Movies on the Cheap?

Gift cards have become very popular - available at most all retailers for products and services.  But, a gift card recipient may (for a variety of reasons) not want or be able to redeem the card.   Not to worry, in that case, they can go to one of several websites that act as gift card clearing houses and buy and sell gift cards. The charge for this service typically averages about 15% of the value of the card - Giftcardgranny.com, giftcardrescue.com, plasticJungle.com, and Swapagift.com are several.

Well, you could have knocked me over with an anvil, when I saw AMC Theatres gift cards at a 58% discount from face value !  Hmmm, is this a good proxy for the value of cinema admissions?  Well I guess it is what the market will bear so lots of folks must feel that going to the movies is only worth half of what a major circuit is charging.

Cheers and Happy Movie Going!
Jim Lavorato

Virtual Print Fee - It's All One Sided



Its all about Money

I receive queries almost daily from movie exhibitors regarding the Virtual Print Fee scheme. My response: Like many contracts, at first blush it sounds great, but in the details it's all one sided - and make no mistake, the film Studios know how to make up a "good" contract.

The Studios' scheme to get  movie exhibitors to convert to digital cinema by paying a virtual print fee (a fee given to the exhibitor because a film print did not need to be distributed)  which defrays the cost for the D-Cinema conversion, comes with lots of stipulations and, in fact, is advantageous to - you guessed it - the Studios

For example, to qualify for the VPF, movie exhibitors must, among other requirements:
- Open digital movies on the first day of their release.  That is why you will
   see first run movies opening in smaller auditoriums with small screens.
   The movie must open but there are other films already in the large auds.
   which can not, under contract, be moved to the smaller auds.

- Any renovation made to a cinema from 1/1/10-to-present that did not
  include a digital cinema platform can not qualify for the VPF. Code:
  those cinemas that are thinking of upgrading, for whatever reason, must
  include a D-Cinema conversion into their plans.

- Once a d-cinema platform is installed the exhibitor has 6 months to
   upgrade all other auditoriums at that location, and one year to upgrade 
   all auditoriums within the circuit.  I'm not sure if this covenant is being
   enforced but it makes conversion very costly and is totally unnecessary.

- Exhibitor must pay a royalty fee on all alternative content exhibited to
  the Studios while the VPF contract is in force. Theory: since we are
  paying the VPF we get our take on all content using the D-Cinema
  equipment.

- Movies released in 3D format must be exhibited in 3D if the exhibitor is
  3D equipped.  This makes for conflicts, as a 3D feature already playing,
  and contracted say for 3 weeks makes compliance with this stipulation
  impossible and may result is a forfeiture of that movie.   

These are but a few of the stipulations under the Studios' VPF scheme. But the giant loophole - that gets the Studios out of the deal (does anyone really think the Studios will be paying the VPF for 10 years as is stipulated in the VPF contract) is the one that states: the Studios reserve the right to demand that the exhibitor upgrade to the latest technical standards as stipulated by the Studios and non-compliance will void the VPF contract.

So there you have it.  Enjoy!

Best and Happy Movie Going.
Jim Lavorato

CineBUZZ REPORT - 25 October 2011

3D Glasses Proliferate

Focux 3D Glasses

Over the last six months or so I have been beleagered by companies selling 3D glasses, some good some not so good.  The Focux Active (see insert) look pretty good.  Stating that the glasses provide, " the best feeling of brightness, color, and stereoscopic impression, but are also  compact, comfortable, earth-friendly, and cool-looking".

The promo sheet states that the Focux glasses, although active shutter type, require a battery change only once very 5 years, are light-weight, and easy to store as the arms fold automatically.  Storage trays are available and the glasses can be recharged 600 at a time.  Also note worthly, the promo sheet states that a silver screen is not required given the brightness of the image through the glasses.  Additionally,  they are compatible with all DLP D-Cinema Systems, and have a built-in auto test mode for moviegoers.

Check out the Focux 3D glasses at www.sales@focux.

BOX TOPS

Paranormal Activities 3 (Paramount) took top honors this weekend with a domestic gross of $54 million, a very good opener for the horror franchise and exhibs are hoping it will have legs over the coming weeks.

Coming in at #2 was Real Steel (Disney) which pulled in over $11.3 million and has now grossed over $112.7 worldwide (it has performed very well in the overseas markets as well) so it has now covered its production/marketing cost which means Disney will reap significant profits as this product moves through its life cycle.

Footloose (Paramount) came in #3 with $10.9 million and has been a steady performer. The 3 Musketeers 3D (Summit) the other new release besides PA3 that made it into the top 5 took 4th place with $8.8 million. A so-so showing but demonstrating again that being in 3D doesn't guarantee B.O. success. Rounding out the top 5 was Ides of March (Sony) at $4.9 million, look for this one at the Oscars.  The other new release was Johnny English Reborn (Universal) which wasn't reborn but was dead on arrival at the B.O. with an opening of only $3.8 million.

The domestic gross for the top ten movies totalled, a respectable, $109 million for the weekend and finally pushed the cinema out of its early autumn slump and hopefully on an upward trajectory for the remainder of the year. 

Early predictions have the domestic 2011 box office gross and ticket sales below 2010. Admissions are projected to reach 1.27 billion or about 60 million below last year, while dollar gross is expected to reach $10.2 billion or $300 million less.

Best and Happy Moviegoing!
Jim Lavorato

MILDLY HOSTILE BUSINESS PRACTICES

When conducting Cinema Training Central's (www.cinema-training.com) management workshop I discuss what are termed "mildly hostile" business practices - small annoyances that by themselves may not garner sufficient weight to motivate a customer to cease dealing with your business but tend, over time, to compel customers to look elsewhere to satisfy their needs.

This is what Sony Pictures recently did when it informed movie exhibitors that come May 2012 it would cease paying for 3D glasses and referenced the fact that exhibitors adopt a "guest ownership model"  - which is code for have moviegoers buy their glasses and re-use them on future visits to the cinema.

The Sony LCoS based 4k D-Cinema projection system is more costly than the DLP based system used by it competitors, so it has many less installed D-Cinema platforms (and from what I hear the majority of these are loaner systems).  Sony's policy change on 3D glasses will come just before its release next summer of  Spider Man and Men In Black III, both to be released in 3D format.  Stating that "there are ways to deal with the cost of 3D glasses that will not adversely impact the (moviegoer) and also help the environment" , Steve Elzen, Sony Pictures spokesperson, called on exhibitors to work on the situation. 

In response, NATO (National Assoc. of Theatre Owners) noted that Sony's policy change was "insensitive" to consumers. While Regal Entertainment, the U.S.'s largest cinema circuit, in a statement issued by its CEO, Amy Miles, stated "if  Sony shifts costs to exhibitors we would be forced to evaluate this new economic model and program our screens accordingly".  Code for, Regal may not exhibit Sony pics in 3D format.

MY TAKE
First, charging moviegoers for the glasses would fall under my definition of "mildly hostile" business practices - and would over time decrease patronage at cinemas.  Second, do you really believe Sony when they say they want to shift cost to exhibs and moviegoers to save the environment.  Third, the more the distribs and exhibs battle the more eyeballs they loose to the in-home movie experience.

Best and Happy Movie Going!
Jim Lavorato

Interesting Tid-Bits

CONNECTED TVs SURGE

The latest stage in the evolution of the TV is the arrival of internet
connectivity, which has surged as improved bandwith and usability allow people access to the vast world of content on the internet.

Strategy Analytics, a media research company, recently conducted a survey of over 5000 respondents in the U.S. and Europe which found that "connected TVs are being purchased at a very fast pace, with over 42 million homes now connected for the purpose of watching TV shows and movies".    We are in day one of the connected TV revolution as UltraViolet (see prior post of UltraViolet) launches its individualized video "locker" concept and Apple considers its own streaming movie service. Connected TVs are going to proliferate, and will be the cinema exhibition industry's greatest threat and competition in the not to distant future.

KODAK & IMAX MAKE DEAL ON PATENTS

In a deal between Eastman Kodak and IMAX, Kodak will license a portion of its patents for an upfront fee of approx. $50 million from IMAX. Reported in a prior Cinema Mucho Gusto post, (see Kodak's Hidden Treasure - 20 September 2011) Kodak has over 10,000 patents which are essentially more valuable than the company itself.
Under the deal IMAX will also pay recurring royalties as it uses Kodak's patents in its  products. IMAX is exclusively licensing 100 patents related to laser projection technology and will get the cinema rights to the bulk of Kodak's remaining patents.  These patents will allow IMAX to deliver digital content to its largest screens, which it previously hadn't been able to convert from film.  For Kodak, the infusion of cash will be welcomed as it transitions into a company that sells digital consumer and commercial printers.

NETFLIX BREAKS PROMISE.......and it costs them

When giving the Cinema Training Central (www.cinema-training.com) seminar on Cinema Management, one of the topics discussed is Branding and Corporate Identity.  A company's brand is essentially a promise.  A promise that it will provide a product or service that it has "promised to deliver".  But once that promise is broken it is very difficult to get it back.  Case in point: Netflix, which last month decided to raise pricing on mail order videos in an effort to force customers to use streaming as the cheaper alternative.  Big mistake.  The Netflix brand (promise) was broken and customers - to the tune of  3 million - stopped using Netflix.  To recover, Netflix had to regroup and publicly renounce its new policy. In the meantime its share price dropped over $100.
Branding and corporate identity are crucial elements in marketing and developing brand equity.  If your company isn't or doesn't brand itself call us for information on our Management Training Workshop on Marketing.

IMPULSE OR SURGICAL ?

According to ShopperTrak, impulse buying by consumers is waning in favor of surgical shopping.  Impulse purchases require people to browse, and that is happening less and less because tech-savvy consumers use the web to get info on the product they want and simply go and buy it and leave the store.
Termed "mission shoppers" , these consumers are visiting stores less which lessens the chance of the impulse purchase.  The research points to the fact that Americans are turning into "surgical shoppers" vs. impulse shoppers.   And while mission shoppers were almost always men women are now adopting this practice.

Cinemas should pay close attention to the so-called conversion rate (the percentage of people that actually buy concession after walking into the cinema). As Americans make fewer trips to the cinema, each moviegoer becomes more valuable and coaxing them to buy more concession becomes more crucial. 

12 foot WebTV

Currently, because of the d-cinema conversion and the recession many cinema operators stopped refurbishing, hired less staff, and posponed needed repairs and upgrades.  Now, because of the coming proliferation of content streaming and inevitable shrinking of the theatrical release window, cinemas are going to have to move quickly to improve the movie-going experience - with upgraded technology, and improved service and superior merchandising - to better engage their customers.

Cinemas have let the consumer get too far ahead of them and now they are going to have to scramble to fix that situation.  We have many prior posts to this blog recommending just that: installing pay-by-phone, adding wireless Internet networks, using smart phone technology to check inventories, having staff spend more time with moviegoers, going back to the use of  customer greeters, and on and on.  Its a return to old-world service but using high tech tools to do it.

My fear is that the cinema experience gets no better or becomes gimmicky while the in-home entertainment experience gets better and more immersive- accelerating the migration away from the cinema.

Best and Happy Movie Going
Jim Lavorato

WEEKLY CineBUZZ REPORT - 18 October 2011

Exhibitors Have No Juice

Last week Cinemark, the third largest movie exhibition chain in the U.S., announced that it was not going to exhibit, Tower Heist (Universal), because Universal (Comcast) had stated that it was going to offer the movie via its video-on-demand service just three weeks after the theatrical release.
Well, imagine that.  Like this threat from Cinemark really matters to Comcast!  It's like I've been saying for 5 years now - not that I like saying "I told you so" - but movie exhibitors have no juice, because they bought into the digital game.  Eventually movies will be available day-and-date across the world to everyone as content is streamed on a variety of devices and outlets with cinemas being just one outlet.  Cinema exhibitors just don't have the juice in terms of numbers to back up their threats.
The millions  movie exhibitors spent (and are still spending) on D-Cinema conversions should have been spent on changing their business models - refocusing their branding and marketing, connecting to their local communities, upgrading their facilities to more sustainable operations, and on and on.

It's all about eyeballs
Cinemark is fighting the wrong battle, and one they can not win. In the digital age, movie exhibitors will be marginalized and will become just one of many outlets where films will be viewed. Therefore they must concentrate on basic strategies of improving the movie going experience  as it will become harder and harder to compel consumers (who will have a vast array of entertainment alternatives via their connected TVs and other mobile devices) to get off their sofas and pay a visit to the the local cinema.  Exhibitors need not only good content but must offer an exceptional out-of-home entertainment experience to survive.

Not to be left out, the studios are also in a precarious position.  As the Comcast buyout of Universal, so vividly, demonstrates - the studios are takeover targets for the digital Kings.  Apple, Google, Amazon, Microsoft, Netflix, Facebook, and many others, will need content for streaming and it is the premium content, ie. major motion pictures, they will demand. And the best and most efficient way to get premium content is a buyout of a major media company. 
The scenario, I've just laid out is inevitable. Movie exhibitors should prepare for it as the survivors will reap huge benefits.  But at this stage in the game, not exhibiting films because of collapsing release windows (as Cinemark is doing) will gain nothing except lost revenue and less movie patrons in the future.

F/U to story: As of today, Universal has backed off of its position for the early VOD release of Tower Heist, but it is an omen of things to come. It's a shot across the bow - take heed exhibitors.

Cinema Needs A Comeback

Flat and crowded - that is what the world is becoming.  By 2050 the United Nations estimates the world's population will exceed 9.8 billion from today's 6.8 billion headcount.  The world is also becoming increasingly flat, as it emulates and pursues an "American lifestyle" becoming smaller as both the information and energy technology age develops.

The U.S. cinema is already flat in terms of box office grosses and decreasing in terms of admissions - but these trends can be reversed if distributors and exhibitors adopt a modern pragmatic and accommodating business relationship as both Hollywood and the exhibitors will need each other's support in the future.  A much more streamlined movie entertainment community is in the works so that necessities change.

Cinedigm's Bragging Rights........Not Too Good.

According to the Motion Picture Association of America, and who am I to doubt the MPAA, there are approximately 150,000 cinema screens in the world. Of which 40,000 or so are in North America.  Cinedigm, the digital cinema conversion folks, say that they have converted 8,000 screens with another 1400 or so in the works.  That's about 25% of the total screen count in the U.S. and Canada.  Hmmm, after ten years you think it would be more, but then again the exhibitor really gets nothing for converting, except higher operating expense.

Listed as a penny stock on the NASDAQ, Cinedigm (CIDM) current share price is $1.15 down 55% for its 52 week high of $2.60.  After the Virtual Print Fee scheme, Cinedigm will have no value - in fact it has no value now.  It lost 18 cents per share last quarter and is, in reality a puppet company for the studios which will dissolve next year.

Hollywood Suffers from "Uchimuki"

Japanese companies suffer from - "always looking inward" - in other words they are not innovative and their managers lack creativity because their mindset is inbred.  The Japanese are acutely aware of this inward thinking trait, called "uchimuki", and have tried to overcome what is rooted in very old and traditional social norms without much success.

I'm afraid the Hollywood studios are suffering from uchimuki as well.  They are inward thinking and following a movie exhibition business model that is at least seven decades old and in dire need of a revamp.

The studios had a choice of going digital with cinema exhibition or staying with film and they, unfortunately, chose the former.  The savings derived from the demise of film prints had the studios' bean counters drooling but in the long run will cost them movie distribution control and make them the puppets of the digital domain kings, such as Amazon, Google, and Apple.  The studios are under the delusion that they are "safe" and control premium content but don't realize that they are future takeover targets of the tech kings.  The studios' venerability is apparent - at least to some of us outside Hollywood - but continue to rush headlong with d-cinema conversion.

Comcast, the country's largest cable provider, paved the way with its purchase of Universal from G.E. and other buyouts will follow.  The studios have maneuvered their way into a very bad position because  of their "uchimuki" tendencies.

Best and Happy Movie Going !
Jim Lavorato

Who's Watching What ?

When it comes to viewing premium content, consumers have more options than ever - web TVs, PCs, tablets, game consoles, cellphones, etc. and they are using them.  A new study by PriceWaterhouse Coopers (PwC) finds that traditional TV is still king with web-enabled TVs and tablets coming on strong, while Smartphones, due to their small screens and slower network connections, have limited appeal.

PwC found that 58% of consumers said they spend more time viewing movies and TV shows online than they did a year ago, with the preferred device being the tablet.  In a concurrent study, the Nielsen Company, reported that only 10% of mobile users watch video streams on their phones; however, mobile "views" of TV shows increased 200% in second quarter of this year.

UltraViolet Locker System   

The PwC study also noted a significant increase in cloud-based media storage offerings.  The idea of digital lockers - a la the UltraViolet locker system - for storing music, shows, movies, photos, and other content in individualized "lockers" appears to be very appealing to consumers, although they expressed concern regarding costs to maintain a locker.

The study is good news for content streamers: Netflix, Hulu, Roku, Google, Apple, Amazon, and Microsoft  (to name several), but bad for the social media platforms like Facebook and YouTube, as over 65% of survey respondents said they wouldn't pay anything to watch movies or TV shows via social networks.  However, because we are just in the beginning stages of premium content streaming there is still opportunity for the Hollywood studios to leverage social media sites.

Overall, the PwC study indicated that consumers would rather rent than buy video-on demand because it is viewed as less expensive, and does not occupy space on their PC's hard drive.  Consumers also like getting faster access to movies (now commonly available within four weeks of the theatrical release) as this rated as the most appealing feature of VOD offerings - with most consumers willing to pay an up-charge of $5 for the quicker release.

Best and Happy Movie Going !
Jim Lavorato

WEEKLY CineBUZZ REPORT - 4 September 2011

Box office Malaise Continues

The box office slump is now in its sixth week, as the top grosser last weekend - Dolphin Tale (WB) - took in only slightly over $14 million. It was followed by Moneyball (Sony) and Lion King 3D (Disney) which were prior week holdovers. The other new comers, 50/50 (Summit) and Courageous (Sony) ranked fourth and fifth, but with dismal performances.

Other new releases: Dream House (Universal) and What's Your Number (Fox) made it into the top 10 but with minuscule numbers. In fact, the top 10 movies for the week only grossed an aggregate $88 million.

Year-to-date the U.S. box office totals $7.8 billion, which represents a decrease of $265+ million as compared to 2010.  We are all hoping for a break in the box office slump as there are some very good films being released over the next several weeks, lets keep our fingers crossed.

Streaming Content

Roku, launched in 2008, has quietly become the first streaming platform which has been really embraced by consumers and has become the partner of choice for content providers.

Roku is simple to use and its platform allows for quick deployment of content using a variety of monetization options.  Roku provides subscribers access to over 300 entertainment channels that deliver content which includes: TV shows and movies from both Netflix and Hulu, videos from Amazon Instant Videos, live and on-demand sports, music, photos and videos from Facebook and Flicker, plus regular news channels. Look for Roku to be a major player in the streaming content game going forward.

In other news, Amazon continued to build out its streaming service by inking a deal with Fox for access to over 2000 movies and TV shows. No first run films or current shows but it ups the amount of video available through its streaming service by 20%.

Unlike Netfilx and Hulu which stream across platforms and devices, Amazon's subscription is limited to PCs and web TVs but mobile devices can't be far behind as Amazon will be introducing a new tablet shortly and it still has the Kindle as a device which could be enhanced to receive content.

Exhibitors Need To Use Cashless Payment Options

I've written before on the need of cinema exhibitors to embrace the use of SmartPhone payment systems at their theatres. This technology, although not widely used at present, will become more and more popular.

Google Wallet

Last week, Google officially launch The Wallet, which allows consumers to tap or swipe their phones to pay for purchases.  While other companies, including Visa and American Express, as well as AT&T and Verizon have stated they will be offering digital wallets, Google is the first to take the wallet to market.

Citibank, MasterCard, and Sprint are the initial launch partners for The Wallet and it will be the first such device to use "near field communications" technology for digital payments. NFC allows for secure communication between devices at very short distances. Google stated that their "near field"  system will be licensed to AMEX, Visa, and Discover which means that upcoming versions of Google Wallet will support these credit cards as well.

Google wants its digital wallet to offer consumers and retailers more then just payments. It wants to incorporate and deliver Google Offers, a service which allows people to enter loyalty cards into their Wallets and also allow retailers to send promotional deals to customers based on where they have shopped in the past and where they are located.
Exhibitors get on The Wallet bandwagon!

Best and Happy Movie Going!
Jim Lavorato