So… today’s announcement via the Wall Street Journal (also here, if you don’t have a WSJ subscription) is about how Paramount is breaking the windows system and how this is a game changer.

Our usually very smart friends at the Wall Street Journal seemed so anxious to ring the bell for the revolution, that they didn’t notice what was actually being spun before their eyes.

The two movies in play here are both throwaways for Paramount. Both have been delayed more than six months from original release dates… the Paranormal movie will be released a full year after its intended release. This is marginal product. (I actually liked the idea offered in the trailer for the Paranormal film… but when you start showing your secrets, you also must know that the joke is played out.)

And what has been negotiated is what the majors have not been able to do because of their relationship with exhibitors in the past… created early VOD. It’s not quite at day-n-date VOD yet, but the freedom to do this with movies that have little theatrical upside is understandably attractive to the majors. These companies have been – especially Sony Classics, Searchlight, and Focus – squeezed out of a revenue opportunity because they are in the families of the majors.

In the case of Paramount, they created Insurge coming off of the success of Paranormal Activities in 2009, hoping to capitalize. They suffered diminishing returns. And now they are doing two things. They are, indeed, creating a framework in which majors can, in some cases, do earlier VOD in partnership with theatrical. And I think that this is good.

On the last Paranormal Activity film, Paramount brought in 87.5% of the gross by the end of the first two weekends. This is the box office nature of many horror films. I get it.

From there on, it was drops in the 70s every week. And Paramount dropped it to below 300 screens for Weekend 5. So it would be available for VOD on Weekend 7, according to this plan as offered in the WSJ. By then, the film was doing less than $50k a weekend and yeah… it was over.

But when Poltergeist fell under 300 screens, earlier this summer, they were still generating over $200k a weekend. Hot Pursuit, $100k. Tomorrowland, $400k. There were four major studio releases on under 300 screens last weekend with per-screen grosses over $1000.

And the way studios have worked historically – and if you have any doubt that the shortening window was created with intent by the studios themselves, you need to educate yourself – is that they push for Shortened Window Creep until they realize that it is costing them money. It’s happened a couple times in the last 20 years that I have been following this closely. Big hard pushes for day-n-date and then… silence for a while. But then they forget again. There are real financial ramifications to shortening the theatrical window.

By the way, comparisons of this proposal to the Tower Heist stand-off are simply idiotic.
1. Tower Heist was an expensive movie and a major release.
2. Universal did not engage exhibition in talks before announcing their intentions.
3. The idea there was day-n-date for premium pricing, which is not what is happening here at all.

Paramount told the Wall Street Journal that they hope to have the same deal that they are planning to announce soon for these two throwaways for all of their films. But Rob Moore also told WSJ (he must have been on the phone to keep the reporter from seeing his smirk), “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.”

I call “bullshit.” Again? BULLSHIT!

AMC and Cineplex have about 550 theaters in the US and Canada. That’s about 10% of the theaters in the US and Canada. (Stats by NATO.)

I assume that Sumner Redstone’s National Amusements will join in with their 1500 screens (not sure how many theaters that is).

But are Will Ferrell and Ben Stiller, amongst many others, going to be happy with their distribution opportunity being shrunk by 85% so the studio can chase a shorted post-theatrical window? I wonder how Skydance and other funders who are in business with Paramount will feel about this line in the sand. You tell me.

But even if other major exhibitors agree to this arrangement, it gives a lot of control to the distributors… control that they have proven that they will abuse in pursuit of an idea.

It wasn’t long ago that a major distribution chief openly noted that studios were intentionally leaving millions, even 10s of millions, on the table for some movies just to get to the Home Entertainment gold mine that was DVD.

Last weekend, Insidious Chapter 3 dropped 72%, grossing just $558k towards its $51.2m total on 651 screens. Will it drop under 300 screens this weekend? Probably not. Maybe just over. But if the option was there to get it to VOD and other post-theatrical earlier, given where the film is now, could change that. All of a sudden, it is strategy. And if it takes one or twho weeks out of the theatrical run of that film, who cares (goes the saw)?

That is how you get a slow, steady creep that changes moviegoing behaviors. That is how movie theaters end up closing. And once they are gone, they are not likely to come back.

Of course, maybe Rob Moore believes his pitch lines. “Our expectation is that total revenue will rise and the theatrical revenue will be relatively unaffected, if at all.” I guess he hasn’t really looked at the years of data coming from the independent world and its VOD strategies. After years of swearing by day-n-date or slightly delayed VOD, we now see indies experimenting with – gasp – theatrical ones without an artificial end date seeking to maximize revenues for the titles that have a legitimate chance of generating bigger numbers.

Paramount, it seems, is a company looking for an edge, as it struggles to find a clear voice as a studio. This makes Paramount very dangerous. They can roll the dice.

Part 1 – Getting Here

Part 3 – Does This Matter?

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