How do you talk,
reasonably, about theatrical windows in an environment that seems hell-bent on
making such “important” things largely irrelevant?
On the surface there
seems to be a certain degree of stability right now; an equilibrium. For three years running the “window” between
a “hit” film’s initial theatrical release and its subsequent debut as DVD and
Blu-ray product offerings has been locked in at an average of 115.7 days.
We finished 2014 with
115.5 days. It was 116.1 days in 2013
and an average of 115.7 days in 2012.
Those numbers seem pretty stable.
Back when The DVD & Blu-ray Release Report was
launched 17 years ago we needed to come up with a fancy term for this “window”
between the theatrical market and the home entertainment arena. The
Asset Rollover Rate, or ARR, seemed like a pretty good shorthand, so that’s
what it is … the ARR measures the time (in days) between when a hit film (a box
office take in excess of $25 million) opens theatrically and then heads home as
DVD and Blu-ray SKUs.
It is updated and
monitored each week. There’s an ARR
chart in the report each week … it shows wild “seasonal” swings around a fairly
stable annual trend line … at least for now.
Why $25 million? Why that number? There’s probably some really “smart” number
out there, but this one seems to work.
To get to that level of box office performance a theatrical release
needs three things.
These are:
1.
Sufficient
screens to provide enough seats during a relatively small period of time to
provide a platform for ticket sales. A
film must score reasonable numbers during the opening weekend to hold those
seats … failure to do that means the film is shifted down the hall to a smaller
seat venue.
2.
Sufficient
theatre-goes must have a desire to see the film. Word of mouth is a strong motivating factor.
3.
Sufficient
advertising and PR support to drive consumers to their local multiplex during
the opening weekend.
It comes down to money,
seats and acceptance to make a film a “hit” for the home entertainment market
place. It has nothing to do with a
film’s budget. Studio accounting is a mystery anyway … so
don’t believe a word about profit and loss or critical acclaim as being the
defining factors as to what makes a home entertainment release a hit.
If you look at the trend
of the ARR averages over the past ten years for these “hit” theatrical releases,
they have “stepped down” from 139.5 days to roughly 127 days (paused), then to
120 days (paused) and now to 115 days.
The ARR appears to be
stable. But, for how long will this detente last? At what point to the studios once again squeeze
the ARR down? Is there a point where exhibitors begin to
scream? Is it 105 days? 90 days?
There must be a point where such a squeeze will start a war of survival.
Frankly, a case could be
made that there is something of a death wish at play in the movie-making
business these days. The seeds being
sown of shorting the ARR from over 130 days to 115 days — and perhaps to another
step down — coupled with the steady erosion of theatre consumers (for various social
and economic reasons), seems to be putting the so-called “Hollywood” studios into
something of a box.
The number of films
generating the necessary $25 million threshold has dropped below the 100 mark
for two years in a row. Overall box
office in 2014 was down sharply. Are
they letting an unreasonable love affair with the world of digital kill
time-tested distributional models? Will
2015 see more of the same; is this the so-called canary in the cage? Cough, cough, choke … the beginning of a big,
big problem?
Shorter windows and fewer
hits … is there a cause and effect relationship? If you expand viewing opportunities through
various platforms — and then crush them all together into ever-shortening windows
— are the studios creating an environment where consumer behavior is directed
away from theatrical venues to the point where the definition of “hit” has to
be completely redefined?
Theatrical hits have
traditionally been the driving force of the home entertainment business. The studios are the source for such
hits. It is their game, so let’s see
how 2015 shapes up in terms of ARR averages and the total number of “hit” films. If you look at these two components right
now, the entertainment industry is teetering right on the edge.