Paramount to Speed Up Home Release of Movies

Studio, two cinema chains agree to shrink the long gap that comes after a theatrical run

Paramount Pictures has struck a deal with two major cinema chains to make new movies available to watch at home just two weeks after they leave most theaters.

The new arrangement will begin with two smaller films, but the Viacom Inc.-owned studio hopes to continue with the strategy, potentially changing the calculus of movie distribution for studios and exhibitors alike.

Since the rise of the VCR in the 1980s, studios have waited at least 90 days after a movie debuts on the big screen before making it available elsewhere, regardless of when it stopped playing in theaters. Most movies play for less than two months, but cinema owners have argued that people wouldn’t go to the multiplex if they knew they could watch a film at home in less than three months.

In recent years, however, a growing chorus in Hollywood has complained that the 90-day “window” encourages piracy and fails to acknowledge shifting consumer behavior. A recent study commissioned by Paramount found 72% of consumers weren’t aware of the 90-day delay. Even so, shortening that window is a much-debated idea for an industry that continues to wrestle with shrunken DVD sales, a rise in digital competitors and worrisome attendance trends at the multiplex.

By reaching a pact with two of North America’s largest exhibitors— AMC Entertainment Holdings Inc. and Canada’s Cineplex Inc.—Paramount has crafted the most legitimate threat yet to the traditional theatrical model. To sweeten the pot, the studio will share a portion of revenue from iTunes downloads, video-on-demand, and other digital channels with exhibitors that play the films, giving them a hedge in case box-office revenue declines.

The studio’s vice chairman, Rob Moore, said the same terms will be available to other theater chains, but Paramount has so far struck deals only with AMC and Cineplex, which had previously expressed more flexibility on release dates than competitors. If no other exhibitors agree to the new terms, Paramount will still release the movies with just those two chains, said Mr. Moore, potentially forgoing millions of dollars in box-office revenue.

The nation’s largest exhibitor, Regal Entertainment Group, didn’t respond to requests for comment and the third-largest, Cinemark Holdings Inc., declined to comment on the arrangement or whether they would be participating. The National Association of Theatre Owners, an exhibitor trade group that has vehemently opposed some windowing changes in the past, said the collaboration put the Paramount deal in a different light. “We have asked for years for studios to work with theaters on new models,” said NATO spokesman Patrick Corcoran.

By Wednesday afternoon, Mr. Moore said several other exhibitors had reached out to explore getting in on the deal—an about-face in a relationship between studio and exhibitor that is often strained when it comes to scheduling. “The universal reaction from exhibition has been, ‘We are open-minded to this,’ ” he said, adding that he is meeting with exhibitors over the next two weeks to try to bring them on board.

The deal involves two inexpensive horror features out in October: “Paranormal Activity: The Ghost Dimension” and “Scout’s Guide to the Zombie Apocalypse.” But assuming the early digital releases meet financial expectations, Paramount will make the strategy standard for all its future films. The studio releases the big-budget “Transformers,” “Mission: Impossible” and “Star Trek” franchises.

“Our expectation is that total revenue will rise and the theatrical revenue will be relatively unaffected, if at all,” said Mr. Moore.

Past movies in the “Paranormal Activity” series have played nationwide for five weeks before shrinking to fewer than 300 theaters, the threshold under which Paramount will start a two-week clock before releasing the films online. If the new movies follow the same pattern, they would be available to watch at home about 50 days after opening in cinemas, just over half the traditional 90-day window.

Big-budget movies typically play longer, making them less likely to undercut the traditional turnaround for a home release unless they flop. The average movie that opens nationwide runs in more than 300 theaters for 51 days, according to Rentrak.

All of Hollywood was buzzing about Paramount’s plan on Wednesday and how long it would take for competitors to follow suit. “Someone had to go first,” said a senior executive at another major studio. “It’s the edge of the sword.”

Some prominent filmmakers have previously been critical of early home releases, arguing that their work is meant to be seen on the big screen. But Jason Blum, the producer behind the “Paranormal” series, said he supports Paramount’s plan. “If we want movies to stay relevant against other media, we need to experiment,” said Mr. Blum.

“To pretend that we don’t have the ability to satisfy our customers and reinvent our economic models and this windowing system would be foolish,” said Paramount Chief Executive Brad Grey.

If it takes hold, the model would have sweeping implications across Hollywood and the distribution chain. Studios would save money by not re-marketing a movie for home release, and DVD retailers and pay-TV channels would get access to films earlier.

It could also reduce piracy, as the current release schedule means there can be several weeks between theatrical and legal online releases, a situation that can whet demand for illegal copies.

“What other product creates its most attention at launch and then creates a significant period of time where the consumer can’t acquire that product?” Mr. Moore asked, echoing a common frustration among studio executives.

Splitting digital revenue also gives exhibitors buy-in on the movies’ post-theatrical success, said Elizabeth Frank, AMC’s chief content and programming officer. As a result, the theater chain might be willing to help market the “Scout’s” and “Paranormal” digital releases using data from its loyalty programs, she said.

“We do see an opportunity to play a bigger, more profitable role,” she said.

Cineplex, which commands about 78% of the Canadian box office, also sells digital copies of movies through an online marketplace—giving it extra incentive to support Paramount’s new approach.

In the past, studios have experimented with early digital releases, but never with the cooperation of theater chains or the intention of a permanent overhaul in their release strategy, as Paramount is doing.

In April, Metro-Goldwyn-Mayer Inc. released the flop “Hot Tub Time Machine 2” onlinesix weeks after it opened in theaters, angering exhibitors caught off-guard by the move. Paramount released the comedy theatrically but MGM controlled the digital rights and the two companies split the proceeds. Mr. Moore said digital revenue was more than twice as high as the studios normally expect for a movie with its box-office gross that waited 90 days for a home release.

In 2011, Comcast Corp.’s Universal Pictures said it would test an early home release of its Eddie Murphy comedy “Tower Heist” in two cities at a premium price. Faced with broad resistance from theaters chains, however, it canceled the plan.

Write to Erich Schwartzel

Source:WSJ