There is a dark underbelly to the rumors that US studios Universal Pictures and Warner Brothers are in discussions with Comcast and Apple to offer movie downloads just two weeks after theatrical release – potentially tipping the scales to trigger the collapse of the cinema industry and the revolution of the movie studio.
The number of movie theaters in the US has been flat for five years at around 40,000 screens at 5,000 sites, while China is opening a staggering 15 new cinemas every day. To paint an ominous picture, the drive-in movie theater is remembered with an affectionate nostalgia, but the number of drive-in sites has declined 91% since its peak to leave just 330 or so left in the US today.
Similarly, consumers love the modern cinema experience, but to add to the growing competition from in-home viewing services, Chinese firms are asserting more influence over cinema chains – companies which the US studios have little admiration for.
The proposed deal was first reported by Bloomberg this week, citing people familiar with the matter who claim that the two parties are struggling to strike a deal on how a digital movie download product, priced at between $30 and $50 a title, could be mutually beneficial. But the sources expect the studios to reach an agreement with distributors as soon as next year.
AMC Theaters, Regal Entertainment Group and Cinemark Holdings are the three largest movie chains in the US, which all saw sliding stocks following the news. The largest, AMC, is ultimately owned by Beijing Wanda Culture Industry Group, but recently felt obliged to comment that its funding of subsequent cinema chain purchases all came from revenue or commercial US loans, and were not funded by its parent and a consortium of Chinese banks as media reports suggested.
An Apple and Comcast deal with Universal, which Comcast owns, and Warner would leave 21st Century Fox and Paramount out in the cold, and the two most prominent studios, Disney and Sony, are nowhere to be seen in these discussions. The studios should rally together to ensure some serious bargaining chips when talking to the cinema chains, as it could lead to cinemas threatening to boycott movies should an agreement for a download service come to fruition. Although Disney has recently decided to go it alone with a to be announced 2019 service.
A boycott by the cinemas could be considered corporate suicide on one hand, but on the other it could scare the studios into realizing the sort of power the cinema chains still hold over the movie industry – as the major directors and actors still peg the cinema as the holy grail of screens.
Universal and Warner perhaps saw Disney’s takeover of streaming technology firm BAMTech as an imminent threat set to revolutionize the movie industry, triggering them to initiate talks with Apple – at the same time offering Apple a convenient piece of the puzzle in its own video ambitions.
This type of movie service would be genuinely disruptive, a feat which will certainly appeal to Apple as it strives to restore its reputation as an innovator. However, reports suggest that talks have been ongoing long before Disney took a 42% stake in BAMTech earlier this month for $1.58 billion, following its previous $1 billion purchase of 33% in the company.
For families and groups of friends, replacing a cinema trip with a newly released movie, downloaded for $40 to the big screen at home, incurs some major savings, as costs can quickly pile up when accounting for refreshments and travel for an entire family, plus the inflation of ticket prices – which are in danger of nearing $9 on average in the US.
An analyst at financial services firm Wedbush Securities is doubtful – stating the obvious to Bloomberg: “The studios always claim they’re going to do something dramatic, and then they don’t.” Which we have largely seen to be true.
China is surging ahead in cinema while theater screens in the US and Europe continue to close, yet this isn’t necessarily true for other Asian countries. Over in India, South East Asian OTT service YuppTV only recently added the Mini Theatre Platform to its offering, giving subscribers access to the most recent Indian movie releases – available between one day and a week after their initial cinema screening.
The studio partners for the platform have not been released yet, but the cinema industry in India didn’t seem to bat an eyelid, while a similar move in the US or Europe would have huge knock on effects.