and Disney declined to comment.
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