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Mar 4, 2021

The Scandalous $19.99 Rental and the End of Cinema



The pandemic shut down movie theaters, the movie industry was in a profit standstill, and thus the $19.99 Premium Video on Demand (PVOD) rental was born. VOD rentals typically range from 99¢ to $6.99 so the markup on PVOD titles was exceptional, even more so when you can purchase a digital movie for an average of $14.99. Some balked, some paid, and now consumers are watching industry titans at war. On March 20, 2020, Universal drew first blood making by making The Invisible Man available for home viewing a mere 3 weeks after its theatrical release, a bold unprecedented move that wrecked the nerves of the (flailing?) industry.


Until now, a gentleman’s agreement on release windows for mainstream movies was strictly obeyed: first-run was always in theaters, 3 months later on to the home rental market (VOD) and physical BD/DVD sales, a few months later they go to premium cable networks, then 2 years later onto free broadcast networks. Netflix and other streaming services have since changed the game as many films skip theatrical release entirely and premiere exclusively on one service. In late 2020, Warner Bros. dropped an atomic bomb announcing that its slate of prominent first-run films (starting with Wonder Woman 1984) would simultaneously be released in theaters and at home for HBO Max subscribers. The future of movie watching is here, rejoiced movie lovers! The uproar from the industry was deafening. Many argued that upsetting the established (profit-maximizing) business model would end big budget blockbusters which could never recoup costs, force millions of workers out of jobs, eliminate deals with movie stars, and obliterate movie theaters themselves. The finger pointing between studios, directors, stars and theater chains began. Big budget films were shelved, release dates changed and changed again, constantly. Christopher Nolan refused to release Tenet to PVOD, forced it into available U.S. theaters last September, and it failed with a paltry $58 million box office (Tenet is estimated to have cost $205 million). Panicked studios with slates of delayed films gathering dust and sequels loosing viewer interest started auctioning films to the highest streaming bidder. Meanwhile the largest movie chains like AMC, Regal and Cinemark cast evil glares and threats in all directions. In the end, the blissfully unaware and avaricious movie industry just wants to squeeze out as much profit as possible from viewers, many of who are stuck at home, may have lost jobs, or otherwise been victims of the pandemic. Which brings us back to the $19.99 PVOD rental fee. Is the price justifiable for a first-run film? Math proponents would argue that two or three viewers amortizes the cost to a devilish $6.66 per person, a fraction of the cost of the standard ticket price. That sounds reasonable at first but more factors should be considered. In 2019, the average cost of a U.S. movie ticket was $9.26. Studios pocket between 50-70% of the ticket price, so they are doubling the price of the PVOD rental and also keeping the majority percentage of that profit since they no longer have to share it with the theater chains. $19.99 is absurd given that the studios incur much less over all costs. There is no production of physical hard drives called DCPs (Digital Cinema Packages) for distribution of films to theaters, no poster or stand-ups to print and negotiate for placement, and no limits on screens or times a film can run with essentially no downtime. Want to rent a movie at 4am? Go for it. The price point benefits only the studio and it’s pure greed. Theater chains, especially independently-run theaters, depend on overpriced concessions sales to keep the doors open. Luckily over 70% of patrons visit the snack bar and spend an average of $15.06. Together with the average price of a ticket the total cost is $24.32 per patron, so $19.99 sounds reasonable again right? For the casual movie enthusiast who sees a handful of films a year, I would say maybe. These could be seen as “events” for date night or the special family movie night. For a cinephile like myself, who in 2020 watched over 250 movies, the cost is a lot less reasonable. In 2019, there were several ways to reduce a ticket price: signing up for movie plans ($7.99 per movie), attending during discounted matinee hours ($6.99 per movie), buying vouchers at stores like Costco and Sam’s Club. As for snacks, forgoing the concessions stand or sneaking in some candy (sorry not sorry) significantly reduces the overall cost to the consumer. (For the record, I support independently run theaters, buy full-price tickets, and always buy the popcorn with the real butter.) The $19.99 pricing model also assumes that several people are watching the movie, which makes sense if the nuclear family gathers to watch a singing rainbow troll movie. My preferred genre is horror and unfortunately horror is your typical household viewing event. I see most horror films alone, especially now during the pandemic when we aren’t supposed to meet up with friends. A $19.99 rental doesn’t make sense for a horror release. But studios don’t seem to care about diehard horror fans and likely believe we will flock to see any release, at any price. I’m not opposed to paying more for PVOD rental but in a more reasonable range of $9.99-$11.99. Finally, there's an open secret the movie industry knows well: horror movies are insanely lucrative. This makes the price gouging an even harder slap on the face. Horror is made with low or modest budgets and can make astronomical profits, for example:

  • The Exorcist (1973): Budget of $11 million made $441 million

  • Halloween (1978): Budget of $320,000 made $47 million

  • Friday the 13th (1980): Budget of $550,000 made $59.8 million

  • The Blair Witch Project (1994): Budget of $60,000 made $245 million

  • Saw (2004): Budget of $1.2 million made $103 million

  • Paranormal Activity (2007): Budget of $15,000 made $193 million

  • Insidious (2010): Budget of $1.5 million made $99.5 million

  • Annabelle (2014): Budget of $6.5 million made $257 million

  • Get Out (2017): Budget of $4.5 million made $225 million

  • IT (2017): Budget of $35 million made $701 million

The pandemic has taught me many valuable lessons, among them is a newfound sense of patience – and budgeting. In the before times, I found myself eager to see new releases to be able to talk about them with friends, post on social media, and avoid all spoilers. I missed all the discussions on Freaky because it opened only in theaters, and four weeks later became available on PVOD. I refused to pay $19.99. At first, I experienced FOMO and struggled to avoid spoilers but then came a calm and a greater realization that it didn’t really matter. I knew that 6-8 weeks down the line, that $19.99 rental will be a more reasonable $5.99 rental and I will enjoy it all the same. Smaller films like The Hunt, The Craft: Legacy, Shadow in the Cloud, Promising Young Woman, and Willy’s Wonderland could have been viral hits but by following a PVOD route, they’ve alienated a huge segment of horror fans. And there’s a growing and admitted undeserved backlash against these films. Some won’t rent them at all and will wait for them to arrive on Netflix, Hulu, HBO or Shudder. And yes, I know it’s not the filmmakers who make the decisions about distribution. Once the pandemic truly subsides and people feel safe to go back theaters, will they? Some believe audiences will want to keep seeing films at home. I certainly do. Yet watching a horror film is a communal experience and nothing compares to that exhilarating moment when a room full of strangers gasps in fear at the same time. But the gripes about theater experience that was – rude audiences, bright cell phone screens popping up, and terrible overpriced food – is the reason many won’t want to return. There are glimmers of hope, like the one heralded by the Alamo Drafthouse Cinema who is cultivating a better movie going experience. With zero tolerance policies for rude behavior, wait staff, a gourmet menu, comfy assigned seating with tables, it’s the experience I would leave the house for. We can’t go back and settle for what came before, otherwise all the change in vain.


 

Further Reading:

From ‘Blair Witch Project’ to ‘The Exorcist’: The Most Profitable Horror Movies at the Box Office https://variety.com/2020/film/box-office/horror-box-office-profitability-1234815848/

The Pros and Cons of WB's Industry-Shaking HBO Max Move https://www.ign.com/articles/the-pros-and-cons-of-wbs-industry-shaking-hbo-max-move

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