Studios mull home rentals

HOLLYWOOD STUDIOS, looking to spark stagnant movie viewing, are considering offering fans high-priced home rentals of new films as little as two weeks after they debut in theaters, according to people familiar with the deliberations.

The studios are looking at rental prices ranging from $ 25 to $50 per film, said the people, who asked not to be identified because the matter isn’t settled. That’s in line with a pair of tickets at theaters in cities like New York and Los Angeles. Kevin Tsujihara, head of Time Warner, Inc.’s Warner Bros. unit, said at an investor conference Tuesday he’s held “constructive” talks with exhibitors about a premium home-video offering and is prepared to move ahead.

“We’re working with them to try and create a new window,” Tsujihara said. “But regardless of whether it happens or not — whether we are able to reach that agreement with them, we have to offer consumers more choices earlier.” Comcast Corp.’s Universal Pictures said Thursday it too was having conversations with theater operators about making movies available sooner to consumers at home.

Such a plan could still trigger a fight with exhibitors. Regal Entertainment Group and Cinemark Holdings, Inc., two of the largest US chains, have resisted Hollywood’s efforts to cut into the exclusivity they enjoy with new movies. Last year, the companies boycotted Paramount Pictures films that were released on home video seven weeks after their debut in cinemas. Theaters still produce a major share of Hollywood’s film revenue.

Cinemark, the nation’s thirdlargest theatrical circuit, acknowledged in early November it held preliminary talks with various studios about a premium video-on-demand window, without disclosing details.

Early home-video releases of new movies would upend a longstanding industry tradition that predates pay TV, streaming and video recorders. Chains including Cinemark used to enjoy as much as six months of exclusive rights to new releases. In recent years, that has shrunk to about 90 days, according to the National Association of Theatre Owners. And by the third quarter of 2016, some new movies were available for online purchase two months and 26 days after their cinematic release.

STAGNANT HOME VIDEO

But stagnant home-video sales are pressuring studios to ditch or alter that old arrangement. US home entertainment revenue grew 1% to just over $18 billion last year, with DVD sales falling 1%, according to industry-backed researcher DEG. Domestic box-office revenue grew 2.1% to $10.7 billion in 2015.

James Murdoch, CEO of 21st Century Fox, Inc., raised the issue in September at an investor conference. He questioned “crazy holdbacks that the theater owners put in place in terms of these blackout periods, that really make a lot of problems for movies.”

“Our business rules are of no interest to families who just want to see the movie,” Murdoch said.

Studios and exhibitors still have a lot to work out. While some executives have discussed releasing movies for home viewing after two weeks in theaters, others have said it could be as long as four weeks. Cinemark described its talks as preliminary.

That suggests studios may pursue different strategies. They’ll also have to decide whether to market films directly to consumers or through third parties like Apple, Inc.’s iTunes or pay-TV operators.

COMPENSATION

In past discussions about earlier home-video releases, theater owners have said they need to be compensated for the risk that would pose to attendance.

Also, the fees that cable networks and services like Netflix, Inc. pay for movies are based on box- office sales. Anything that reduces ticket revenue could have fallout for studios in their homevideo businesses.

“It is a very difficult knot to unravel,” said Barton Crockett, an analyst at FBR & Co. “Everyone understands consumer tastes are changing and there is pressure to innovate.” But revamping the system has been difficult and means there’s likely to be “a lot of talk and very little changing.”