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What Tom Said: Hollywood Stays In Control (For Now)

Tom Butts
Editor-in-Chief
tbutts@nbmedia.com

There was a brief moment recently, when the debate over what would be the future of movie distribution ventured into dangerous territory for Hollywood. I’m talking, of course, about Sony’s move to distribute the controversial film “The Interview” online, after anonymous threats forced the studio to remove the film from theaters. Despite a last minute about-face to show “The Interview” in selected theaters during the holidays (turning many moviegoers into instant patriots and advocates for free speech), the movie thrived online and could well become the most financially successful streamed movie release in history, earning $40 million online versus $6 million at the box office. Of course, being the top news story for the better part of the holiday season didn’t hurt either.

Coordinating theatrical releases with television distribution is not new; as far back as 10 years ago director Steven Soderbergh allowed the release of “Bubble” in both theaters and on video-on-demand simultaneously. But the theater industry has been highly resistant to the concept of such “day-and-date” releases. That resistance that formed 10 years ago has become even more hardened with the success of streaming. Although the economics of online distribution favor the studios—which can retain about 75 percent of video-on-demand revenues—over theatrical releases, where they retain only about one-half.

Nevertheless, any hopes that “The Interview” would be the start of a trend were quickly squashed by Sony, which emphasized that the online release of “The Interview” was an outlier and didn’t represent the future—for now. Theatrical releases are still the film industry’s bread and butter and 10 years ago, DVD and video-on-demand (which was widely available, but not all that popular yet), were the only legal alternatives (piracy is a topic for another day). Today however, nearly every other home has a large screen with broadband and many more programming choices.

You may wonder what this has to do with the traditional pay-TV bundle. Plenty, when you consider what effect it has on breaking down the lines of demarcation between how movies and television programming could be distributed in the future. Pay-TV is going through its own transition, with more and more online services like Amazon and Yahoo developing their own programming “channels,” and in effect, bypassing the traditional pay-TV model. Whether or not we’ll ever see a “Yahoo” or “Amazon” channel on pay-TV is debateable and it’s highly doubtful that any of Netflix’s original programming will show up on cable or satellite anytime soon. There is, however, plenty of evidence that distributing original cable or broadcast programs on Netflix—while the shows are still in production—actually helps increase interest in those shows. Cord cutters still pay for cable (er, broadband), but the increased quality, availability and ease of access—all at a much lower price—of over-the-top programming represent the biggest threat yet to cable’s traditional video service.

Even the mighty pay-TV bundle is no longer impenetrable, as HBOGo sets out on its own this year and valuable franchises such as ESPN are peeled off by services such as Dish’s Sling TV. And Apple, perhaps sensing an opportunity, is rumored to be considering developing its own OTT programming service to compete.

The quality of television programming has increased to the point that it demands to be viewed on an ever bigger screen; hence the recent showing of several HBO “Game of Thrones” episodes on IMAX screens around the country. The limited release, ended up being an experiment in both aesthetics and social networking.

These developments continue to illustrate the blurring of lines between television and movies and how the battle over distribution—and ultimately control, with an eye towards reducing piracy—will shape the future of video entertainment. As much as Hollywood is resisting the move to “day and date” film distribution, cable is resisting the calls for “á la carte.” But technology (and sometimes world events) have a habit of changing minds and tactics, sooner rather than later.