NATO Says Shorter Theatrical Window Leads to Lower Home Video Revenue

Shorter theatrical windows could lead to lower home video revenues, the National Association of Theatre Owners (NATO) warns.

The trade group in an April 15 news release cited data from an Ernst & Young study it commissioned that examines the effect of the length of the theatrical window on revenues in the home, in theaters, and overall.

The study found that a 1% longer window between a film’s theatrical opening and its availability for home viewing could boost home video sales by $56,000.

The study comes as studios have been accelerating the home release of films to counter movie theater closures due to the coronavirus pandemic. The most pronounced example was Trolls World Tour, which was released digitally at a premium “rental” price of $19.99 the same day it was supposed to open in theaters.

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NATO warned that such early release patterns should be temporary, until the pandemic subsides and theaters reopen, lest studios leave money on the table.

“With movie theaters shut down due to the COVID-19 pandemic, studios have accelerated home release for some titles that were already in theatrical release when the industry shut down,” NATO said in the press release. “Without theaters available, the release window was temporarily irrelevant for those movies. These unique circumstances, however, do not signal a change to the theatrical release model.”

NATO noted that three films unreleased at the time of the shutdown were released digitally, directly to home audiences. “Yet the vast majority of theatrical releases scheduled from March through June have been rescheduled for theatrical release — 37 of them, with six more delayed with no set release date — rather than rushed to the home,” NATO said. “Studios clearly believe it is in their financial interest to have exclusive theatrical releases.”

NATO said the findings of the new Ernst & Young study “are significant, as shrinking revenues in the home have put pressure on distributors to find a way to boost the fortunes of a home segment in secular decline. Shrinking the length of the theatrical release window has been the mechanism most often cited as a means to that end. This study finds that shorter release windows not only damage theatrical revenues — as expected — they damage home revenues as well.”

NATO said the study also finds that “without controlling for the influence of other variables, the length of theatrical run is more highly correlated to home sales than to box office sales.”

Total home video transactional revenue slipped 30% between 2012 and 2017, the period of the study, NATO said, citing DEG: The Digital Entertainment Group numbers. “The study finds the average percentage of transactional home revenue to total combined home and theatrical revenue per movie has declined even more — 32% — from 40% to 27% over the same period,” NATO said.

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