New Hollywood Panic and Pressure Over Rival Premium VOD Plans

As CinemaCon, the annual convention of theater owners, gets underway Monday, traditional theatrical windows are facing changes.

This year's edition of CinemaCon could hold plenty of intrigue.

The annual gathering of theater owners, which gets underway Monday in Las Vegas, will once again see the major Hollywood studios touting their slates with elaborate, star-studded presentations and lots of new footage inside the cavernous Colosseum Theater at Caesars Palace in Las Vegas.

But beyond the usual ballyhoo, there are bigger issues in play. Studios and theater owners are having serious discussions about shortening theatrical windows, the amount of time films play exclusively in theaters before they are made available for home viewing. And some of the studios themselves are in the midst of executive turmoil that could also affect their future direction.

As detailed by The Hollywood Reporter late last year, theater owners and studios are for the first time engaged in substantive talks regarding a premium Video on Demand service that would finally shorten the traditional theatrical window of 90 days and allow movies in the home far earlier. Many believe a PVOD service could be announced by the end of the year with several studios participating. The big stumbling block: A variety of differing proposals are on the table, each advanced by one of the rival studios.

Universal, owned by Comcast (which is in the home-delivery business), has staked out the most aggressive position and ideally would like a title to be made available for home viewing for $40 after 10 days. Warner Bros. — which AT&T is buying — has put forth a proposal for $50 after 17 days.

Fox has recently come in with a PVOD plan that theater owners could find it easier to live with since it would charge consumers $30 to rent a movie 45 days after it is first released in cinemas. These studios, along with Sony and Paramount, argue that PVOD could help make up for the cratering of the DVD market, as well as help mid-range films that often leave theaters quickly and face competition from the likes of Netflix.

The one studio that has no reason to tinker with the current system is Disney, which will present a full screening of Pirates of the Caribbean: Dead Men Tell No Tales, in which Johnny Depp reprises his role as the zany Captain Jack Sparrow. The studio is enjoying a record-breaking run at the box office, and insiders say Disney is not part of any PVOD discussions.

For years, theater owners have decried early home viewing as the death knell of moviegoing. But that attitude is shifting, although some cinema chains still want assurances that the regular VOD and DVD window won't be altered. Others want a cut of the PVOD pie.

"Change is certainly inevitable. The truth is, after four to five weeks in theaters, even the biggest blockbusters have played out and made most of their box-office revenue. I think the 45-day proposal actually works, in the same way studios already offer premium films on pay-per-view at hotels," says analyst Jeff Bock of Exhibitor Relations.

Adds Wall Street analyst Eric Handler of MKM Partners: "I think it is inevitable that we will see PVOD at some point, but you have to come up with a solution that works for every party."

One huge hurdle is that the studios can't directly work with each other due to antitrust laws. Ditto for theater owners. That means a theater owner, or digital distribution platform, such as a cable company, Amazon or iTunes, will have to make their own deals with the studios.

Last year at CinemaCon, Sean Parker's Screening Room caused a stir by trying to convince studios and exhibitors to make movies available in the home for $50 on the same day they were released in theaters. But while most of the studios met with Screening Room, insiders say the major film companies have little interest in sharing revenue with a third party.

National Association of Theater Owners president John Fithian is sure to be asked about windows following his state-of-the-union speech Tuesday. The need to find new sources of revenue could also come up when various studio heads appear on stage.

And that's the additional element of intrigue that observers will be watching closing. There has been massive change in the terms of studio leadership since last year's CinemaCon.

In September, Stacey Snider succeeded Jim Gianopulos as chairman-CEO of Fox, and Gianopulos is now in line to run Paramount. For years, former Paramount vice chairman Rob Moore was famous for hosting that studio's CinemaCon presentation; Moore departed the studio last fall, followed by chairman Brad Grey's exit earlier this year.

At Warner Bros., former New Line chief Toby Emmerich has replaced Gregg Silverman as head of all film operations. Sony is also in flux after the departure of Sony Pictures CEO Michael Lynton, although Tom Rothman continues to head up the movie division.

Only Disney and Universal have enjoyed stability among all the changes the surrounding studios are undergoing.

One major figurehead who won't be at this year's show is former U.S. Senator Chris Dodd, chairman-CEO of the Motion Picture Association of America. In a major break from tradition, Dodd has a family commitment that will keep him from attending CinemaCon and giving his own state-of-the-industry speech.