5 Hurdles Facing Sean Parker’s $50 Home Movie Service

Sean Parker and Prem Akkaraju’s bold bid to collapse theatrical windows and make new movies available in the home for $50 on the same day they hit theaters has set off a firestorm, sparking a fierce guessing game as to whether they can actually convince a majority of Hollywood studios to license their content.

So far, Parker, the co-founder of Napster, and Akkaraju, a music executive, haven’t spoken publicly about their new venture, The Screening Room. Rather, they’ve relied on a raft of high-profile filmmakers who are shareholders, including Peter Jackson and J.J. Abrams, to explain why the service isn’t a threat to theaters.

According to Jackson, the “SR” model would only target consumers who don’t go to the movies, while Abrams says the Screening Room would be “beneficial” to theater owners because they would share in the revenue.

On Wednesday, the National Association of Theatre Owners dismissed the idea, saying any decision to shorten windows should be made by exhibitors and Hollywood studios, not a “third party.” NATO also politely told filmmakers advising on the matter to let theater operators determine what’s in their best interest.

Here are five obstacles facing the Screening Room.

Price Point
“I think $50 is too low and I can see a lot of cannibalization, especially for family movies,” says analyst Eric Handler of MKM Partners. “It could be a lot cheaper for a family of four to stay home. Kids could have sleepovers, and 10 girls could watch Frozen 2. And think of colleges, where students could get together and watch a movie on a big-screen television. I think it would have a significant impact on the industry.”

You Can’t Put the Genie Back in the Bottle
Offering movies day-and-date in the home could forever change customer behavior and expectations. “The cost of failure here is pretty great,” says one executive who couldn’t speak publicly after signing a non-disclosure agreement with the Screening Room. “And if such a service indeed impacts theatrical or home entertainment revenue, you can’t take it back. The genie is out of the bottle.”

Adds Handler: “People are often willing to watch a movie twice in two different settings, first in a theater and then on VOD or DVD. If you have a home-viewing system and you watch it day-and-date, are you going to pay for it again? I don’t think so.”

There’s also concern that customers would soon want lower pricing.

Not Enough Theater Support
So far, AMC Entertainment is the only major theater circuit signing a letter of intent to do business with the Screening Room, while Regal Entertainment and Cinemark, the country’s two largest chains behind AMC, are a no. And the Art House Convergence, which represents 600 smaller specialty and independent cinema houses, says the Screening Room is a bad idea.

The Hollywood Reporter has learned that under the Screening Room’s plan, customers paying for a $150 encrypted set-top box would designate their “local theater.” When they rent a movie for $50, a percentage would go to the designated theater. Also, the Screening Room would give a customer two free tickets to that theater in the aim to boost concession sales.

For the Screening Room to secure content from Hollywood studios, exhibitor support is key since studios may not want to risk theater owners refusing to carry their films, or striking tougher terms. Disney has already made it clear it has no interest in the Screening Room; studios mulling the idea include Paramount and Universal.

Filmmakers Divided
Parker and Akkaraju were smart to line up top filmmakers to serve on their advisory board, but now filmmakers of equal prominence, including James Cameron and Christopher Nolan, are objecting to the service. The two voiced their objections on Wednesday, followed by Roland Emmerich and Brett Ratner on Thursday. “I’m with Nolan, Landau and Cameron. It’s crucial that we support and protect the cinematic experience,” Emmerich tweeted.

Ratner was even more emphatic. “This alternate form of distribution would destroy the exclusive theatrical window which is one of the crucial elements — along with the best possible presentation, the social experience, and the sense of a unique event theatrical creates — that drives the value of the entire distribution chain,” he said. “There may be certain movies that will lend themselves to this platform, but I am still a firm believer, and as a moviegoing fan will always support the traditional theatrical experience.”

And it’s possible some of those who say they support the Screening Room could retreat in the face of the outcry from theater owners and their fellow directors.

Piracy
Studios and theater owners have been assured that the $150 set-top box protects against piracy, but many are still concerned. “No matter what software has been included, what is there to stop someone from using their iPhones to record what they are watching? Bringing movies into the home day-and-date gives people the opportunity to find whatever way they can to share it illegally,” said Cameron’s producing partner, Jon Landau.

Insiders say the Screening Room would use watermark technology to identify anyone who tried to record the movie with a camcorder of other device, such as an iPhone.

March 17, 12:35 p.m. Updated with Emmerich’s comment.