Movie studios and theater chains often have a contentious relationship. Recently we saw how Sony’s announcement that it planned on no longer providing theaters with 3D glasses for its films starting next spring lead to an angry denouncement from the National Association of Theater Owners (NATO). Despite the protest, Sony is still planning on going through with their decision.
Another fight between the two sides is brewing following Universal’s announcement yesterday that it would release the upcoming Ben Stiller-Eddie Murphy comedy Tower Heist to video on demand services just three weeks after it debuts in theaters. In response, Cinemark Theaters announced it will not book the film for any of its 300 locations. The company released a statement outlining their position –
Cinemark recognizes and acknowledges the changing technological landscape and related challenges that Universal and the other studios are facing in the in-home window. Cinemark has urged Universal Pictures to reconsider its market test of this product. If Universal Pictures moves forward with its ‘Tower Heist’ premium video-on-demand offering as announced, Cinemark has determined, in its best business interests, that it will decline to exhibit this film in its theatres.
Now it should be noted that VOD release is only going to happen in two markets, Atlanta and Portland, OR, and comes with the hefty price of $59.99. Universal is doing this more as a test to see what response they get. But it seems as if after a year of participating alongside other chains in negotiations with the studio over keeping VOD releases far enough away from theatrical runs to help insure maximum profitability for theaters and making little head way, Cinemark feels as if they have no choice.
Is Cinemark cutting off its nose to spite its face, though? Tower Heist looks as if it could be a big hit and what theater doesn’t want to bring in audiences who will be looking to buy popcorn, soda and snacks as part of their trip?
But even though this is only a test case happening in two markets, I can see that the theater chain is standing on a principal. Most distribution contracts are structured so that studios take a large percentage of box office receipts with the theater getting a smaller cut of ticket sales in the first few weeks of a film’s release. But as a film stays in theaters, that ratio will slowly start to shift towards the theaters favor. Big release films becoming available via video on demand just as distribution contract starts to tilt box office revenue in favor of the theater would very likely cut into their already shrinking profit margins.
Distribution should be a partnership between the studios and the theaters, but this is a rather underhanded way of studios trying to screw their partners out of their fair share.
Via LA Times.