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Will Technology Advances Limit Entertainment Choices
By: More articles by Nigel Swaby
Hollywood has recently been telling America about the financial trouble the movie industry is facing. In response Americans have asked Hollywood to start producing movies that are good enough to watch and worth the ten dollars theaters charge! Over the past four years ticket sales for new movies have steadily decreased. Why is this happening Are movie theaters going away Will movie studios go out of business and further limit consumer choice This article will attempt to answer these questions by examining the challenges and opportunities faced by both the entertainment industry and consumers.
Why are ticket sales declining
Home theater systems
Besides the limited quality of movies being produced many Americans have set up home theater systems in their homes. The decrease in prices of big screen TVs and theater quality surround sound systems has produced a generation of movie viewers who have the resources to create a theater environment in their own homes. When you add the convenience of not having to tolerate someone elses crying child and being able to pause the movie when you need to get a snack or drink theres really no question why movie theater attendance is down.
DVD pricing and release windows
For years the movie business has operated on a series of complex release windows:
First movies play in theaters then six months later the video window opens followed by the opening of the pay TV and then free television window. (Slate Downloading for Dollars)
Since the price point for a DVD is lower than taking a family of four to the theater many consumers simply wait for the movie to be released on DVD. DVD players have decreased in price so much theyre almost ubiquitous in American households and are a crucial part of any home theater system.
Hollywood is being pressured financially at the theaters by these situations. A good opening weekend is a huge part of the viability of a film. Studios spend an average of $30 million per film promoting the theatrical release. The question many industry analysts are asking is why the studios dont shift the release windows or eliminate them all together.
Simultaneous Releases
Some of Hollywoods biggest players are testing this theory right now sort of. The film Bubble directed by Steven Soderbergh and backed financially by tech entrepreneur and Dallas Mavericks owner Mark Cuban is the first of six films planned to test Hollywoods window system. Released January 27th Bubble could be seen in theaters or payperview on cable and from satellite providers through HDNet television. Four days later Bubble was released on DVD with additional content available on the DVD version.
Bubble is a tightly controlled experiment. The film itself is short (72 minutes) starred only amateur actors and was mostly panned by critics. Theatrical distribution was limited to Landmark Theaters which Cuban owns and a few independentsother theaters boycotted it. Payperview was also distributed through a Cuban owned venture HDNet which has distribution through many major cable companies and satellite providers DISH Network and DirecTV.
A few days after the films release Soderbergh and Cuban declared victory in their experiment. While theater earnings were only $70644 on 32 screens DVD sales quadrupled expectations. A profit sharing model gave 1% of DVD sales to theaters that showed Bubble. The film itself cost about $1.7 million to make and had profit projections after only a week of release.
Are movie theaters going away
Why do Hollywood profits matter to American consumers
If you like economics the declining movie ticket sales conundrum may be of interest to you. Most Americans however dont really care. Hollywood presents an image of big budgets expensive cars mansions and movie star lifestyles while most of America is buried under credit card debt and struggling to put gas in their Hondas or pay their heating bills. But Hollywood profits should matter because if a film TV program or documentary doesnt have a large audience it gets cancelled and nobody gets to see it.
In America we love our entertainment. Despite the quality of a program television shows that dont have big enough audiences for network TV inevitably get cancelled. In my mind Arrested Development is one of the funniest programs out there right now. It has had critical success and a core of viewers but it wont be coming back next season. Fox will burn the remaining episodes in poor and sometimes random time slots. Even long running successful programs like The West Wing and Star Trek: Enterprise ultimately get the axe. If Hollywood resorted to different distribution and income models they could still make a profit and American consumers could still get the programming we crave.
Will consumers pay for TV programming
Hollywood has made an assumption that consumers wont pay for programming and have to rely on advertisers for revenue. But over 70% of Americans already subscribe to cable or satellite TV to get clear programming. The question isnt whether Americans are willing to pay it is how much will they pay.
Andy Bowers from Slate offers this theory
The West Wing has about 8 million viewers per week. It costs about $6 million per episode. In other words if every person who now watches the show paid $1 a week TWW would more than pay for itself.
Obviously not all 8 million viewers could or would pay for the show. But lets say a quarter of them would. Thats 2 million people paying $3 per episode (or maybe $4 throwing in a buck for Steve Jobs and the cable companies). The episodes could be viewed on a PPV channel downloaded to a DVR or slurped onto video iPods.
Now imagine if all TV programming could be distributed in this fashion! Programs like Arrested Development wouldnt have to rely on a top 20 ranking to stay on the air. Programming would become a function of consumer demandAmerican TV watchers would actually have
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