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Saturday, November 17, 2018

The Cinema-world: What Lies Ahead

Ripe For M&A

According to John Malone, billionaire media investor, removing the middlemen from content production and going direct to consumers will foster a rash of mergers and acquisitions between the major studios and networks over the next several years. He's RIGHT!

Malone argues that Netflix, Amazon, Apple, the remaining FAANGs and other gate-crashers in the streaming content biz are end-running the major studios with their direct-to-consumer strategy.

Studios Just Couldn't Get It Right

You have to hand it to Netflix, in the very volatile world of mass entertainment they have achieved great success and up-ended a 100 year-old industry.

Hollywood played Netflix all wrong. First it was, Netflix needs content and they'll buy it from us. Then it became - they will buy it from us and we'll keep the rights. Then it became - they will  buy it from us and we don't keep the rights. Then it became - if we don't deal with them, they will go to our talent pool and produce content themselves.  Which Netflix DID!  Now Netflix both, and produces their own content.

$100 Billion Content

With a projected spend-level of $100b a year for quality content worldwide (which, I believe is unsustainable) the need to merge and/or acquire to get larger to survive is inevitable.  CMG believes Malone is correct - the mass entertainment industry is changing and all players must figure out, and quickly, where they are going to wind-up.

Related Issue: Italy Falls On Own Sword

Last week Italy enacted a new law which regulates the theatrical window on Italian films. The new law dictates that there will be a wait-period of 105 days after the first cinema screening before a movie could be streamed via Netflix. The new law only applies to Italian films. France has similar screening rules but are stricter still - a minimum of four months for VOD and a full 36 months for SVOD content.


CMG believes that laws that restrict day-and-date release are bad for all participants.

- These laws hinder audience choice. Certain films can, and should, be released day-and-date. Those with big-screen pull and big audience draw are a prime example where both the exhibitor and streamer can benefit.

- These laws restrict the roster of films available to cinemas to screen, and streamers, such as Netflix offer very favorable gross terms vs. the major studios.

- These laws stifle local production of films as the streamers require/need local content to generate more subscriber acquisition.

I could go on; however, it's easy to see the short-sighted impact these release restrictions have.  Hey, why not let the consumer decide if they want to view a particular movie on the big screen, their TV or their mobile device. The exhibitors need to work with the Netflixes and not against them.

Just saying,
Jim Lavorato
Cinema Mucho Gusto

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