The gloves have come off.
For the first time since taking over as chief of the world’s largest trade organization for theater owners, Cinema United president-CEO Michael O’Leary ended a relatively long period of détente over the issue of theatrical windows when delivering his second annual state-of-the-union speech at CinemaCon.
O’Leary called for studios and exhibitors to play a movie exclusively in theaters for 45 days before being it available in the home. That’s instead of windows as short as 17 days or 31 days for bigger titles, a practice that arose during the pandemic.
“Everyone feels the pressures of today’s marketplace – from the biggest studios to the one-screen independents. But clinging to the norms of a pre-pandemic world or to the temporary adjustments made during that time, threatens the overall health of this great industry,” he told the assembled group of theater owners to applause. “We need a system that recognizes our common goals and does not pit one sector against another in a short-sighted quest for immediate financial return at the cost of long-term success.”
Continuing he said, “The perception, or more importantly, the reality at times, that everything will be available on other platforms in a matter of weeks, undercuts the sustainability of the entire industry by negatively impacting the frequency of movie fans going to the theater.”
While Cinema United cannot negotiate windows because of antitrust issues — that is up to the individual studios — O’Leary can comment on the issue.
During the pandemic, Universal drove the effort to create a new, lucrative premium VOD window, and signed a historic agreement with AMC Theatres, the world’s biggest theater operator (it’s no coincidence that O’Leary changed his tune after AMC chief Adam Aron also said windows need to revisited.) Other studios followed suit, although most wait a bit longer. Disney is the lone holdout, save for a few exceptions, and abides by a 60-day exclusive window.
The dramatic shortening of exclusive theatrical windows endangers an already fragile ecosystem, theater owners argue.
“We cannot sacrifice long-term success for short-term gain. That said, we recognize that the nature of windows has undeniably changed. Gone are the days of a minimum 90-day theatrical window for all movies, and we understand the desire for the flexibility to shift movies which have maximized their theatrical performance to other platforms to recoup investment,” O’Leary said. “But there must be a baseline, and for most movies, the ultimate box office success and consumer demand cannot be effectively determined short of a 45-day window.”.
He’s convinced that a compelling movie will do just as well on premium VOD at 45 days as it would at 20. Plus, it would have the benefit of added marketing impact, publicity and word-of-mouth from additional time in the theater, and additional revenue as well. “It’s not a zero-sum game. The goal is to make the pie bigger, for everyone,” O’Leary contined.
O’Leary said shorter windows reduce the number of people that head to the theater in the opening weeks of a release. Worse, it undermines the ability of medium or smaller-budget movies to build an audience or even get off the ground.
In comparing the box office results of the top 100 films per year, both pre- and post-pandemic, O’Leary’s team found that that revenue for the top 20 movies declined by 10 percent. The average window for those pics were 49 days. But grosses for the next 80 titles — many of them small or mid-sized — tumbled 32 percent. The average window for those movies fell all the way to 31 days.
“The corresponding drop in box office is not surprising,” O’Leary said. “If we can limit the decline of those 80 movies to the same 10 percent decline as the top 20, it would add over $1 billion to the annual box office.”
O’Leary conceded that shortened windows weren’t the sole reason for the dramatic drop among the 80 films. But he said it was a major factor when consumers have grown used to being able to watch a movie at home within three to four weeks. He said exclusivity doesn’t just benefit exhibition, but also filmmakers, actors, studios and the movie-going public, provided the window is long enough.
“Longer windows, supported by marketing would reduce the current level of decline, and create more revenue across the industry,” he said. “If we continue to shorten windows, and crowd out the small and medium-sized movies, creating the impression that the only reason to go to the theater are the big blockbusters, then eventually, the very network needed to make those blockbusters successful, will atrophy.”
Earlier, Motion Picture Association chief Charles Rivkin, who advocates for the major entertainment conglomerates, used his annual state-of-the-union speech to urge the industry to return more production to the United States. He steered clear of any mention of the new Trump administration.