Upsetting the Apple Cart

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The old adage “When it rains, it pours” was certainly appropriate as we perused the entertainment industry news this past fortnight. Perhaps the item that will have the biggest impact on the motion picture industry is the recent announcement that Netflix and The Weinstein Company have signed a deal to release the sequel to Ang Lee’s Crouching Tiger, Hidden Dragon simultaneously on Netflix and in select IMAX theatres around the world.

Netflix is consciously upsetting the apple cart and is aiming with both guns drawn to ambush the traditional theatrical release pattern. In making this deal, they have bypassed the normal theatrical run. If this was the only overt action by Netflix, the industry could roll with it, albeit certainly not like it, as there have been other examples of companies going out simultaneously with premium VOD and theatrical releases.

But two days later, Netflix issued an even bigger challenge to the motion picture industry by announcing plans to team with Adam Sandler and Happy Madison (Sandler’s production company) to produce four films during the coming years. This announcement really caught the industry by surprise, as Sandler has a longtime first-look deal at Sony.

We all know how digital has changed the industry, and now it appears that there will be a lot more change on the horizon. The entire structure of releasing films is now under attack and exhibition needs to be very concerned about preserving their 90-day exclusive theatrical run. To make matters worse, Netflix has also announced its intention to spend $3 billion on original content in 2015 alone. How many other deals will be forthcoming? How many other performers or filmmakers will jump at the opportunity for a big payday and a long-term arrangement?

Exhibition as we know it could be in the fight of its life. Already the major U.S. circuits have expressed their outrage at the Weinstein/IMAX deal and have publicly stated that they will not play Crouching Tiger, Hidden Dragon: The Green Legend on their IMAX screens. We applaud them for this action. Exhibitors must continue to upgrade their theatres so that the best home-entertainment systems will pale in comparison. Giant screens, extraordinary sound systems, plush seating and the aroma of new and varied foods all serve to get potential patrons out of their homes on a Friday or Saturday night.

Although digital is allowing companies like Netflix to operate in this industry, exhibitors stand to benefit the most by using digital projection systems to expand their offerings to live events such as the opera, ballet, sports and concerts.

Now let’s move on to China. Chinese box-office revenue rose 32 percent in the first nine months of the year to hit $3.55 billion, already nearly equaling last year’s 12-month total. Forty-five films this year reached the symbolic 100 million yuan ($16.17 million) mark. Total box office in 2013 was $3.55 billion (21.8 billion yuan).

The top ten is divided between domestic films and four foreign films. The best-performing movie so far this year is Transformers: Age of Extinction, which took in $320 million. The biggest-performing domestic movie was Hong Kong director Poi Soi Cheang’s 3D fantasy epic The Monkey King, which earned $160 million. The third-biggest movie was X-Men: Days of Future Past, which tallied $118 million, followed by Captain America: The Winter Soldier at $117 million. This year’s box office looks on track to exceed $5 billion.

Still to come is the October National Day holiday, a big cinema-going event in China, and there are some major titles scheduled for later this year–Guardians of the Galaxy is due to be released, while Jiang Wen’s 3D epic Gone with the Bullets, a sequel to the hit 2010 film Let the Bullets Fly, is due to open in December.

Meanwhile, China’s Dalian Wanda Group Corp. is setting aside $163 million (one billion yuan) annually to attract movie producers to its yet-to-be-completed super-studio in Qingdao, Oriental Movie Metropolis. Wanda’s billionaire chairman, Wang Jianlin, has predicted this will be the largest studio in the world, likening it to a “Chinese Hollywood.”

“Sometimes you have to go back to move a little forward,” but, in our final piece of jarring news, what some film companies are doing to feed the ego of director Christopher Nolan is just crazy. After getting the industry to spend billions of dollars to convert their cinemas to digital, two studios are asking theatre owners to step back in time if they want early access to Nolan’s Interstellar. Paramount and Warner Bros. are allowing theatres that are equipped with 35mm and 70mm projection to open Interstellar two days early. At press time, it appears that some 240 theatres including IMAX screens will participate.

The exhibition community is a bit confused over the message being sent, especially since Paramount was one of the first major studios to stop distributing 35mm film. With 92% of the world converted to digital, exhibitors have to unpack the mothballs to take out old 35mm equipment. Obviously Mr. Nolan, a strong advocate of film, has enough clout to make this happen. And many exhibitors are saying, “It makes no sense to step back in time.”

Celebrating Malco and Reynolds
Last year as the industry was heading to ShowEast in Hollywood, Florida, we were projecting a record box office for 2013. Things are a bit different this year, as we experienced one of the worst summer seasons in history. Although the industry is anticipating a full-year slide of about six percent, the environment at ShowEast will be happy and enthusiastic. Year-end films look promising and 2015 on paper could set more records with titles like Star Wars, the new James Bond, Tak3n, The Hunger Games: Mockingjay—Part 2, the new Mission: Impossible, Ted 2, Fast & Furious 7 and The Avengers: Age of Ultron.

Two things happening at ShowEast this year that are particularly noteworthy are the kickoff to the 100th anniversary of Malco Theatres and the presentation of the Al Shapiro Distinguished Service Award to Stan and Jody Reynolds. In addition to prepping for their centennial, Malco Theatres is also the recipient of the Salah M. Hassanein Humanitarian Award. The family-owned circuit is being cited for its contributions to the industry and to the community by raising money for many charities.

Jody and Stan Reynolds are wonderful and kind people. They have built Reynolds & Reynolds into one of the largest independent insurance agencies in Iowa. But their real love is charity and giving, and perhaps that is why they have both held the position of president of Variety International and helped Variety raise millions of dollars. FJI salutes their philanthropy and care for those less fortunate.