Hoping Bubble Doesn’t Bust

Date January 26, 2006

As usual, I seem to be completely unaware of something that has apparently been making a bit of a buzz in the entertainment industry. Steven Soderbergh is releasing a new film, and the film itself is not what’s creating the buzz. Bubble is being financed by Mark Cuban (owner of the Dallas Mavericks, star of a really bad reality TV show, and general half-crazy/half-genius guy) and his partner, Todd Wagner, who own (among other things) the Landmark theater chain. They are releasing the movie simultaneously (roughly — within four days) in theaters, on DVD, and on cable (high definition, at that). Obviously, this breaks the normal pattern of theater first, then DVD release, then cable release (and, ultimately, broadcast TV release, if there’s money to be made there).

Theater owners are up in arms about this experiment (Soderbergh and his partners freely admit this is an experiment — the movie itself is low budget, with no professional actors). I’ve heard some representatives of the theaters argue that this approach, if it goes mainstream, will put them out of business, as they are already operating within razor-thin margins. Now, it is hard for me to believe that, at $6-8/ticket plus airport prices for popcorn and soft drinks, with flexibility to pull movies that aren’t filling up (or cut back the number of showings), that these guys are really back-to-back releases of Showgirls and GI Jane from bankruptcy. If the industry is so brutal, why is there another gargantuan, stadium-seating venue going in every six months in Austin? It can’t be non-lucrative and booming at the same time.

Another argument I heard by a representative of theater owners was that it is simply not the same experience to watch a movie at home on TV, as compared to watching it in a theater. His case was as much about the communal experience of a theater visit as it was about the large screen and surround sound. His statement was something along the lines of, “It’s just not the same to watch Shrek without having a lot of kids laughing at the jokes around you.” Um. Yeah.

The traditional approach seems like a classic revenue-maximizing, demand curve-based ploy. Start with a higher priced good (the theater) and get all of the people who are willing to pay a higher price to see the movie early to buy it. Once that starts to taper off, release a lower-priced offering — DVD rentals. Again, there is the spike of new release rentals (higher priced) and then plain old rental (lower priced). Finally, release on cable, where, presumably, the royalty back to the moviemakers is its lowest. That is all well and good, I guess, but this really boils down to just charging more for how quickly someone gets to see the movie — not necessarily charging more for the heightened experience. Time is the key element.

In my case, my wife and I see 1-3 moview per year in the theater. The math is pretty simple for us. With three young kids, we pay about $10/hour for a babysitter. So, on top of the high ticket prices and snacks, we’ve got to tack $20 for the person who is watching our kids while we see the movie. If we try to grab a meal before or after the movie, the price of the evening just keeps going up. We don’t really go out on dates so we can sit next to each other and not interact. Sometimes, we’ll combine dinner with a movie at Alamo Drafthouse (a great concept for a movie theater — eat medium-quality food while watching the movie). But, the fact is, we just can’t manage to get out all that often, so DVD rentals are our only viable choice. Even with those, we don’t really manage to rent all that often.

So, maybe I’m weighing in on something that I don’t have any business having an opinion on — I’m really not that much of a movie watcher. Then again, maybe I’m not much of a moviewatcher in part because of the current model — by the time a movie is to a point that I can manage to watch it, the promotion and buzz around it has long since faded away, and nothing reminds me that I was interested in it when it first released.

This line of thinking triggered me to ponder something I reallly do care about and do do on a regular basis — read books. On the one hand, the fact that books get released in hardback first (higher margins) and then paperback once the hardback sales taper off could be viewed as a similar situation. If anything the differences in the “experience” of reading a hardback versus a paperback is much subtler than the difference between big screen and 27″ TV movie viewing.

But, somehow, I’m still okay with the publishing model. When I do get a hardback, I’m more likely to hang onto it and pass it along to others to read — they are more durable. So, there’s a “public good” (sorry, Dr. Huber) aspect to them, marginal though it is.

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