PVOD’s Brief Moment in the Sun

The novel coronavirus pandemic has given movie studios a taste of something they’ve always wanted: premium video-on-demand, or PVOD.

Long talked about as the antidote to shrinking film profits, PVOD allows consumers to watch big movies at home on the same day as their theatrical release — at a premium price, of course. Three years ago, a Morgan Stanley Research report looked at the viability of PVOD and found “significant upside for film studios,” according to the report’s lead author, Benjamin Swinburne. Swinburne and his team estimated that PVOD could boost studios revenues by as much as $2 billion a year, with hardly any extra costs.

PVOD talk died down a short time later when theater owners made it perfectly clear they were not on board.

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Then came the pandemic. All of a sudden, the country was effectively shut down. The big movie theater chains at first said they would remain open, but sell fewer seats to maintain social distancing. But within days, both AMC and Regal Cinemas, the No. 1 and No. 2 theater chains, went dark.

Productions were halted and, for films already in the can, premieres were canceled and theatrical openings delayed. On March 16, Universal Pictures announced its current theatrical slate would be available for home viewing at a premium rental rate of $19.99 — and that it would release DreamWorks Animation’s Trolls World Tour digitally on the same day as its scheduled theatrical debut, also at $19.99.

Other studios quickly followed suit, smashing the traditional 90-day theatrical window with a wide range of movies — including Disney’s Onward, which was released digitally on March 20, two weeks after its theatrical opening, and Sony Pictures’ Bloodshot, released to home audiences just 11 days after its box office debut.

But now that studios have gotten a taste of PVOD, they have been conspicuously silent about its success — and about its future.

That’s because studios need movie theaters as much as theaters need Hollywood movies. Simply put, one cannot survive without the other — which is why studios are treading carefully with PVOD. As the Morgan Stanley study found, there’s a significant upside to releasing movies early through digital channels. But $2 billion is a fraction of the estimated $22.5 billion studios earned globally from theatrical ticket sales.

Regardless of how well studios do with PVOD during the pandemic, once theaters reopen the genie will be put back into the bottle — with PVOD’s ultimate fate still dependent on theater owners, whose opposition to PVOD stems in large part to the fact that they derive 40% of their profits from concessions.

Studios, however, will have a little more leverage when the crisis is over. In a survey of 1,000 U.S. consumers, Performance Research found that 49% of respondents said it would take “a few months” to “possibly never” for them to return to movie theaters, while just 15% said they intend to frequent movie theaters more often after the pandemic is over. As Variety observed, “the net effect suggests an alarming erosion of theatrical returns that exhibitors and studios alike can ill afford.”

‘Trolls World Tour’ PVOD Release No. 1 on iTunes, Amazon Video

Universal Pictures/DreamWorks Animation’s groundbreaking PVOD release of Trolls World Tour topped digital charts, including No. 1 on iTunes, Amazon Video and Redbox On Demand, among others (through April 12), following its April 10 launch. Financial results have not been released.

The sequel to the 2016 original Trolls movie was released on PVOD for $19.99 on the same day it had been scheduled to debut in theaters prior to the coronavirus pandemic.

With movie theaters shuttered globally to reduce the spread of the virus, studios have either postponed launch dates for tentpole titles or expedited a movie’s retail distribution, including Universal’s The Invisible Man, Paramount Pictures’ Sonic the Hedgehog and Sony Pictures’ Bloodshot, among others.

Disney has said it would debut Artemis Fowl on its branded subscription streaming video platform — the first of several other undisclosed titles.

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“The measures being taken right now are because of the unforeseen circumstances,” Paul Dergarabedian, senior media analyst with Comscore, told Business Insider. “And consumers have an appetite for new content. We are literally stuck at home.”

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, doubts PVOD has much of a long-term shelf life. He says studios cannot recoup production/marketing costs of big-budget movies for $20 to households.

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“One off and unsustainable,” Pachter said in an email. “We have been trained to wait for $5.99 digital rental. [Studios] will scrap the idea once the pandemic is behind us.”

‘Trolls World Tour’ a Test of Premium VOD

It’s a first for a big blockbuster release.

Trolls World Tour — the animated sequel to Trolls originally intended to premiere in movie theaters April 10 — instead heads directly and exclusively to premium VOD on the same day at a $19.99 rental price for 48 hours.

Well, almost exclusively — according to a Universal Pictures spokesperson, the film “will be playing at 25 drive-in theaters around the country, so clearly it’s not exclusive to on-demand.”

With movie theaters closing due to the COVID-19 crises, Universal Pictures and DreamWorks in mid-March elected to release the film simultaneously in theaters and on PVOD. Now, with theaters around the country closed, PVOD is getting the relatively exclusive premiere.

The sequel, featuring the voices of Anna Kendrick, Justin Timberlake, Rachel Bloom, James Cordon and Kelly Clarkson, among others, is a test case for PVOD.

Will the strategy pay off?

Richard Greenfield, co-founder/analyst with Lightshed Partners, discussed the move to digital delivery on CNBC’s “Squawk Box” April 9.

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“It’s a pretty monumental day in the film industry where a mainstream consumer movie in Trolls is going to skip the theaters,” he said. “I give [NBCUniversal CEO] Jeff Shell and the team at Universal Pictures a lot of credit for being willing to try this. It’s a unique circumstance. A lot of the marketing dollars had already been set in motion for Trolls, but you got kids stuck at home, families stuck at home — $20 for Trolls, direct to consumer tomorrow, is really interesting. I’m certainly rooting for them to do well because I think this is an important model for the industry.”

Digital retailers are making the most of the unprecedented opportunity.  FandangoNow, movie ticketing service Fandango’s digital retail site, is offering an “extended sneak peek” on Fandango.com and on the FandangoNow Extras YouTube Channel starting at 8 a.m. PT (11 a.m. ET).

Then, fans renting the film can participate in a 10 a.m. PT (1 p.m. ET) “Trolls World Tour Watch Party,” hosted by podcasters The McElroy Brothers (who provide troll voices in the movie),with commentary from the film’s director, Walter Dohrn, along with other talent and fellow fans on the official @Trolls Twitter page, using the hashtag #TrollsWatchParty.

FandangoNow is pulling out all the stops for Trolls World Tour, the first big movie to premier on PVOD.

“There’s so much excitement surrounding our first-ever Home Premiere pre-order that advance orders for Trolls World Tour are the strongest we’ve ever seen,” said FandangoNow head Cameron Douglas. “Families can’t wait to watch the reunion of the beloved ‘Trolls’ characters, while stocking up on DreamWorks Animation titles they can enjoy together at home.”

Vudu, too, has a “Trolls World Tour Watch Party” scheduled for 3 p.m. PDT (6 p.m. EDT), preceded by a half-hour “virtual red carpet pre-show,” accessed through Twitter, with movie trivia, influencer interviews and favorite character talk.

Analyst Greenfield questions whether consumers will return to theaters as stay-at-home orders lift.

“What happens when the theaters reopen, and people really don’t want to go to them?” he said. “Is there a model where your Peacock subscriber (or Disney+, HBO Max, etc.), do you try to market movies at a $20 or $30 premium? You could think of it like ‘NFL Sunday Ticket.’ You had to have DirecTV to get it. Or UFC. You can’t get UFC streaming unless you are an ESPN+ subscriber. It’s possible you move to that model; the PVOD model is certainly possible. But you are already limiting the person who can see it. Anyone can see it in a theater. If you limit the universe just to people who are just Disney+ subs, you do run the risk of just not being able to reach as many people as you otherwise would have reached. So, [PVOD] is an idea. All the studios are trying to figure it out.”

He noted that social distancing in a theater drops capacity significantly.

“Our core business of putting people in theaters for decades, it’s not clear when hundreds of people are going to feel comfortable again in a movie theater,” he said.

Subscription VOD is a beneficiary of the crisis as well, he said.

Vudu’s email to customers, promoting the Trolls World Tour “watch party”

“Consumers want to stream a lot of content, and the pandemic is just accelerating that trend,” he said. “Can you wait for movie theaters to do $1 billion for a movie like Mulan, or do you with a base of 50 million for Disney+ (maybe 70 million, 80 million by the end of the year), you say, ‘You know what. We have to change the model, use this Disney+ far more aggressively to get content out to the consumer.’

“It will be really interesting to see if [new Disney CEO Bob] Chapek has the guts and boldness to shift Disney’s business model. Or [say], ‘Hey, we got a lot more subs, and it’s still a small part of overall business model.'”

Certainly, movie theaters will put up a fight.

Interestingly, just about a year ago in February 2019, Cinemark CEO Mark Zoradi said Hollywood studios were no longer talking about creating a premium video-on-demand window for popular movies, according to a story from The Hollywood Reporter.

“PVOD isn’t even discussed anymore,” Zoradi told the Morgan Stanley Technology, Media & Telecom Conference in San Francisco.

Additional reporting by Erik Gruenwedel.

Redbox also is promoting the unprecedented PVOD debut of Trolls World Tour

‘I Still Believe’ Heading to Premium VOD March 27

In response to theater closures due to the coronavirus outbreak, Lionsgate and Kingdom Story Co. will release the motion picture I Still Believe on premium VOD (PVOD) across all premium platforms beginning March 27.

The film opened March 12 in theaters and has earned $10.1 million at the global box office.

K.J. Apa, Shania Twain and Gary Sinise in I Still Believe.

I Still Believe is the true story of Christian music star Jeremy Camp. Starring K.J. Apa and Britt Robertson, the film follows one young couple’s  journey that proves hope can survive great tragedy and that love tested is the only love worth sharing. The film also stars Shania Twain and Gary Sinise.

Directed by Jon Erwin and Andrew Erwin, the film was written by Jon Erwin and Jon Gunn and is produced by Kevin Downes, Jon Erwin and Andrew Erwin.

“The theatrical experience is core to our business, and exhibitors are our integral partners and allies,” said Joe Drake, chairman of Lionsgate Motion Picture Group, in a statement. “With theaters closed nationwide due to these unprecedented events, we want to continue to make I Still Believe available to consumers. We’re enormously proud of the movie that the Erwin Brothers created and are grateful to be able to share it with audiences for their home viewing pleasure.”

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“As filmmakers, we are heartbroken that we can’t share I Still Believe on a big screen the way we intended,” said I Still Believe directors Jon and Andrew Erwin in a statement. “We make movies because we love movies and we stand firmly behind the nation’s theater chains, from the largest circuits to the smallest mom and pop indies that have been so dramatically affected by these unprecedented closures. But the safety of guests comes first, and we’re proud to have the opportunity to share online a movie whose inspiring message of love, hope and faith is perfect for these uncertain times.”

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According to the studio, the film has received an ‘A’ Cinemascore from audiences and has received a 98% Audience Score on Rottentomatoes.com.

AMC Theatres CFO: ‘No Consensus’ on PVOD

Rollout of premium video-on-demand (PVOD) this year seems increasingly remote after the CFO of the country’s largest theatrical chain said discussions with studios remain at an impasse.

Speaking Jan. 9 at Citi 2018 Global TMT West Conference in Las Vegas, AMC Entertainment CFO Craig Ramsey suggested negotiations with studios have cooled regarding shrinking the longstanding 90-day theatrical window.

“[It] is a very complicated matter,” Ramsey said, adding “[PVOD is] not the topic that it was earlier.”

PVOD enables consumers to rent a new release movie in the theatrical window in the home at a premium ($30-$40) price. Exhibitors have balked at previous attempts to encroach upon their exclusive access to new release movies.

In an era of declining theatrical attendance, studios such as Warner Bros. and Fox have pushed for PVOD, arguing both the need to assimilate with changing consumer habits and technology as well as mine higher margin incremental revenue.

AMC CEO Adam Aron has previously said the chain, which operates 1,000 theaters and about 11,000 screens globally, would be amenable to PVOD provided the financial details (i.e. revenue-sharing) were favorable.

But on a fiscal call last August, Aron said ironing out an agreement was wishful thinking.

“I can tell you categorically that no one is close to resolution of this matter,” Aron said.

Separately, Disney, whose Star Wars, Pixar and Marvel-branded movies dominate the box office, has a stated opposition to PVOD.

Ramsey reiterated that there remains “no consensus” on PVOD at the moment.

Warner Bros. CEO Puts Another Nail in PVOD

NEWS ANALYSIS – Premium VOD, Hollywood’s tortured attempt to mine incremental revenue selling consumers early digital access to theatrical releases at a premium price, appears to be an early casualty of 2018.

With Warner Bros. entwined in AT&T’s government-delayed $85 billion acquisition of studio parent Time Warner, Warner Bros. Entertainment CEO Kevin Tsujihara Jan. 9 announced internal management changes aimed at handling “headwinds” across all of the studio’s businesses as consumers embrace new ways to consume entertainment, among other issues.

Change, however, does not appear to include rolling out PVOD — despite Tsujihara’s (and 20th Century Fox Film CEO Stacey Snider’s) vocal efforts to launch the distribution channel at some point in the near future.

Tsujihara — a former home entertainment executive — was promoted in 2013 to head Warner Bros. in part because of his digital mojo and willingness to shake up the status quo, including the longstanding 90-day theatrical window, among other norms.

The executive was an early proponent of UltraViolet, the industry-wide initiative to jumpstart digital movie ownership through a cloud-based rights locker.

Tsujihara vowed to meld UltraViolet with lone studio holdout Disney — whose Disney Movies Anywhere platform used proprietary cloud technology. It is unknown how much influence Tsujihara had crafting the recently rebranded Movies Anywhere, which now includes digital access to content from all the major studios except Paramount Pictures and Lionsgate.

Regardless, the executive contends that in an age of binge-viewing and over-the-top video distribution, consumers mandate ubiquitous retail access to content, including higher-margin digital sellthrough and PVOD.

Despite facing increasingly younger, fickle consumers accustomed to ubiquitous digital access, blowing up the theatrical window seems fraught with peril to exhibitors.

Tsujihara believes consumers need seamless access to content, lest they switch to all-you-can-eat OTT video and its appealing loss-leader pricing.

When asked about the status of PVOD discussions, Tsujihara — in an interview with The Wrap — reiterated his frustration.

“[Are] shrinking windows closer? I can’t say that we are,” he said.

Will Premium VOD Plans Get Lased in 2018?

NEWS ANALYSIS — Hollywood’s long-running attempt to stream theatrical releases early into consumer homes at a premium price may be dead on the vine following Disney’s $52.3 billion acquisition of 20th Century Fox Film and other 21st Century Fox assets.

Fox Film CEO Stacey Snider, along with Warner Bros. CEO Kevin Tsujihara, has been a vocal proponent of premium video-on-demand. The business model would charge consumers $30 to stream movies in the home 30 to 45 days after their box office debut.

That mindset could change as Disney CEO Bob Iger has made no secret his desire to maintain the current theatrical window. That makes sense as Disney ended 2017 No. 1 at the domestic box office with more than $2.2 billion in ticket sales, according to Box Office Mojo. Warner Bros. and Fox finished second and fourth, respectively.

With Disney planning to launch proprietary over-the-top video services around movie brands such as Star Wars, Marvel and Pixar, it would appear mining short-term incremental revenue during the theatrical window could undermine the media giant’s larger, future digital payday.

Indeed, Adam Aron, CEO of AMC Theatres – the world’s largest theater chain – has said any PVOD deal (i.e. revenue sharing) with studios would have to be fiscally incremental to exhibitors.

Michael Pachter, analyst with Wedbush Securities in Los Angeles, contends studios didn’t learn much following Universal Pictures’ short-lived attempt in 2011 to stream action-comedy Tower Heist early in homes for $59.99. The campaign was scuttled before launch when theaters (totaling more than 3,000 screens) threatened to boycott the movie. Pachter said the PVOD “threat” has even less of chance of materializing without Disney/Fox on board.

“I think PVOD is stupid and a dead issue,” the analyst said in an email.