Sean Parker's New Service Offers Theaters A New Revenue Stream But All They Can See Is Business Model Intereference And Piracy

from the don't-be-trying-to-hand-us-money,-freeloader dept

Any time anyone routes around Hollywood’s windowed food chain — theatrical release, delay, video release, delay, VOD, longer delay, pay TV, even longer delay (or never), on-demand streaming — studios and theaters get bent out of shape. This terrible system makes major studios and theaters happiest (and their own worst enemies), even though it’s apparent a large percentage of the public would rather enjoy films on their own terms.

Along with the complaints about the reshuffling of The Schedule come the inevitable cries of “PIRACY!” Sean Parker, formerly the major labels’ worst enemy, is now at the receiving end of motion picture industry hate, even though his plan — the “Screening Room” — involves everyone getting paid.

Parker’s pitching a day-and-date video-on-demand service that would allow customers to view first-run movies in the comfort of their own home — provided they’re willing to pay $150 for a “piracy-proof” set-top box and $50 for a single viewing of the new release. For reasons only understandable to those pitching the idea, the purchase price of the single, suprisingly-expensive viewing also includes two tickets for the same film non-moviegoers just watched at home.

I guess that’s the consolation prize: the inversion of leaving a game show with nothing but the home version of the game you just sucked at. In this case, if you felt you just paid too much to watch a mediocre movie at home, you have another chance to view it in the theater while paying much, much, much more for snacks. Or give them away to someone who you think doesn’t spend enough time feeling underwhelmed.

Parker did manage to secure some big name backers from major studios:

[S]creening Room’s board of shareholders and advocates includes Martin Scorsese, Taylor Hackford and Frank Marshall. They join [Peter] Jackson, [Brian] Grazer, [Ron] Howard, Steven Spielberg and J.J. Abrams.

Even though Parker has the support of several of the most successful directors of all time, the theaters are against it. Pamela McClintock of The Hollywood Reporter notes that the Art House Convergence — a group representing 600 independent theater owners — has issued a statment in opposition of Parker’s proposed service.

The letter says the group is not opposed to day-and-date video-on-demand per se.

We are not debating the day-and-date aspect of this model, nor are we arguing for the decrease in home entertainment availability for customers — most independent theaters already play alongside VOD and Premium VOD, and as exhibitors, we are acutely aware of patrons who stay home to watch films instead of coming out to our theaters…”

They’re just opposed to Parker’s plan.

There are many unanswered questions as to how this business model will actually work,” said the Art House Convergence. “The proposed model, as we have read in countless articles, suggests exhibitors will receive $20 for each film purchased. At first glance, an exhibitor may think it represents a small, but potentially steady, additional revenue stream. But how will this actually be divided among the number of theaters playing the purchased title; will exhibitors who open the title receive more than an exhibitor who does not get the title until several weeks later (based on a distributor’s decision); who will audit the revenue to ensure exhibitors are being paid fairly; does this revenue come from Screening Room or from the distributor … these are just a few of the issues yet to be explained…”

These are fair questions and ones that Parker and his backers will hopefully have an answer for. But the rest of it is ridiculous. The letter also includes sentiments that make the theater owners sound like Jack Valenti after too many microbrews.

The organization, of which Alamo Drafthouse founder Tim League is a leading member, said if studios and larger theater owners agree to the plan, “we will see a wildfire spread of pirated content, and consequently, a decline in overall film profitability through the cannibalization of theatrical revenue. The theatrical experience is unique and beneficial to maximizing profit for films. A theatrical release contributes to healthy ancillary revenue generation and thus cinema grosses must be protected from the potential erosion effect of piracy.”

It always comes down to piracy. Parker claims his service will be “piracy-proof,” but apparently if it doesn’t involve cable provider set-top boxes, it can’t be trusted. This piracy alarmism isn’t surprising, but the group making the hysterical claims isn’t the normal set of alarmists. Tim League has normally been a voice of reason amidst the “sky is falling” doomsayers. He may not have penned this letter, but he did sign off on it.

People paying $150 just for the chance to watch movies once at $50 per viewing aren’t pirates. And they’re probably not going to shell out that much money just to use it for some sort of trap-and-torrent Robin Hooding. Why Parker’s tech is considered somehow more prone to piracy than other VOD options isn’t explained. We’re just supposed to believe it’s running Piracy Wildfire OS because it isn’t being routed through cable/DSL hardware.

The organization representing the rest of the nation’s theater chains has also come out against the plan, though it has chosen to deliver a more muted response. No piracy alarmism here, but the group does make a couple of ridiculous assertions as well: release windows are still good, even though no one likes them but theaters, and the future of moviegoing should be decided by theaters, not third parties like the Screening Room nor, apparently, the public.

[T]he National Association of Theatre Owners, the trade group representing the majority of the country’s theaters, has come out against the proposal, acknowledging in a statement that perhaps more sophisticated distribution models may be needed to keep the movie-going business successful, but those models “should be developed by distributors and exhibitors in company-to-company discussions, not by a third party.”

The statement reaffirms the belief most studios and theater owners share, that the exclusive release of films in theaters is what makes them successful for the lifetime of the movie. Says the statement, “The exclusive theatrical release window makes new movies events. Success there establishes brand value and bolsters revenue in downstream markets.”

So, the more things change, the more the arguments remain the same. Even with Parker offering a percentage of the take and encouraging Screening Room customers to patronize their local theaters by giving them two tickets with every rental, the studios still see nothing more than piracy and business model interference.

Parker’s service will likely have negligible impact on box office revenues. This may be a hesitant step towards the future of movie distribution, but it’s not likely to become the new Netflix and siphon off millions of moviegoers. Box office records continue to be broken despite streaming services, cheap rentals and piracy. The Screening Room isn’t going to change anything. And even if it did, it would just add another way for theaters and studios to make money, monetizing the small percentage of consumers who still love first-run movies but, for whatever reason, are unable or unwilling to patronize theaters. But all anyone can see is broken windows and a torrent seed in every rental.

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Comments on “Sean Parker's New Service Offers Theaters A New Revenue Stream But All They Can See Is Business Model Intereference And Piracy”

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Ninja (profile) says:

Gosh just make a deal with Netflix and other streaming platforms like Youtube and so on and charge ana mount for the ones that are willing to watch home. Make it twice the cinema ticket and it will still be attractive to me.

It would seems the MAFIAA is dead set in either preventing people from moving ahead from the stone ages or at least preventing such move for a few thousand years. Obnoxious.

I’m avoiding the cinemas like the plague.

Anonymous Coward says:

‘All They Can See Is Business Model Intereference And Piracy’

should be ‘all they WANT to see!’ and this attitude will stay until a government gets some balls and say change or be changed! it’s not right for a single industry to stop the rest of the world from progressing, especially when it has had and has ample opportunity to be lightyears ahead of where it is, all because of stupidity, greed and pig headedness!!

zip says:

It was a similar story with Napster. Sean offered the record labels a billion dollars if they’d allow an authorized Spotify-like service which would have in all probability snuffed out MP3 piracy by turning Napster users into legitimate customers. It was only after fighting –and losing– a twenty year war against its own customers that the record industry finally allowed Spotify, a mostly-free music streaming service, that in most respects is no different to what Napster could have been, had Napster been allowed to transform itself into an authorized music sampling service.

And it’s worth noting that in 2015 the record industry made *record* profits due to music streaming, which bumped up revenue by about a third. A fact that they’re keeping very quiet about, in stark contrast to years when profits were down.

Anonymous Coward says:

Re: Re:

And it’s worth noting that in 2015 the record industry made *record* profits due to music streaming, which bumped up revenue by about a third.

[citation needed]

I don’t think revenues in the recording industry have even climbed back to half the level of peak sales at the turn of the 21st century.

Do you mean that 2015 was the first year that revenues from streaming accounted for a third of all revenue? I think that is correct, but you’re talking about one third of a pie that’s half its former size.

DannyB (profile) says:

Piracy is a major concern with this Screening Room

If you get to watch this in your home, you might also have a friend watch with you who did not also pay the incredibly expensive fee.

It seems like the piracy proof set top box better have something like a camera that watches you while you watch the movie. Prevent any unlicensed persons from viewing.

Did Sean consider that the fee paid to watch a first run movie in your home should also have a higher price if your room has more comfortable chairs?

I can see other legitimate concerns the movie industry might have with this. Considering how much you paid, shouldn’t you also be subject to random people’s cell phones ringing, and cell phone conversations? Babies crying? Small children talking or yelling? If you’re going to pay a premium price and get to watch the movie sooner than most people, you should be subject to all of those annoyances, or it would be unfair to the movie industry.

Anonymous Coward says:

Re: Piracy is a major concern with this Screening Room

…you might also have a friend watch with you who did not also pay the incredibly expensive fee…

I’m not sure piracy is an accurate word for this.

Remember drive-in theaters? Those that charged per person had issues when folks ‘hid’ friends in their trunk (or boot, depending on what part of the world you’re in) while those that charged by the auto didn’t care how many people were in them. I never heard that described as piracy.

But Parker’s proposal sounds like it will have the same issue: is that high price per person or per household? What’s to stop one from inviting 100 friends to join them for a showing?

That One Guy (profile) says:

Legitimate concerns

I can see where the theaters are coming from here actually, someone stupid enough to pay that much is likely the same kind of idiot that would buy $50 worth of popcorn and soda at the theater itself, and they don’t want to miss out on the ‘more money than sense’ market if they don’t have to.

That’s a ludicrous amount of money that they wanted, it’s not fair that someone else is getting it instead.

Chris ODonnell (profile) says:

Any device being pitched as “piracy-proof” is automatically suspect. Honestly,this sounds like a damn stupid idea. The theaters should go all-in and support it just to keep Parker busy enough chasing this unicorn so that he doesn’t have time to come up with an actually good idea that really might change the theater business.

Anonymous Coward says:

Re: Re:

It won’t be “piracy proof” by simple expedient that there’s no way to prevent someone from setting up a good video camera aimed at the screen to record as the move airs. Camera recordings aren’t what most people looking to pirate a moving are looking for, but I’m sure the MPAA and accomplices only care about whether piracy would be possible, not whether someone would be interested in the copy that results.

Anonymous Coward says:

Re: Re:

I too was confused by the claim of “piracy proof” coming from Parker. Now, I’m not sure how video devices and scrambling, etc. and all that works, but this strikes me as being quixotic on the level of trying to make “piracy proof” audio playback, which is something I do know about.

In music, as long as the audio signal at its final stage can be carried by, say, an RCA cable to an amplifier/speakers, or simply a headphone output, then pirating music will always be as trivial as intercepting that signal with another device that can record that final stage output. If anything, all that has been accomplished is that you’ve slowed the initial copying from seconds to however long it takes to listen to the album/song. But only for that initial copy. After that: business as usual.

And if you do make some sort of audio playback system that can’t route through RCA cables, then your system is effectively useless and no serious musician/listener is going to touch it.

Anonymous Coward says:

There are many unanswered questions as to how this business model will actually work,” said the Art House Convergence.

Business model #1: The Studios

1. Studios realize their profits come from actual movie watchers.
2. Studios get rid of the middlemen.
3. Profit!

Business model #2: The Theatres

1.Whinge about any business model that doesn’t put butts in their sticky yet, paradoxically, greasy seats.
2. Walk away from a pot full of money for DOING NOTHING.
3. Lose!


PNRCinema (profile) says:

Re: Re:

In regards to the theatre issue, they actually will make very little money. The chains will do well if they sign on, but the smaller mom and pop arthouse cinemas will not.

Studios currently take a huge bite of tickets – up to 90%. And they’re trying to raise it to 98%. The only way these theaters can make money is through concessions and other in-house sales. Their cut of tickets is so minuscule now that what Parker is offering won’t even begin to offset their lost revenue if even just 1 or 2 percent of their audience subscribes to Screening Room.

Me, as someone who loves movies, critiques them and podcasts about them, I’d much prefer to see a film on the big screen. Sure, I do OnDemand, and older stuff on Netflix, Fandor, etc. But it’s not the same as experiencing the film in a theatre with an audience. Take “The Wave” a recent film available in theatres AND on Video OnDemand right now – Norway’s first ever disaster film. It’s a doozy, a great movie, and the effect of the title disaster wouldn’t be nearly as impressive on a home screen as it was in the theatre.

Just my two cents, but I understand where the chains are coming from. We have a lot of great small theaters in our area, and I want to see them stay up and running. Which they may not if this kind of big day-and-date service takes over.

Michael Morley (profile) says:

"negligible impact on box office revenues"

There is a way to see this as a problem for theatres.
$50 is about four or five tickets (last I went). With the proposed system, one guy with a nice TV system in his basement could easily cut the cost of viewing a movie for a whole bunch of friends who chip in a bit extra on top of the pizza money. The high up-front cost would also encourage buyers to avoid going out in order to make the purchase feel worthwhile.

Now, obviously, cheaper viewing could increase viewership – but not infinitely. This service really does have the potential to replace some of the incumbents with a couple of ‘home theatres’ in a way that would more directly compete with them than Netflix ever did.

As a consumer, I agree that this competition would be good, but because it actually would be something approaching competition, the theatres’ fears are not quite as groundless as the tone of the article suggests.

Anonymous Coward says:

The high prohibitive cost is part of what sunk the theater experience, among other issues.

I’m still having problems understanding why some one would shell out that sort of money for a money when a month or two later you can just rent the damn movie for around 4 bucks.

As usual, this group is completely disconnected from the public in what it can and can not afford. At this price, this will go no where fast.

That is unless you got 8 kids or something similar. In that case it might actually save money. Anything that can be seen can be copied. I suspect the IP holders have insisted that watermarks be part of each movie. Otherwise, camcorders have just been handed a license for the perfect copy experience.

Geno0wl (profile) says:

Nothing is Piracy proof....nothing.

I would bet anything this “piracy proof” box gets a work around in less than a week. All it takes is the feed to run into a video capture system that mimics the TV input.
It really doesn’t even sound that hard to do, and hell it doesn’t even have to be “perfect”, just better than the current “cam” rips that currently float out there for months before Blu-ray and DVD rips exist.

Anonymous Coward says:

I rent movies for $4.99 and show them on my theater (HD projector and full surround sound) at home. I don’t even bother with the theaters anymore. They’re not a pleasant experience. Sure, I usually have to wait a few months for the movie to be available for rental, but that’s more worth it than spending $20 or $50 for a single viewing and I get the full theater experience without any of the drawbacks.

Geno0wl (profile) says:

Re: Re:

I always laugh when I hear people say things like

“I don’t even bother with the theaters anymore. They’re not a pleasant experience.”

Are you SO anti-social and irritable that even the most minor things bother you? I have been to dozens and dozens of movies, and I can only think of twice ever being “bothered” at a theater. Even then it was a minor thing that didn’t really impact the actual movie.

I mean if you avoid theaters because of price or whatever, fine. But don’t lie and say “not a pleasant experience”. tell the truth and just say “I don’t like crowds”.

Dan (profile) says:

Re: Re: Re:

I’m not especially fond of crowds. I’m even less fond of paying $5 for a soda and another $5 for a bag of popcorn. In most theaters, I can’t get a beer or real food with my movie (I know there are exceptions, but not local to me in Savannah). Ticket prices, though not terrible, add up. And though I’m far from a germophobe, the movie theaters I’ve been to just aren’t very clean.

Balance that against waiting a couple of months to see the movie. I can buy the DVD/Blu-Ray for less than two tickets (never mind renting or streaming), and I can watch it where I want, when I want, and how I want. If I want to get a drink, or use the restroom, I can pause the movie so I don’t miss anything. I can eat and drink whatever I choose. I don’t think I’d say, overall, that going to the theater is an unpleasant experience, but watching at home is generally a far more pleasant experience.

JMT says:

Re: Re: Re: Re:

“I’m even less fond of paying $5 for a soda and another $5 for a bag of popcorn. In most theaters, I can’t get a beer or real food with my movie”

Like Geno0wl said, you can legitimately bitch about the crazy prices but I wish everyone would quit whining about the high prices and low quality of the food. Just don’t buy it! No movie is long enough that you can’t survive without sugary sustenance. If people bought less the prices would drop in response. If you absolutely must snack mid-movie, buy it elsewhere.

Personally many trips to the movies also involve a food and drinks at a bar beforehand with my wife or friends, which makes going to the movies a thoroughly enjoyable social experience you can’t truly replicate at home.

Anonymous Coward says:

This will never happen.

First, Sean Parker’s name is mud, where the entertainment industry is concerned. It doesn’t matter how legal or legit his new service is, the entertainment industry will never allows Sean Parker anywhere near their copyrighted content.

Second, only morons will pay $50 to watch a first run theater movie at home.

Finally, theater owners will not get onboard with this because the movie theater business is a volatile industry.

Anonymous Coward says:

I didn't see a studio complaint here

Was there a complaint from the studios here, or just from two cinema owner associations?

Frankly, cinema owners do stand to lose from this, not that that is a compelling reason to prevent it. Their objection is kinda a “man bites dog” story, really.

The money going to the cinema-owners is a token gesture, that isn’t actually required because the cinema owners do not control the copyrights. If it were me pitching it, I’d drop the offer to give the cinema owners money, drop my prices by 25 USD, offer more to the studios, and drop the theater ticket.

I suspect it’s an attempt to work around the exclusivity requirement in the release contracts with the cinemas, but it’s only a matter of time before studios realize that they can make more opening weekend if they ink a deal with Netflix.

Anonymous Coward says:

Shrug, if they don't want money

If the theaters don’t want the money I’d say good for the service. Instead of $50 movies will only cost $30 and for that price the service is ok in my opinion.

It’s not Parker’s job to find out how their business works and who earns how much and when. Seriously… here is someone offering them ~40% of the companies income and all they can say is “How are we going to spend it? That is unacceptable”

When your competition wants to pay you and you complain about it then maybe you should go out of business.

Whatever (profile) says:

Thread 605

I am not surprised to see which side you come down on on this story, but wow, talk about missing the point.

Let me try to frame this for you in your own terms. You have said that adding a “backdoor” to encryption is bad, because there is a small risk that hackers may be able at some point to exploit it, no matter how complex and how many keys required to make it happen.

Do you think the same about taking a first run moving and putting it into people’s home in a digital format? If they can display it on their TV, then they can copy it and they can share it. The risk of piracy here is not insignificant. At a minimum, you must admit that doing this would significantly increase the chance that a good digital version of the movie would get out. Forget camming, just get one of these boxes.

Second of course is the question of training people NOT to go to the theater. For the moment the lovers of home theater rather than big theater movie viewing wait for releases. They may go to the big theater if they really want to see something now (and pay more for the honor). Having this system at home potentially changes their approach.

Thirdly, it’s a question of income. At a $50 per movie price point, you have to think that people would do “movie nights” at their homes. So invite over a half a dozen friends, plus your own famliy, and boom, you get 10 people to watch a movie for effective half the ticket price. The number of potential viewers for a movie is always pretty much limited by type, stars, and whatnot. Having a portion of this audience converted into cheaper “watched as a group” viewers isn’t financially beneficial. Turning group night out to the movies into group night at home for a movie would be potentially costly.

The only upside would be a single person, couple or small family (2 and 2) that might be about a break even at $50.

It’s also important to remember that theaters generally don’t make their money on movie tickets, they make it on the upsells, snacks, and 3D glasses. A family of four isn’t spending $50, they are spending maybe $80 or even $100 by the time it’s all done. Giving them a cheaper stay at home option isn’t going to magically INCREASE income.

Any increase in income would have to come from converting those who either wait for the DVD / pay per view /netflix or those who pirate into higher paying customers. They are the ones who would increase revenues. Pirates aren’t going to pay $50 for a movie (they will download the rips), and the rest are the only potential source of increase in revenue. Each person you talk out of the cinema and into their home theater is a loss.

The only way it makes sense (economically) is if the theaters all closed. Even then, it’s very likely that movie income would drop as the number of viewers per ticket goes up, or a number of people stop paying for first run because it’s too expensive for just two people (or one person) to pay $50 to see a movie.

Anonymous Coward says:

Re: Thread 605

I am not surprised to see which side you come down on on this story

You said the same thing about Hulk Hogan.

Dude: you’ve been at your pathetic crusade for years. It’d be really sad if you were surprised at this point. The only surprising thing is that you continue to subject yourself to this embarrassment.

nasch (profile) says:

Re: Thread 605

So basically what you’re saying is this evil plan must be stopped because it might change the movie business. Is there some Constitutional guarantee that once you have started making money in a business you are guaranteed to keep making money that way forever? If there isn’t enough interest in theaters to keep them running then they should go out of business. It’s unfortunate for those people who like going to the theater and can’t but that’s how our economy is supposed to work.

Anonymous Coward says:

I don’t know where you have been for the last several years, but movies are available on streaming services BEFORE they are available on DVD or at the very least on the same day! Your “delay” is delusional. I can stream dozens of movies that are still in the theaters on VUDU, Amazon or cable/satellite PPV.

If you are the content owner you can market the movie in the way you want, it’s part of ownership rights. If you don’t like the way movies are marketed, create your own content. God knows there are a plethora of platforms for doing just that!

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