Taking a Wider View: NATO's John Fithian and Patrick Corcoran call for global communication

Cinemas Features

“No comment on the production mess-up,” John Fithian tells us on the morning after the Oscars, dialing in from the Los Angeles office. “We have a series of meetings this week with studios and technology companies to discuss cinema technologies. Before CinemaCon, we always try and make the rounds to make sure we know about the latest developments, so that we can have intelligent discussions during the convention.”

The president and chief executive officer of the National Association of Theatre Owners elaborates that these tech talks involve high dynamic range, immersive audio and laser illumination. “It is nothing earth-shattering, but just some good developments made possible by digital cinema… We are always looking to examine new developments that make the experience for our patrons better. Then, of course, we need to balance those developments against the business model. In the end,” he foresees, “many of these new technologies will work well in some cinema locations…but not be economical for everywhere.”

Fithian says it works well to combine a full week of tech business with one day “full of all the fun festivities” related to the Academy Awards. After multiple viewing- and after-parties, “I ended last night at Lionsgate and they were very gracious and proud for getting multiple big awards and recognition for La La Land. They just described the end as ‘Well, that’s Hollywood, and we have to roll with the punches.’ So, despite the snafu at the end, they were in good spirits about a movie that did really well with our audiences.”

About this year’s lineup of Oscar candidates, Patrick Corcoran, NATO VP and chief communications officer, noted that almost all of them were still in theatres. “They have really increased their theatrical revenue with the attention that the Oscars gives them, along with Golden Globes and Independent Spirit Awards. There is a lot of life left for and interest in these movies. Audiences are very tight with their dollars and they need to know that what they are going to see is going to be worth their time and money. That becomes one of the real values of this whole award season. And that audiences are given a chance to see them in theatres where they should be seen.”

Corcoran has joined the conversation to talk about one primary theme for CinemaCon 2017—the enduring success of our business. “If you look at domestic theatrical exhibition, we had nine straight years with over $10 billion in ticket sales. We had record box office in five of the last seven years, including the last two with both grossing over $11 billion for the first time. There is just real strength in terms of the revenue that is coming into the industry.” Add to that about another $5 billion in concession sales, based on per-capita that the major exhibitors are reporting in their quarterly returns. This growth happened, he continues, “while we have seen a dramatic shrinkage in home-video revenue, which has been cut by more than half since 2004. So, with international box office also up to around $28 billion,” looking at preliminary calculations, Corcoran lauds “the importance of theatrical in the entertainment ecosystem…while maintaining a fairly stable level of admissions over this decade.”

Whereas most countries around the world count actual admissions, North America still relies on estimations based on average ticket prices. “One thing you should know is, when we calculate the average ticket price, it is based on actual admissions,” Corcoran emphasizes. During the quarterly surveys, the top ten circuits that represent at least 60% of the screens in the U.S. all participate. “What you are getting are real admissions from the top markets across the country. So, if anything, the average ticket price that we report is probably a little high because we do not always get the smaller companies that do not have the staff to keep track and may not be members. I think the admissions that we get are pretty accurate but may actually be a little low.”

Are we going to see 2017 as another year on the high end? “We are not big on making predictions,” Corcoran replies, “because the audience always decides. There are always surprises of movies that way overperform and some that do not meet expectations. It is interesting to note, however, that before last year, everybody was pointing at 2017 as the year that was going to be huge… The industry in general is very confident about how this year is going to turn out,” he believes. “It looks really, really solid and the audience will tell us.”

According to media companies and affiliated film studios, audiences have been telling them that they want their films—and other content—in a convenient, all-accessible way and in a very timely fashion. To John Fithian, issues such as “premium video on demand and where the outer, lower-priced windows are going” are nothing new for NATO. “For years, we have championed the concept that distributors and exhibitors should work together as business partners to evolve models in a way that helps everyone. And in the past, we did have several rounds of meetings…encouraging everyone to sit down and talk,” he confirms. “Once individual companies begin to engage in real discussion of specific business models, as a trade association, we then step out of the process and let companies engage in those discussions.” While “not privy to the specific competitive terms,” Fithian and the NATO team “hear that productive discussions are taking place. As NATO, we were in the media as well, when a studio executive said something about that subject.” That said, “our preference and that of our membership is not to discuss those things publicly.”

Fithian notes that during quarterly investor calls, many member companies announced that they too would like to work out the models with their business partners first. Admitting that these issues are “very complicated,” Fithian encourages the discussion process and does not believe there will be any announcements at CinemaCon. “But I can certainly say that a great number of distributors and exhibitors are committed to the process of finding a model that includes both a premium VOD offering and some stability on the rest of the windows.” The goal is to grow the pie together, and not to be “fighting publicly about where the windows should go.”

What not so long ago was a rather public fight between Fithian and Ted Sarandos, chief content officer of Netflix, has since matured into something that the former finds merely annoying. To Fithian’s credit, he only agrees to the term when prompted by this author. As always, he has a positive counterexample at the ready, with Amazon Studios. “Five years ago, you would have said, ‘Why are people who represent theatre owners hanging out with streaming services?’ Well, here is why, both the good news and the annoyance. When looking at its Amazon Prime customers, Amazon learned that they like the fact that movies did well in cinemas and established their artistic credibility in the cinema environment before streaming. So, Amazon made a considered business judgment to respect a theatrical period of exclusivity, by taking their content to their customers later. When they did that, we brought them to CinemaCon last year for a great presentation. It was the first place that our members got a taste of Manchester by the Sea, which then turned into a tremendous hit.”

The involvement of Amazon and other new players like STX Entertainment, A24 and Bleecker Street is part of what Fithian sees as a welcome mini-resurgence in diverse product. “What do I mean by that? We have seen with some trepidation how the major studios shrink their slates and increase their production and marketing budgets to focus primarily on a tentpole strategy. And that’s great at the top.” But we also need mid-budget films. “Those are perhaps films with a more serious theme,” Fithian finds. “We are very, very, very pleased with the evolution of new companies that are stepping in to take on that mid-target range movie… We are encouraged by the fact that these new players see the value of producing alternatives to the four-quadrant, gigantic blockbusters, because we need those films too, to provide choices to our customers.”

And giving it to them in cinemas first and foremost, Fithian believes to be “the way in which the modern streaming services can work with our industry.” Unlike the other model that is cause for Fithian’s annoyance and that of many others. “With Netflix, I continue to be concerned about a business model where, for one monthly fee, customers can watch all kinds of content to the point where it becomes homogenized in their minds… This is not a differentiating model of something being special for the cinema and being different from product made for the home. Every time we see the Netflix leadership talk about how the cinema experience is not relevant and how they do not need it, that is annoying to us. We believe there is a way that the cinema and the home and streaming can live and grow together. To kind of sum this up: We think Amazon got it right and Netflix got it wrong.”

Ever the politician, Fithian also finds something good in the Netflix position, mentioning a recent article in the Financial Times. “Ted Sarandos basically announced that they are not interested in theatrical anymore and that they are going to let other people do that. So, I think Ted has come around to our way of seeing things… His interest in exclusivity mirrors ours. Exclusivity has a real business value for theatres and has a business value for Netflix. And both are going to be pursuing those values in our respective business models.”

A theatrical business model that has global impact is the second theme that Fithian has identified for CinemaCon. (As well as NATO chairman John D. Loeks, also profiled in this issue.) “The industry is going through substantial consolidation and it is international in scope,” he elaborates. “Our membership base is much more international than it used to be. We have members now in 87 countries.” With that, he has noted, also comes the interconnectivity of topics that are important to exhibitors. “When Patrick and I started some 20 years ago, the issues were predominantly local in nature: what local governments did, how local industry partners related to each other.” Since these issues still exist, “there remains a need for local trade associations…but the bigger issues today are truly global in nature.”

Fithian begins his list of common topics with content theft. “It does not matter where a movie is stolen around the world, it affects exhibition everywhere once it is stolen. Release windows, as we just discussed earlier, are a concern for exhibitors everywhere and so are technology issues… All these issues are tremendously global.

“At the same time,” he continues, “we believe that open global economic policies are good for our business.” Fithian names several current examples. “United States immigration plays a big role, because Hispanics are the largest source of immigrants and they are also the most frequent moviegoers. If you think about free trade, Alejandro Ramírez Magaña, chief executive officer of Cinépolis, was quoted recently that the company buys popcorn from Iowa and Illinois. If the free trade agreement between the U.S. and Mexico were to go away and drive up prices, he said, they would probably have to shift popcorn buying to Argentina.”

Equipment import duties are another industry-wide concern. “Our very sophisticated theatre equipment is not manufactured in every country and most members have to import it. As many countries impose duties or restrictions,” Fithian insists that open global policies are better for our business. “I think in a day and age where many in the world are thinking to look inward and take a more nationalistic view, we would urge on behalf of our business, and others like us, that the global community stay connected.”

Obviously, CinemaCon 2017 will be a good place to do just that.