Theater Owners Fuming Over Studios' VOD Plan

 Sony

LAS VEGAS – Feeling blindsided, theater owners were furious Thursday that four Hollywood studios didn't brief them on plans to launch a new premium VOD service on DirecTV late next month, followed swiftly by Comcast and VUDU. Exhibitors could respond by changing how they book films and play trailers.

Adding to their ire, word of the service broke just as exhibitors and studios were together in Las Vegas for CinemaCon, the annual convention of theater owners. Throughout Caesars Palace, home of the show, meetings between distributors and exhibitors ended abruptly as theater owners scrambled to make sense of the news.

Warner Bros., Fox, Sony and Universal are all on board, according to insiders. The movies will be available 60 days after their release in theaters for $29.99. Fox Searchlight titles will be offered 60 days from the date that they go wide.

In a strongly worded statement, National Assn. of Theater Owners John Fithian said the VOD service could fundamentally alter the economic relationships between exhibitors and the studios taking part in this “misguided adventure.”

Theater owners say the shortening of the theatrical window could damage their businesses. Today, the average window is 120 days, although exhibitors have been amenable to a 90-day window in some cases.

“As NATO's executive board noted in their open letter of June, 16, 2010, the length of a movie's release window is an important considering for theater owners in whether, how widely and under what terms they book a film,” Fithian said.

Fithian also said exhibitors could reevaluate how they play trailers for the films that are going to be made available on premium VOD.

While exhibitors knew there were discussions going on between the studios and DirecTV, they didn't know the deal had been finalized. They say the studios had assured them they'd be kept in the loop.

“Theater operators were not consulted or informed of the substance, details or timing of this announcement. It's particularly disappointing to confront this issue today, while we are celebrating our industry partnerships at our annual convention – CinemaCon – in Las Vegas,” Fithian continued. “In the end, the entire motion picture community will have a say in how the industry moves forward. These studios have made their decision in what they no doubt perceive to be their best interests. Theater owners will do the same.”

Theater owners aren't likely to speak out themselves until early next week, after they've returned home and checked with their boards. They always have the option of refusing to play a film.

Throughout the history of the film business, there have been dramatic showdowns between theater owners and studios over the window issue.

While DirecTV will offer the service to its to customers nationwide, Comcast and VUDU will do so only in select markets, at least initially.

Studios are hoping that premium VOD can help offset the decline of the DVD business, once a major source of revenue.

But some in the industry question whether consumers will want to pay up to $29.99 for a movie.

There's also concern over piracy. Paramount isn't taking part in the premium VOD service because of this issue.

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