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DVDs and the Theatrical Business Model

From Saturday’s NYT, an interview with Regal Entertainment Group head Michael L. Campbell. According to the story, Regal owns the country’s largest chain of movie theaters; according to its site, Regal is the largest motion picture exhibitor in the world.

Two quotes of note. More below the jump.


Q. Is the threat of DVD’s to movie theaters overstated?

A. I think DVD’s have been the savior of not only the studio model but have been beneficial to theater owners, too, because it funnels more money back into the studios, which in turn fuels higher production budgets, greater numbers of films, and so on.

We have seen the window shrink from an average of about six months between theatrical to video 10 years ago to about four and a half months today. Some compression of that window over time is justified, or has been justified at least in the past, because we generate our piece of the pie at the box office much quicker today than we did a decade ago.

People who run the studios are smart people, and I think they realize the tremendous value of having that theatrical launch pad. And I don’t think that’s going to change. They make films to be released on the big screen.

Not a bad answer, though it tells us as much about the politics of film as it does about film economics. The answer tells us even more about how much the motion picture business is driven by mythology. There is still something special, so they say, about going to the movies.


Q. Are ticket prices too high?

A. Ticket prices in movie theaters have increased far less over the 10- to 15-year time period than live concerts, live plays, sporting events and other similar out-of-home venues. And during that period I think we have dramatically improved and invested in our business, billions of dollars as an industry to upgrade the theatergoing experience.

Going to the movies is probably not only the absolute cheapest form of out-of-home entertainment today but it’s probably the best value.

That’s more mythology. Are ticket prices too high compared to what? Are ticket prices too high compared to a rock concert or a Broadway show? Obviously not. Are ticket prices too high compared to borrowing or renting or buying a DVD? To me, that’s the more interesting question, because in my life, that’s the choice that I actually face. Maybe there are a lot of people out there who sit around on Thursday night and think, “Movie tomorrow? Or concert? Or baseball game?” I suspect that there are many more people out there who think, “Should I spend $10 per person to go to the movies, or should I put another item in my NetFlix queue?” In my house, we haven’t made the jump to NetFlix. We borrow DVDs at the public library. For us, aside from our property taxes, watching films is literally free.

In other words, the A. here misses a standard that I suspect is pretty typical in American households: Can we wait to see this on video? Maybe all motion pictures are designed to be seen on the big screen, but the number for which the big screen actually makes a difference is pretty small, and growing smaller. I liked Good Night and Good Luck, and I saw it in the theater, because I wanted to see it before the Oscars were awarded. It will be out on DVD shortly. I’m certain that the film will lose nothing in the translation to the small screen. Norma Desmond was more prescient than she imagined: Hollywood is big. It’s the pictures that got small.

What do I take away from the sense that the ego of the motion picture industry is inflated by romance ? I’m thinking about future of the industry and arguments about what if anything needs to be done to save it — from film piracy to Cubanomics. For now, I’m not drawing any conclusions, but I am wondering about how to redraw a portrait the industry to clear away the myths and to get to a better understanding — not merely an economic understanding, which everyone can see, thanks to the Smoking Gun — of how it ticks.