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Rainbow Sees Gold in Day/Date

Oct 31, 2005  •  Post A Comment

Networks, distributors and theater owners can relax: The sky isn’t falling and neither are theatrical distribution windows. At least not by much.

Last week Cablevision-owned Rainbow Media created a stir by announcing the launch of the nation’s first day-and-date program, in which movies are released in theaters and on video-on-demand at the same time.

Such a distribution model could be a step toward eventually undercutting several theatrical television platforms-like premium cable, basic cable and broadcast-which would presumably take a back seat if cable operators make all theatricals widely available on VOD.

Along similar lines, Comcast announced it is expanding its on-demand theatrical service to include 800 titles per month, making it the most extensive library of VOD movies anywhere-yet another method of trumping DVD sales and premium services.

But despite Disney President and CEO Robert Iger’s call in August for a distribution window collapse, which enraged theater owners, experts see the current step-by-step platform as too entrenched with financial benefits for too many behemoth companies be endangered anytime soon.

“With Rainbow you’re seeing a niche move that might carry some potential as being a trailblazer, a niche deal that may prove more symbolic than having a significant impact,” said Kagan emerging technology analyst Ian Olgeirson. “There are huge financials that ride on the current arrangement. Hollywood is deeply entangled with theatrical releases and [has] restricted the pipeline to VOD.”

Rainbow’s plan is to acquire independent films, then launch them simultaneously theatrically and through a new VOD service the company is shopping to cable operators. The company said it will release 18 to 24 films per year.

Josh Sapan, president and CEO of Rainbow Media, has described the move as being the first step toward “Spider-Man 3’s” premiering in living rooms and theaters at the same time.

“We are altering the distribution food chain by having independent movies’ on-demand platform at the same time as being in movie theaters-which is a first and a breakthrough,” Mr. Sapan said. “It sets the stage for theatrical and on-demand TV being simultaneous.”

As might be expected, cable operators are strongly in favor of day-and-date, both as a direct revenue source and as a method of distinguishing themselves from satellite. “We would like to see day-and-date become a reality and, hopefully, it’s something that will happen,” a Comcast spokesperson said.

“From the theatrical industry there’s a huge pushback, but from the television industry, especially of cable operators, this is the Holy Grail,” said Jonathan Sehring, president of Rainbow’s IFC Entertainment. “This is the one area of entertainment where a product is windowed and you can’t access it at the same time. Where we feel that model is flawed, especially in the indie film industry, it’s such a competitive marketplace that to remarket, remarket and remarket a film is becoming prohibitively expensive.”

Industry experts said the plans are a smart way to give underdog independent films wider distribution.

“There are many films that are only available in a handful of markets, and people, myself included, end up waiting for months for something to end up on DVD,” said Paul Rule of Marquest Research, who lives in North Carolina. “You can have an Oscar contender, and nobody will see it outside of New York and Los Angeles for six months.”

That said, Mr. Rule noted that embracing day-and-date could be “a slippery slope.”

“Before long, somebody is going to want to expand this concept to major studio releases,” he said. “I really don’t want to see ‘Spider-Man 3’ on a small screen.”

Such a prospect could trump several entrenched distribution platforms-from DVDs to HBO to TNT. One top cable executive whose network airs theatricals said such platforms will ensure studios will “never” embrace day-and-date.

“Warner Bros., and any major distributor that’s got properties like HBO, will never do [day-and-date] … never happen,” he said. “The only thing they’ll do is shorten the window between DVD and theatrical to take advantage of the marketing.

“There’s a reason [Rainbow’s] doing this with indie films. You’re talking about films that can’t get an audience. These are people who don’t have output deals with HBO, CBS, syndication, the rest of the world. This is no threat to us; it’s a smart PR stunt and a very smart thing for cable operators,” the executive said.

Whether such maneuvers are threatening to existing platforms is also in debate. HDNet owner Mark Cuban attempted a day-and-date release for his documentary “Enron: The Smartest Guys in the Room” and called the Rainbow plan “a nice first step.” Mr. Cuban said the so-called threat of VOD depends on the price and duration of VOD availability.

“For instance, our day-and-date releases are not available free on VOD,” he said. “In addition, we only play them twice in a single night on HDNet Movies. So if viewers miss them, they have to go to the theater or wait for the DVD. It’s a huge mistake to give the movie unlimited free VOD access unless you think there are no ancillary revenues available for the title.”

Despite proclamations about spearheading a new wave of theatrical distribution, even Rainbow executives said any sea change is unlikely to occur anytime soon.

“I don’t think it will spread to mainstream theatricals for the foreseeable future,” Mr. Sehring said.