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What South Korea’s Video On Demand Experiment Tell Us About How Movie Theaters Block Innovation

It’s fairly common practice to complain that the people who make desirable content, be it HBO or the major movie theaters, are in some way trying to deny audiences access to their programming out of some odd sort of spite. It’s easier, though less logical, to argue that HBO is acting out of malign impulse by not offering HBO Go to cable subscribers, than to acknowledge that HBO’s business model is built on the cable business model, and that its carriage agreements with the cable providers. And for some reason, it’s been easier for people to get angry at movie studios for not making more of their content available in disc or streaming form more quickly than they do, and to ignore the fact that movie theaters play a role in this as well.

But as an article from the Wall Street Journal about South Korea’s experiment with making movies available in all formats simultaneously makes clear, it’s as important, if not more so, to focus on distributors of content as it is to focus on content creators themselves. As Ben Fritz and Jeyup S. Kwaak report:

In the U.S., top cinema chains including Regal Entertainment Group Rand AMC Entertainment Holdings Inc. refuse to play films without at least a 90-day “window” — industry jargon for the time between the theatrical and home-entertainment release — out of concern people will choose to wait for the movie at home rather than go to the theater.

“A short window or simultaneous release muddies the value proposition being offered to consumers,” said Patrick Corcoran, a spokesman for the National Association of Theatre Owners trade group.

Small distributors commonly release low-budget movies in independent theaters at the same time they are on VOD. But major studios, which need to work with AMC, Regal and other chains to blanket the country with their big-budget releases, rarely even come close to doing so.

Of course, movie theaters, like cable companies, are doing what they’re supposed to, and acting in their own financial best interests. Movie theaters are trying incredibly hard to keep butts in seats by trying to insist that the theater experience is genuinely, materially different than watching a movie at home, no matter how big your screen is. In the smart category, there are innovations like the Alamo Drafthouse and Arclight chains’ dramatically improved menus and alcohol offerings, or cell-phone free screenings, or appearances by filmmakers at theatrical screenings. Less positively, there are attempts to squeeze more money per ticket out of moviegoers with 3D prints or 3D conversions, even though few filmmakers have really figured out how to use the technique to the actual benefit of their visuals or narratives, or the metastasizing junk food available at escalated prices.

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All of these things are a hedge against an idea that’s gained more currency in the music business than in movies: that people place different value on the same content, and that it might be better to have their business at those variable prices than not to have it at all. If someone values a movie at $3.99, and that price is an absolute ceiling for them, making them wait 90 days for it may not raise the price they’re willing to pay for it. And if that 90 days pushes movies to Netflix or to cable rather than just to rentals on iTunes and Amazon, they may decide they’re willing to wait to pay even less than that. The theaters are anxious about losing business that may never have been theirs to lose. The question is at what point the movie studios decide there’s more money to be made by working around the theaters than staying shackled to their historical key distributors’ business model.