Duo scripts new Hollywood rules

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Oscar-winning filmmaker Steven Soderbergh is teaming with flashy entrepreneur Mark Cuban on a game-changing plan that could rewrite Hollywood's business model and shatter movie marketing conventions.

Their ambition is to create and simultaneously release six low-budget movies in theaters, on DVD, pay cable and satellite TV. But even before it's begun, the scheme is meeting resistance from theater owners who fear they will take a big financial hit.

The groundbreaking push comes as the $9.5 billion industry grapples with film piracy and on-demand consumers increasingly shunning the multiplex-all while trying to protect the core product and its even more lucrative ancillary life. "Technology is a freight train," said Todd Wagner, a partner in Mr. Soderbergh's venture; Mr. Wagner's 2929 Entertainment will shepherd the films across each of the platforms. "Let's find new models and ways to monetize it instead of trying to hold it back."

To try to keep pace, theater chains are upgrading their facilities and considering a joint marketing program to tout the uniqueness of the movie-going experience. Entertainment companies also looking at the timing of releases in theaters and on DVD. ("Your premiere will be in Wal-Mart," Warner Bros. Chairman-CEO Barry Meyer recently told a Hollywood audience.)

The industry's challenges are many. Some films are bootlegged and sold the same day they hit theaters. Films stay in theaters for shorter runs, with blockbusters taking up numerous screens at the multiplex, and those movies that don't perform are bumped quickly. Home-theater systems, now more modestly priced, are proliferating. DVD rentals and sales continue to explode, growing to an estimated $24.5 billion. Films generally make more on DVD than in theatrical runs.

Box-office revenue is still rising, with 2004's take of $9.5 billion up slightly over the prior year, according to the Motion Picture Association of America. But admissions-the number of people going to the country's 6,000 theaters-were down 2.4% to 1.54 billion.

Consumers who opt out of the theater experience can see the same movies at home quicker than at any time in the past. The time between a feature and its video release has dropped from an average of six-and-a-half months a decade ago to four-and-a-half months. Some are released as soon as two months after their theatrical run, as was the case with last year's "Surviving Christmas." DreamWorks SKG put the film out in October, and it hit DVD 60 days later. Universal released the Oscar nominee "Ray" three months after its theatrical debut, and Fox put "Elektra" on DVD within 80 days of its feature release.

Executives at the theater chain trade group, National Association of Theater Owners, said there's a proven business reason for feature-first releases. "Theatrical release is the engine that drives the train for all markets," said John Fithian, president. "It expands the other revenue streams." He argues that films would be devalued if feature-to-DVD windows keep shortening or simultaneous releases become the norm. "Hollywood movies would lose their luster and become more of a commodity and less of an event."

Regal Entertainment Group, the country's largest theater chain, won't show a film that has a simultaneous release on other media. "I do not anticipate that policy will change," said Dick Westerling, senior VP-marketing and advertising, adding, "The shrinking window concerns us."

`A NEW AUDIENCE'

Mr. Soderbergh, the filmmaker behind "Traffic" and "Erin Brockovich," is already working on the first film, a thriller called "Bubble," with a budget of less than $3 million. It will be distributed this fall through his partners' Magnolia Pictures, shown at their Landmark multiplexes, and aired on their pay cable HDNet Movies.

Their model aims to be cost-efficient and consumer-friendly. The films will be shot on digital cameras, saving print and film costs, and marketing for all platforms will happen concurrently. "We don't think this will cannibalize any revenue streams," Mr. Wagner said. "We think it will open up a new audience that doesn't go to the movies."

Mr. Wagner said he will discuss revenue sharing with theaters that run the films. He thinks he has a leg up in that he has an A-list filmmaker who can produce sought-after work, as opposed to much of the substandard straight-to-DVD product.

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