THE BLOG
10/08/2014 08:04 am ET Updated Dec 08, 2014

Cinema Exclusivity: Why Buy a $17 Imax Ticket When It's on Netflix Too?

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Movie fans are oblivious that their movie-watching loyalties are the focus of an epic battle being played out in Hollywood. Many movie distributors are determined to carve out a video-on-demand (VOD) run for movies at or about the same time as theatrical premiere. This pits the $11 billion domestic box office business at cinemas against the $12 billion domestic VOD segment on TV.

Film distributor The Weinstein Co. just announced that the sequel to Chinese-language blockbuster Crouching Tiger, Hidden Dragon will play simultaneously on Imax theater screens and TV's Netflix when the movie premieres in August 2015. While this announcement made a splash, the concept is not new.

"There has been a lot of conversation about premium VOD over the last several years," Walt Disney Studios president Alan Bergman told an investors conference last month, "although nothing substantial has come of it."

The outside world usually looks upon the jockeying as involving just timing--having VOD release move up to coincide with theatrical premiere. Film distributors, VOD platforms and even movie theaters argue as much about pricing. Those stakeholders in the Hollywood ecosystem question why a pricey cinema ticket is paired with cheap Netflix access, as will be the case with 2015 sequel Crouching Tiger, Hidden Dragon: The Green Legend.

The price tag for a single movie is less than $1 within a Netflix monthly subscription (remember there are unlimited viewings by any number of people in front of a TV screen with any on-demand video), which represents a consumer value disconnect when compared to a $17 Imax cinema ticket (my local price). Hollywood risks undermining perceived consumer value for movies.

The other attempts for a "premium" VOD window with theatrical came with hefty price tags, but consumers balked ("window" is the word to describe each stop in a movie's distribution from theaters to DVDs to on-demand TV to various TV outlets) . For example, in 2011, satellite subscription TV service DirecTV launched its Home Premiere program that charged $30 for major Hollywood films just two months after theatrical (up from four months), but it fizzled, as have others.

Windows for Major Movies After Theatrical
Premium VOD -- 0-3 months
Home entertainment (DVD/Blu-ray), VOD, pay-per-view -- 3-6 months
Premium pay TV -- 7-15 months*
Subscription VOD -- 7-15 months*
Network TV (free and basic cable)-- 24 months*
* first window; same films may return later
Source: industry sources

That $30 price is not outlandish. Remember the professional wrestling mounts monthly pay-per-view TV events with a suggested cable/satellite TV ticket price of $44.95 or $59.95 to the consumer, garnering group viewing and sharing of the cost.

Usually at this point, I'd present a forceful analysis suggesting which way the industry is headed. On this premium early video window, I demur. There are just too many uncertainties with pricing and timing. The sharp plunge in the key peak summer season exacerbates worries, though since summer cinema box office returned to healthy levels.

However, it's a good bet big-budget major films will maintain the exclusive theatrical window in the near term, since half of blockbuster's of $100 million-plus in cinema ticket sales is serious money and would be undermined by VOD telecasts at the same time.

"We want people to see them in a theater first, and then we want people to buy them," Disney's Bergman said to investors of major-studio films. "So as it relates to premium VOD for us, I don't really see any substantial changes in the next few years."

There are several other reasons to predict cinema exclusivity for big films for the foreseeable future. Cinema-only runs are buttressed by the Academy of Motion Picture Arts & Sciences, which at the moment isn't inclined to confer its coveted Oscars on hybrid theatricals with quickie VOD windows. "Hollywood likes cinema release because it creates a marquee value for films that carries over to DVD and TV, and because consumer consumption is limited to one view per ticket," says my book Marketing To Moviegoers: Third Edition. "Moviegoing is further entrenched by theaters investing in big screens, crystal-clear digital sound, plush seats, and stadium-style seat placement with unobstructed sight lines."

Expect films from independent distributors -- which tend to be scrappier and more oriented to short-term economic returns than the six major studios -- to continue to try to carve out a premium VOD window. The "indies" always push movies rapidly into the marketplace on all fronts because their films tend not to linger long in movie theaters.

Don't believe pundits that predict a new permanent paradigm is emerging quickly. Here's where I can make a prediction with confidence. Expect divergent efforts that pair VOD with cinema to continue for some, but not all, movies.