The evolution of Cinema offers us two big steps forward in content

It was a mistake not to attend CinemaCon in Las Vegas last week, in particular for two discussions we missed, which may well define the future of both the theatrical industry as a whole, and give VR a way forward. Note to self, go next year.

The two subjects were “How do studios replace their ailing DVD revenues?” and “How does a movie theatre deal with VR?”

It is a trade secret that cinemas in the US and Europe have barely been holding their own over the past five years – they are managing to just about stand still by playing more movies per week, as each sitting for any given movie is smaller than an equivalent in prior years. The entire industry disguises this by putting movies on in more theaters, by incorporating fresh Chinese and India movie houses, in their distribution. Also first weekends are measured across more and more screens each year.

The theatrical owners have also increased seat prices and made the seats more comfortable and sold alcoholic drinks that you can take into the show, just to stand still in terms of visitors and revenue.

Unlike DVD movie revenue, Cinemas have been able to tread water against the rising tide of piracy, large home screens, and earlier 90 day DVD releases. The DVD industry has halved over that same time, despite the incredibly quality of Blu-ray films.

The answer to the DVD question is to allow people to see streamed movies at home far earlier, while the social media buzz and the promotional spend are at their peak. That way more people will watch each movie. The problem there has been how to keep what little movie theater goodwill studios still have, while shortening the time to Premium Video on Demand (PVOD) delivery of major theatrical releases. The closer it gets to same day, the less reason a theater will have for even showing the movie.

The 90 day window is perhaps on its way to becoming 45 days, as theater owners, the main attendees at CinemaCon, finally realize that their partners, the Studios, need all the help they can get. If the studios have lost 50% of what used to make up 75% of their revenue (DVDs) they are less able to make blockbuster movies, being out by around 37.5% of total former revenues. One way to get better movies is not to boycott moves to PVOD streaming, but embrace it at a higher price than current theatrical visit pricing.

The problem with that is the correct price is “perceived” to be in the $30 to $50 price zone, when theatrical tickets are around $8.65, which means that at the higher price some 6 people have to watch the film, to make it cheaper than going to the cinema.

Of course, that’s not precisely true. You get in your car, spend $10 on gas, then another $10 a year on drinks and refreshments per head, on top of the cinema tickets. It is closer to $21 per person for a Cinema trip so this PVoD price is more like the price for 3 people. But increasingly social viewing is a rarer affair, and people tend to watch only with their precise same social group. A DVD used to cost around $15 per movie, why does the streaming price need to be any higher? It is less than double the cinema entry price.

These days it is the younger groupings which go to the cinema, in 2016 the Motion Picture Association of America tells us that 18-24 year olds went to the movies an average of 6.5 times a year, and that per capita attendance was next highest for 12-17 year olds and that the box office totals were in line with the last few years at $38.6 billion, about 1% more revenue from 1% more movies, this despite the number of cinema screens rising by 8% in 2016 to 164,000, mostly due to 18% growth in the Asia Pacific region.

So you can see, that US and European theatrical releases will have been down substantially – revenue is up $600 million in the US over 5 years but price increases more than cover this. Also, every one of the top 5 movies was a sequel or prequel – there are few new good ideas out there. This is an industry in crisis. Asia-Pacific now brings in $14.9 billion in theatrical box office, while Europe has fallen from $10.7 billion to $9.5 billion over 5 years.

The discussion at CinemaCon is that PVOD at 45 days is doable without a major blockade by theater owners. They will make up the rest of their revenue by showing live Broadway shows, live sports and other new services such as offering VR.

One article from CinemaCon confirmed that most studios are in talks to allow movies priced between $30 to $50 as PVoD as early as 17 days after theatrical release or as long as 45 days. However without such a deal, companies have launched and died trying to offer similar PVoD services to the consumer, but ended up starved of content.

What needs to happen for the studios is that there needs to be a period of transition over perhaps a decade where that window gets shorter and shorter. Eventually social media sites themselves may arrange viewing on their own platforms, and this will make up the shortfall from theatrical release, which may eventually die or at least continue to slow dramatically.

Which leads us nicely onto that VR discussion. We have said many times that if VR is something you do with a headset on then it is something you need to do sitting down in a padded room, away from any objects which break and that includes glasses containing alcoholic drinks in a suddenly liberated cinematic environment.

If you swing around to move out of reach of a VR monster, you don’t want to bump into someone else or smash your wine bottle in the process. Cinemas are a great place to experiment with this, leasing the best and latest VR immersive equipment and showing a broad collection of VR experiences.

Imax is currently testing a way of bringing VR to theaters using high-end VR headsets, motion chairs and haptic vests.

Only when you can swing round safely without bumping into other viewers, will full immersion become popular. And for that to happen, there needs to be a room full of such seats, which means coping with a far lower number of seats per room – which suggests really quite high prices for VR experiences for the foreseeable future.