Shifting Distribution Patterns

The world of film distribution is changing.  What we take for granted, and have for years, may soon no longer be the case.  Movies open in theatres.  Three months later, they're on DVD.  Then they move to pay TV and finally free TV.

Theatre audiences in the U.S. and Canada are shrinking.  Hollywood has compensated for this by raising prices, so that the overall theatrical grosses go up while the number of people buying tickets goes down.  Last summer was a disappointment in that everything went down.  Deadline Hollywood reports that the summer movie season ended with grosses in the U.S. and Canada down 2.8% over last summer and the number of tickets sold dropped 4.3%.  And that was with a rise in ticket prices of 1.5%.

Just like studios have gone to digital projection as a way to cut their distribution costs, they're now shifting to downloads to cut their costs on DVD manufacture and distribution.  DVD sales have gone down in recent years, so the move to downloads is a way to increase the profit when people pay to see the movie at home.  Variety reports (and the article is behind a paywall):

In a first for the studio, 20th Century Fox is making Ridley Scott's sci-fi thriller "Prometheus" available for HD download Sept. 18, three weeks before the release of the physical discs.

Pic marks the inaugural film in Fox's strategy of carving out a new digital window for homevid releases. Studio will make all of its films available for HD download about two weeks before the titles hit store shelves. The three-week jump for "Prometheus" window is an exception. The next few pics in Fox's queue are "Abraham Lincoln: Vampire Hunter," "Ice Age: Continental Drift" and "Diary of a Wimpy Kid: Dog Days."

And the digital versions will be cheaper: Retailers will offer the digital version of "Prometheus" for less than $15, rather than the $20 they usually offer films through the electronic-sell-through category.

On the day of "Prometheus'" launch, the studio will also make 600 of its library titles available through the new service. Those include mainstream movies like "Avatar" and "Rio," but also less readily available DVD fare like the original 1968 version of "Planet of the Apes" and "French Connection." The price point for the studio's library titles may vary slightly from its upcoming releases but will hover around the $15 mark.

We're reaching a tipping point.  As theatrical revenues decrease (even with rising ticket prices) and DVD sales go down, the studios are hungry for cash.  By making downloads available before DVDs go on sale, Hollywood is saying "screw you" to retailers like Wallmart.  They're throwing retailers under the bus, not caring if they reduce the retailer's take so long as they increase their own.

It's only a matter of time before some studio decides to do the same to the theatres.  We are quickly reaching a point where a studio will make a download available the same day a film opens theatrically.  There may be some pushback.  Perhaps a major retailer like Wallmart will tell Fox that they'll no longer carry their DVDs or a theatre chain will boycott movies from a particular studio.  However, that may simply drive more business directly to the studios.  If you want to see a Fox film and can't find the DVD, why not download it?

Just like record stores have mostly disappeared and physical bookstores are suffering, movie theatres may be next.  While they won't vanish entirely, we could be looking at a drastic reduction in the number of theatres.

The theatres are not blameless in this.  While multiplexes are the standard, their selection of films is limited to mainstream releases.  That has narrowed the audience that goes to the movies.  Theatres have done nothing to police their patrons with regard to talking during films and because audiences have been shrinking, theatres have inflated the cost of tickets and their concessions in order to bolster their own bottom lines.  Combine all that with a soft economy, and audience has many reasons to stay home.

It would be ironic after theatres have invested heavily in digital projection at the request of the studios if the studios walked away from them, but it wouldn't surprise me.  I don't doubt that Hollywood bean counters are staring at the numbers right now, deciding at exactly what point the revenue from downloads will be comparable to the revenue from theatres.  Once they reach that point, it's the end of movie theatres as we know them.