Business

DVD dilemma

LOS ANGELES – Someday the phrase “Coming soon to a theater near you” could be replaced with “Coming soon to a Wal-Mart near you.”

The tradition of major films debuting first in theaters, then across staggered release “windows,” including pay-per-view, home video, cable and, finally, broadcast TV, is being openly questioned.

Robert Iger, CEO-elect of The Walt Disney Co., recently suggested the day could come when a DVD is released while the movie is still in theaters. The millions of dollars that studios spend marketing first-run movies would serve double duty promoting the more profitable DVDs, making for a faster and more efficient return on investment.

“Consumers have a lot more authority these days and they know that by using technology they can gain access to content and they want to use the power that they have…” Iger told financial analysts earlier this month. “We can’t stand in the way and we can’t allow tradition to stand in the way of where the consumer can go or wants to go.”

Iger’s remarks are heresy to theater owners who fear people with flat screen, high-definition, surround sound systems in their living rooms will abandon the megaplex.

“Mr. Iger knows better than to tell consumers – or Wall Street analysts – that they can have it all, everywhere, at the same time,” said John Fithian, president of the National Association of Theater Owners. “He knows there would be no viable movie theater industry in that new world – at least not a theater industry devoted to the entertainment products of Hollywood.”

Theaters have already seen profits shrink as movies move more quickly to home video. Studios and theaters split profits in the early weeks of a movie’s run, with the theater making most of its money from concessions. The theater’s split gets larger the longer the movie plays, giving studios an incentive to release films on DVD even earlier.

Studios make the majority of their profits from home video sales, with theatrical runs serving largely as marketing for the DVD.

That has led some to question business models that have not kept pace with technology or consumer demands.

“Why do we make the assumption that five months later people are still interested in your product?” said Todd Wagner, co-owner with Mark Cuban of 2929 Entertainment.

“If I hear a song on the radio, they don’t say, ‘Five months from now you can buy the CD.’ “

The gap between a movie’s opening weekend in theaters and its debut on home video has been narrowing from about six months in 1994 to about four months in 2004.

Some studios release their DVDs even sooner. The action sequel “XXX: State of the Union,” which fizzled at the box office, hit video shelves 11 weeks after its theatrical debut.

Many studios announce the release date of a movie on home video while the film is still in theaters – a practice that infuriates theater owners.

“This is something that drives us nuts,” Fithian said. “When Wal-Mart starts putting up signs a month and a half or two months into the movie’s run, that just kind of tells the consumer: ‘Wait – it’s coming.’ “

Before Iger’s remarks, studio executives spoke of releasing DVDs simultaneous with a theatrical run only in the context of fighting piracy. Many studios are already premiering films around the world on the same date to undercut pirates who distribute illegal copies of films in China, Eastern Europe and elsewhere.

In the United States, studios are pressured by a box office slump and a DVD glut that has led to a sharp decline in sales for new releases that compete for shelf space with old TV show box sets and older hits.



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