After Wednesday’s surprise agreement with the two largest exhibition chains to reduce the period of time that movies play exclusively in theaters, Paramount Pictures may have finally cracked the code on one of Hollywood’s most vexing challenges.
But by getting AMC Theatres and Cineplex Entertainment to allow Paramount to make two October releases — “Paranormal Activity: The Ghost Dimension” and “Scouts Guide to the Zombie Apocalypse” — available for home viewing just 17 days after they hit theaters, Paramount has shown that studios and theater chains may finally be ready to cooperate in dealing with one of Hollywood’s biggest problems.
Filmmakers, studios and exhibitors are facing a broad shift in behavior by consumers, especially the most-prized young adults, away from movie theaters and to digital platforms. This deal won’t resolve how to handle that change, but it could be an important first step.
“Windows,” as the periods of exclusive availability on a particular platform are known in the industry, have been a hot-button issue between studios and exhibitors for years.
Recent attempts by studios to break those windows — Sony with its hack-targeted comedy “The Interview” last year, the Weinstein Company with “One Chance” and Universal with “Tower Heist” in 2011 — have been stonewalled by theater chains wary of cutting the legs off their revenue stream.
Paramount’s experiment is one of the first times that the two sectors have worked together to keep the movie biz from going the way of the music industry, which was gutted when consumers cut record labels and distributors out of the deal as digital access exploded.
Patrick Corcoran, vice president of the National Association of Theatre Owners, applauded Paramount for reaching out. “For several years we’ve been asking the studios to work with theater owners on developing new models and ways to grow the whole pie and market in ways that don’t damage a film’s theatrical run,” he said.
“You have to applaud Paramount’s creativity,” entertainment and media valuation analyst Seth Willenson told TheWrap. “They had to find ways of mitigating rising marketing costs by maximizing returns on as many platforms as possible as quickly as possible, and they may have.”
Not everyone was patting Paramount on the back for peace-making efforts and thinking outside the box. One industry executive said it was more practical reality than historical shift.
“This is Paramount being opportunistic. They have a very thin release slate and this is a way for them to expedite cash flow, make a little money quickly and move on,” said the executive. “I don’t see it as precedent-setting. They’ll be sharing a little bit of the digital stream, but it’s a mainly a way to maximize returns on a couple of genre films.”
Indeed, the risk for Paramount is relatively low since “Paranormal” and “Scouts Guide” are low-budget films without big-name stars. As horror films, they also benefit from communal viewing — it’s fun to get scared witless with your pals — and target young, tech-savvy adults who are driving the theater-to-digital exodus.
Horror releases also tend to be very front-loaded in consumer interest and shelf life in theaters. These aren’t tentpole movies such as “Terminator: Genisys” or “Jurassic World,” which was taking in $40 million at the box office in its fourth week. As a result, any cut in box office grosses from the theatrical run of “Paranormal” or “Scouts Guide” should be minimal.
Theater owners and distributors typically split a film’s profits in half, at least domestically. But video on demand gives the studios between 60 percent and 80 percent of revenues. That market is facing a glut of low-end product of late, and the buzz generated by Paramount’s experiment will help distinguish the two titles.
The “Paranormal Activity” franchise is in decline, and the last entry, 2014’s “The Marked Ones,” was the lowest-grossing of all. It opened to $18.3 million in January’s first week, but by the third week — just after it would become available for VOD under the new plan — it took in just $1.4 million.
Paramount, AMC and Cineplex were all mum Wednesday on the financial details of the plan, but it’s clear the risk to all involved is slight, regardless of how much back-end returns may be shifted.
“We intend to make money on both of these movies,” Megan Colligan, Paramount’s president of marketing and distribution, told TheWrap. “It’s good deal for consumers who get more options, and for the studios and the theaters it reinforces the reality that the theatrical run is No. 1 in terms of giving a film value.”
There are a number of questions left open by the move. Is China’s Wanda Corp., the parent of AMC, using the deal to ingratiate itself with Hollywood studios? Will the studio and the chains go all out on their promotional, social media and marketing efforts to promote each other’s runs? And will consumers want to buy a movie ticket to a film they can see at home in less than three weeks?