If anyone ever asked you if you'd pay $20,000 to install a service in your home or apartment so you could watch movies as soon as they're released for another $500 a movie, you'd probably laugh and say no way. Movie tickets may be high but not that high, right?
Well, like most start-up operations and innovative ideas, the first generation of new gadgetry usually costs more than most people would spend. So the $20,000 initial installation price-tag Prima Cinema Inc. of Los Angeles is proposing may not be that far out of line.
Plus, for Prima Cinema, this service would be made available to only a few thousand customers as a way of testing out the overall appetite for what's to come regarding the so-called shared movie-going experience. The question being asked is why can't you share this experience without leaving the comfort of your home?
Prima Cinema has already received venture capital investments from Universal Pictures and Best Buy. Its plan is to charge initial customers an estimated one-time fee of $20,000 for a digital-delivery system and then an additional $500. Prima has met with all six major studios as well as several of the smaller, independent ones about licensing their films and it anticipates several of them will sign on when the company launches its service late next year.
Are theater owners worried about this? You bet they are even though Prima Cinema doesn't expect this to cut into their revenue on any significant basis.
Given the steep price, Prima Cinema only plans on selling it to a few thousand users at first and possibly to as many as 250,000 within five years. In the beginning, the high price will create an exclusive, super-premium niche market that would be seen as new revenue stream for studios by tapping into a segment of the wealthy who have stopped going to theaters.
On the other hand, The Wall Street Journal says the proposed system represents a twist in an ongoing debate over the future practice of staggering the distribution of movies through different channels to maximize profits in each. Traditionally, that has meant a movie hits theaters first, followed several months later by in-flight and hotels, followed by DVDs, video-on-demand, and subscription-cable channels.
The Journal says the release window system has already come under pressure with DVD sales falling 20% from last year while digital piracy is increasing. During this same time, consumer spending on video-on-demand services rose 17%. Another controversial issue has been an early, "premium" video-on-demand window, in which cable subscribers could pay around $30 to watch a movie a month or two after its debut in theaters.
Theater owners have been objecting to the idea of premium video-on-demand, saying it disrupts their business. The president of the National Association of Theatre Owners, John Fithian, says theater owners aren't in favor of any system that impinges on movie-going and that includes Prima Cinema. He adds that the Prima model also exposes movies to the possibility of piracy early on because there is no such thing as a secure distribution to the home. Fithian believes it will give pirates a pristine digital copy early, resulting in millions of lost revenue, while at the same time selling to a very limited audience of billionaires.
Well, guess what? Prima isn't the only company trying to bring movies to homes faster. Time Warner says it expects to test an early-release offering with a new film as soon as next year. Under the program, consumers would pay $20 to $30 to watch digital copies of movies within a month or two of their release in theaters.
This has already been tested to limited success. In 2008, Sony Pictures its Will Smith film Hancock early to users of its Bravia Televisions before the films were out on DVD.
But not every studio is in favor of early offerings. For example, Viacom CEO Philippe Dauman says his company isn't considering a new premium video-on-demand service and that they prefer to satisfy their theater distributors. Viacom owns Paramount Pictures, but it is also controlled by Sumner Redstone's closely held National Amusements, which also owns a movie-theater business which could explain its reticence to offer new releases to homes.