Sean Parker’s streaming service will change movies,
and theaters can’t stop it
Neither can James Cameron...
Going into this year’s CinemaCon, the annual Las Vegas trade show for movie exhibitors, studios, and vendors, the biggest question wasn’t whether some company was going to pull a blockbuster announcement out of its hat. It was what kind of impact The Screening Room, Sean Parker’s recently-revealed service that will stream first-run movies to the home, would have on the proceedings. It was directly mentioned by name only once during the main studio presentations, but that didn’t really matter: from the tenor of the conference, it was clear The Screening Room’s threat of technological disruption is poised to change the movie business forever.
Word first broke about The Screening Room back in March, and Parker’s pitch is said to be relatively simple: consumers buy a $150 box that lets them watch first-run movies, starting the same day they appear in theaters, for $50 each. It would effectively collapse the theatrical window — the period of time in which new films are available only in movie theaters — and to compensate for fears over lost revenue, exhibitors would get up to $20 of that rental price. Parker had already lined up some heavy hitters before the news went public, with J.J. Abrams, Steven Spielberg, Peter Jackson, and Ron Howard all proponents of the system, seeing it as an opportunity to grow the movie business. Other heavyweights like James Cameron, Christopher Nolan, and Todd Phillips (not to mention most theater chains), were less than enthusiastic. Given that The Screening Room planned to hold closed-door meetings at CinemaCon — traditionally a show that plays directly to the wants and needs of theater chains — the stage was set for an ideological war.
EVERY STUDIO AT CINEMACON CRITIQUED THE SERVICE
Every single studio that presented to exhibitors during CinemaCon took time to proclaim their love and commitment to the theatrical window, and while none mentioned Parker’s service by name, the implication was clear. (Warner Bros. CEO Kevin Tsujihara, for example, told the audience that "we are not going to let a third party or middle man come between us.") It wasn’t until Cameron (above) came onstage during Fox’s presentation that The Screening Room was directly name-checked, with the writer-director stating that "I think it’s absolutely essential for movies to be offered exclusively in theaters on their initial release."
The audiences cheered, of course, but that’s what you’d expect them to do. CinemaCon is a trade show for exhibitors, and when Cameron made his statements, he was talking directly to the people whose financial interests would be threatened by an exodus to at-home viewing. But if you drilled down in the comments a little further, most were less hard-line stances than gentle reassurances. After his initial statement, Tsujihara went on to tell exhibitors that when new services emerged, "We will explore them with each of you" — more of "Let’s see," than a "Hell no, we won’t go."
The ambiguity makes sense; ultimately studios have to chase the money, whether that means defiantly sticking with theaters or supporting some hybrid option. What they know they can’t do is stick their heads in the sand the same way the music business did, and for that reason alone it was J.J. Abrams who delivered the most honest comments of the conference. Receiving CinemaCon’s Showman of the Year award at the opening-night presentation, he took the stage clearly knowing that his support for The Screening Room needed to be addressed. And while he celebrated the benefits of the theatrical experience — "There is nothing better than going to the movies, and there never will be" — he also nodded to the inevitability of technological progress, stating that "We have to adapt" if the industry at large was going to remain viable.
J.J. ABRAMS DELIVERED THE MOST HONEST COMMENTS OF THE SHOW
Perhaps not coincidentally, during CinemaCon Abrams’ production company announced that it was going to be releasing Star Trek Beyond in the new high-end Barco Escape format, which uses three separate screens to create one massive, ultra-widescreen image. It’s yet another example of the many new theatrical technologies that are being used to help differentiate movie theaters from home viewing, but it also underscored the problematic dynamic that’s facing the industry — the same one that will make the success of services like The Screening Room inevitable.
According to the National Association of Theater Owners, movie theater attendance peaked in 2002, and while there have been periodic bumps they’ve been steadily declining ever since. To compensate, theaters have rolled out new technologies like 3D, IMAX, and more recently, premium large format theaters — all of which command a more expensive ticket price. As a result, box office grosses are growing year over year, but it’s actually just less people paying more money. The whole system has turned into a feedback loop: 3D and IMAX prices make up for declines in attendance, but those same prices make watching at home more attractive, so theaters roll out even more new formats that cost more, and so on.
THE SYSTEM HAS TURNED INTO A PRICE-RAISING FEEDBACK LOOP
The end game is all too easy to see, and it’s something that George Lucas was predicting years ago. "What you’re going to end up with is fewer theaters," he said during a panel at the University of Southern California in 2013. "Bigger theaters, with a lot of nice things. Going to the movies is going to cost you 50 bucks, maybe 100." It will take time to get there, to be sure, but things like The Hateful Eight’s recent roadshow presentation, or the "gourmet" dining from the iPic theater chain are already laying the groundwork that will help transform movies into more of an exclusive, high-end experience.
But all of these advances are ultimately defensive measures meant to stop the bleeding, and none address the needs of people that simply aren’t going out to the movies as much these days. Those potential customers, put off by mediocre theaters and expensive tickets, are the ideal market for The Screening Room. But like the music labels before them, most major theater chains are stubbornly holding on to their traditional model, convinced that as long as they keep any reasonably-priced service from launching — $35,000 options like PRIMA Cinema already do this for the comically wealthy — that they’ll be able to bend consumers to their will.
But technological progress doesn’t stop out of respect for existing business models, no matter how disruptive the consequences, and on the surface, the applause from exhibitors at CinemaCon this year reeked of one thing: arrogance. The kind of arrogance that keeps an industry from realizing that its rising prices are encouraging people to watch things at home; that its over-reliance on tentpole franchises have already trained millions that, unless they like one specific type of film, theaters aren’t for them; and that an entirely new generation of movie lovers are growing up watching movies on computers, tablets, and smartphones, and don’t feel nearly as compelled to trek out to a multiplex.
BENEATH THE ARROGANCE WAS SOMETHING EVEN MORE PALPABLE: FEAR
But beneath that arrogance was something even more palpable: fear. Chains know the above numbers as well as anyone, and despite all the theatrics The Screening Room still gave its closed-door demos and met with MPAA chairman Chris Dodd. When everyone in a business is spending their time addressing a new player, it’s clear who is setting the agenda, and by the end of the show it seemed obvious that the emergence of a first-run rental service wasn’t a matter of if, but when.
If movie theaters — and the industry at large — act, they may be able to assist in the way The Screening Room develops. They could ensure it’s something that complements traditional theatrical viewing, as part of a holistic first-run movie ecosystem that everyone profits from. If they don’t, either because of ignorance or because they refuse to face competition, the current cycle will continue. Theater attendance will continue to slowly decline, despite the influx of new Marvel, DC, and Star Wars movies, until they lose the commanding power they currently hold. With The Screening Room, Parker is giving movie theaters the opportunity that record stores never had, but it’s up to them to take it.
Disney wants to invest in Major League Baseball’s video streaming company
Disney is in talks to invest in pro baseball’s video streaming business — a sign that the media giant wants to own the technology to help it power direct-to-consumer video services.
Sources say Disney is in advanced talks to take an equity stake in BAM Tech, the video technology business MLB Advanced Media has been looking to spin off into a separate company for some time.
MLBAM, which is jointly owned by pro baseball’s 30 teams, runs pro baseball’s Web video subscription service. It also handles video streaming for many large clients, including WatchESPN, the streaming service Disney’s ESPN already operates.
People familiar with the proposed transaction say talks are in advanced stages, but could still fall apart. Sources say Disney is one of multiple bidders who want to invest in MLBAM.
Disney and MLBAM reps declined to comment.
Disney and ESPN in particular have been under pressure from investors since last summer, when Disney CEO Bob Iger acknowledged that ESPN has been losing pay TV subscribers.
An ownership stake in a Web video operation could help the company launch and operate new digital services aimed at replacing some of the pay TV revenue that’s at risk from cord-cutters and people who never sign up for pay TV. Industry sources speculate that a Disney investment in BAM Tech would include an option to eventually buy a controlling stake in the company.
ESPN’s WatchESPN service, which replicates what’s available on conventional ESPN channels and also offers more games and shows, is available to ESPN’s pay TV customers. ESPN has tinkered with the idea of selling additional Web video subscriptions services directly to consumers, like a cricket offering it launched in 2015 and will sell again this year; the company has also talked about selling a package of NBA pro basketball games but hasn’t done so yet.
Iger has also floated the notion that ESPN may eventually sell its core service directly to consumers, over the Web, as HBO has started doing, with help from MLBAM. But ESPN President John Skipper has said the company won’t sell a direct service anytime soon.
“That’s not what we’re going to do,” Skipper said at the Code/Media conference in February. “We don’t sell it alone right now because we generate more revenue by being in a larger package, being ubiquitous across the households in this country, in which we can sell advertising. That simply works better for us.”
Disney itself has already launched a consumer subscription service in the U.K., and plans to expand its operations in Europe this year. People familiar with the company say it has previously contemplated launching Web subscription services in the U.S.
MLBAM’s Bob Bowman has spent years trying to figure out how to turn his video operation into a standalone company. Last summer he started a new push, by acquiring streaming video rights from the National Hockey League and hiring bankers to find investors for the company.
Last August, MLBAM sources said the company expected to get a value of at least $3 billion from investors. Industry sources say it has subsequently tried to get a much higher valuation from investors, but has run into skepticism about the value of its core Web streaming business.
Last summer Time Warner, which uses MLBAM to handle back-end operations for its HBO Now video service, bought iStreamPlanet, a company that provides similar services to MLBAM, for less than $200 million. Executives at Time Warner’s Turner, which is operating iStreamPlanet as a separate company, say they could eventually move Time Warner’s streaming operations there.