Martin Grove’s Hollywood Report 04-18-11

Anthony Hopkins as Father Lucas Trevant in “The Rite”

Anthony Hopkins as Father Lucas Trevant in “The Rite”

The cast of “Just Go For It”

The cast of “Just Go For It”

Stars of “Arthur,” Helen Mirren and Russell Brand

Stars of “Arthur,” Helen Mirren and Russell Brand

Premium problems: Like most wars, the one shaping up now between distributors and exhibitors over Premium Video on Demand is senseless, ill advised and bound to cause collateral damage.

The notion that a meaningful number of people will pay $30 to view movies on DirecTV two months after their theatrical release is as close to laughable as you can get without laughing.

Actually, the laughter starts when you consider the titles that are being talked about as likely to be among the first to be offered on Premium VOD. The list — no one really knows at this point if it’s correct or not — reportedly includes Sony’s Adam Sandler romantic comedy “Just Go With It,” Warner Bros. and New Line’s horror thriller “The Rite,” comedy “Cedar Rapids” and unnamed product from Universal.

Early reports about Premium VOD cited Fox’s drama “127 Hours” as an example of the kind of movie Premium VOD proponents think will work well to get people to spend $30.

There was a quickly corrected announcement last week from DirecTV that Warner Bros.’ comedy “Arthur” would be available starting May 1 on what it’s calling Home Premiere. That would have only been 23 days after “Arthur” opened theatrically. If that were true it would really have been like waving a red flag in exhibitors’ faces, but it turned out to be just a big mistake. The “Arthur” DirecTV was referring to was the 1981 original starring Dudley Moore. Whether DirecTV means to try to sell viewings of the “classic” “Arthur” for $30 isn’t clear, but anybody who really wants to see it again can probably find it for much less on DVD.

It’s hard to believe anyone really expects people to pay 30 bucks to watch the titles that actually are likely to surface on Premium VOD. Let’s consider how those movies performed theatrically.

“Just Go With It” opened Feb. 11 to $30.5 million and wound up grossing $102.3 million domestically.

“The Rite” opened Jan. 28 to $14.8 million and ended up with $33 million domestically.

“Cedar Rapids” opened Feb. 11 to just under $303,000 and did $6.7 million domestically.

“127 Hours” opened last Nov. 5 in limited release to just under $265,000 and went wide Jan. 28 with $2.1 million. It took in $18.3 million.

Are people going to be willing to fork over $30 for a Premium VOD look at any of those films? I can tell you that I wouldn’t spend $30 to see all four of them. In fact, you couldn’t pay me $30 to get me to watch “127 Hours” because I’m just not interested in seeing James Franco slice off his arm, no matter how artistically he does it.

“Just Go With It” is coming out in DVD in early June, according to one of the online sites that tracks DVD releases. What would be the point of paying $30 to see it May 1 if you can rent it for a dollar or two a month later? Hollywood may not realize it, but we’re still in a beat-up economy where plenty of people are still out of work or fearful they could be. Maybe DirecTV’s subscriber universe doesn’t fall into that category, but even a more upscale crowd is likely to be thinking twice these days about throwing money away.

While “Just Go For It” did decent theatrical business, there are 10 other Adam Sandler films over the years that out-performed it. So it’s not like this is one of Sandler’s all-time greatest hits that people just can’t wait to get an opportunity to see again.

As for the other titles being talked about, nobody cared much about them to begin with so why would they want to shell out 30 bucks to see them now? Again, we all know these films are coming soon in DVD and renting or streaming them then is a great way to catch up with them at minimal cost.

Of course, the Hollywood bean counters aren’t quite this stupid. If we know $30 to see such titles is ridiculous and won’t work, they know it, too. But setting the pay bar so high let’s them say to exhibitors, “Don’t worry. This isn’t a mass audience thing. At $30 a viewing it’s going to play to a very select crowd and it won’t take anything away from you.”

Of course, the flip side of that statement is the one where a few weeks later they announce that $30 turned out to be too high a price point — so now it’s being cut to, let’s say, “an introductory” $10 or maybe even to $7.50 for “a limited time.” At those prices, it’s an entirely different ballgame. There’s nothing you have to do but point and click your remote control and the movie gets charged to your DirecTV bill that shows up a month from now. You don’t even realize you’re spending money.

In fact, there already have been anonymous quotes in the media from proponents of Premium VOD explaining that the $30 fee is only meant to establish a “price point” for the value of movies in the new window. Fine, once the price point’s established and you slash it to something people are willing to pay, that’s when the problems start. What exhibitors need to worry about is that this could translate into a major negative impact on the boxoffice, which isn’t looking all that healthy so far this year.

Exhibitors know the threat this represents to their livelihood and, understandably, they’re ready to go to war. From what they’ve said thus far, there are a few weapons they’re ready to use.

They’ve threatened to stop showing trailers for films that will play in Premium VOD and, perhaps, to pull all trailers for product from the studios participating in Home Premiere. That would certainly be bad for those distributors, but there’s so much free trailer play on the Internet these days that it probably wouldn’t be crippling.

Exhibitors have said they could scrap in-theatre displays like posters and lobby standees for Premium VOD titles or even for all films from participating studios. That wouldn’t be good news for distributors, but it also wouldn’t be good for the theatres. After all, if they’re still going to play those films they need to let people know they’re there to see.

And then there’s the idea of demanding a better boxoffice split for exhibitors for Premium VOD titles. That would probably wipe out whatever additional revenue they’d bring in from Home Premiere. It’s hard to believe any distributor would sign such a deal.

Most likely, the titles in question would wind up not being promoted in theatres and in some cases might not get played at all. Filmmakers would become collateral damage and those who could would probably gravitate to studios that weren’t participating in Premium VOD.

There’s an additional weapon that exhibitors could implement if they really wanted a fight to the death with distributors over Premium VOD. This would involve not threatening to stop playing the offending films, but instead promising to severely limit the number of performances they would receive.

Consider the mayhem it would create among Hollywood marketers if the biggest U.S. theatre circuits decided to give only one performance daily to titles premiering on Premium VOD. What if they decided to limit those titles to a 10:00 p.m. performance and show something else at 6 and 8 o’clock?

That would be like throwing a grenade into a marketing campaign because with only one performance daily there’s no way the cost of mass marketing would work. With as much product as there is in the marketplace today, exhibitors wouldn’t have any trouble finding something else to round out their schedules.

Considering that the valuation placed on films for other revenue streams like pay TV, digital streaming, DVD and Blu-ray, free TV and syndication is driven by theatrical performance, the repercussions would be significant for distributors.

Things could get even worse if the broadcast networks and leading pay TV and cable channels decided that DirecTV’s Home Premiere will also take audience away from them. If the TV industry decided that a Premium VOD window diminishes the value of movies for subsequent television and cable runs, they could charge premium prices for commercials (likely), refuse to sell airtime at all (less likely) or try to pay less (possibly) to license movies that play in Premium VOD.

Bottom line: It would make sense for Hollywood to scrap or significantly revise its Premium VOD plans because exhibitors have the best weapons in their arsenal. What are the studios going to do — stop booking their movies into theatres?