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Will OTT Mean the Death of the Movie Theater?
Not quite, but as consumers demand more flexibility in the ways they access content, the movie industry needs to be prepared to change with the times

[This is a vendor-contributed article. Streaming Media accepts contributions from vendors and publishes them solely on their value to our readers.]

Digital is king. OTT is the way to go. Mobile is the future! At least that’s what everyone is saying. If that’s true, does this mean the theater-going experience is dead?

You wouldn’t think so. With a record $11.4 billion in domestic box office revenues reported by comScore in 2016, the film business should be rock solid. According to comScore, twenty-eight films passed the $100 million tier in total earnings in 2016, versus 27 in 2015, and eight films grossed more than $100 million in their opening weekend, while only six achieved that mark in 2015. As of April, box office revenues for 2017 were 6% higher than in 2016, setting up this year to be the biggest revenue-generating one in North American box office history.  

Still, there’s cause for theater owners to worry.  Studios have long struggled with declining home entertainment sales, which fell from $24.9 billion in 2004 to $12.5 billion in 2016, according to Deadline Hollywood. And they need to recoup those losses somehow. Major studios like Fox and Warner Bros (which hold 13% and 17% of the market share, respectively) have indicated their interest in offering movies on TV during what has been historically the theaters’ 90-day premium window as a possible additional revenue stream.

Naturally, theater owners are concerned. Patrick Corcoran of the National Association of Theater Owners (NATO) told Deadline Hollywood that NATO's main issues center around the "price studios would charge home viewers, how much exhibitors would be paid, and the length of the lower-priced window."

So will theaters filled with the inexplicably intoxicating aroma of buttered popcorn soon be a thing of the past? No, and with recent box office highs, they aren’t going to be a relic anytime soon. But that doesn’t mean they are safe either.

Studios are hopping on the bandwagon, as they realize the TV ecosystem and broadband/mobile landscapes are evolving. And if they haven’t yet, they soon will be.

Ampere Analysis reported that the pay TV market as a whole reached $204 billion in 2016, and surpassed TV advertising as the biggest source of funding. The firm also projects that by 2021, OTT subscriptions in the U.S. and Western Europe will surpass traditional pay subscriptions as the way to watch TV.

comScore reports that while live TV still dominates the market, OTT isn't terribly far behind. Both Hulu and Netflix lead the way in monthly viewing hours, while Netflix and YouTube have penetrated more of the market. This, in part, has to do with the type of content OTT services are delivering.

The Wit, which helps producers, broadcasters, distributors and advertisers dissect the ins and outs of the industry, reported that the number of  "extra territorial" drama titles from Netflix, Amazon, Hulu, and YouTube Red shot up 110%, from 31 in 2015 to 65 in 2016.


Graph courtesy of comScore


Combine that with the FCC’s initiatives to encourage broadband internet providers to provide higher-speed product offerings in underserved areas of the rural U.S., and that is bound to upset the balance of the current industry climate. 

The continual rise of digital platforms can't be ignored.  More and more companies are popping up, hoping to capitalize on our addiction to content. A new OTT platform will come out of the recently created Oath Division of Verizon, which already has Fios TV and the mobile app Go90. Blackpills is a digital media company that creates short-form content via an app that is free to download. The app targets millennials who grew up in a culture where binge viewing is the norm and aims to air new shows each week. Then there is Premium Platform Japan, a new investment with six of the most prominent media companies in Japan, including broadcaster TBS and newspaper publisher Nikkei.

Is digital changing things? Yes. In the future, will we all watch the newest blockbuster on our couch? Maybe. At the end of the day, it boils down to how consumers want to ingest content. Movie theater viewing isn’t dead, any more than mobile is the singular choice for viewing consumption. Die-hard movie fans don’t mind spending the extra money for the experience, while there are others who prefer viewing from the comfort of their own home or on the go. But one thing is certain: Consumers like options, and that trend is not likely to change.

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