Hollywood Ending?

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Billionaire entrepreneur Mark Cuban keeps a list of things he might like to try, just to challenge himself, but isn't sure he'll ever actually do. He calls it his NFW (No F--ing Way) List, and at one time, being a player in Hollywood was writ large there.

But now, as another entertainment mogul seems to bolster Mr. Cuban's renegade ideas on changing the way feature films are released-to simultaneously deliver films to consumers on pay TV, big screens or laptops-it doesn't seem like such a pipe dream after all.

Support came from none other than incoming Walt Disney Co. Chief Executive Robert Iger, who said during a recent call with analysts that it could make sense to release films in theaters and on DVD at the same time. And while Warner Bros. Chairman-CEO Barry Meyer and News Corp. President-Chief Operating Officer Peter Chernin haven't gone as far-they remain committed to keeping releases separate-they too admit that the traditional distribution model is under siege.

Mr. Cuban, the outsize and outspoken technology pioneer who owns the aptly named Dallas Mavericks and has starred in a short-lived reality TV show, spends the majority of his time these days studying digital entertainment and how to offer it to consumers when and where they want it. In doing so, the executive who lists among his marketing role models Bill Gates, Dennis Rodman and Paris Hilton is rattling a $9.5 billion theater industry already reeling from surging home-theater sales and competition from other entertainment options like video games, the Internet and video on demand.


Consider: Box office was down 9.4% compared to 2004 for the summer and film grosses for the year are down 7.4%. The dearth of major hits is bad news for fourth-quarter home video, which usually buoys studios' bottom lines. Films often pull in 60% of their total grosses in the home- entertainment market, which has slowed considerably from its triple-digit growth heyday. All the more reason, Mr. Cuban thinks, to upend the current distribution system.

"We're not saying we're right and everybody else is wrong," said Todd Wagner, Mr. Cuban's partner in 2929 Entertainment. "We're saying, `Isn't this worth considering?"'

While Mr. Cuban has been called a hotheaded frat boy, he's also a successful one. His 2929, a vertically integrated mini-conglomerate created by the partners after selling their streaming media service Broadcast.com to Yahoo for $5.7 billion at the height of the dot-com boom, includes high-definition pay-TV channels, entertainment production and distribution, classic TV series' libraries, and the Landmark theater chain. The principals are in talks with studios to distribute their movies on DVD to major retailers, and they're nearing a deal with a marketer for an ongoing promotional relationship.

But the heart of Mr. Cuban's plan is simultaneous film releases, in which the movies his company produces will be available to consumers across a number of media platforms at the same time. Theater owners say it threatens their very existence. So heretical is the issue, in fact, that the theater owners' trade group president publicly struck back at Mr. Iger for his recent comments. "We consider simultaneous release to be a death threat to theaters," said John Fithian, president of the National Association of Theater Owners. "It would devalue the product."

It's far from the first time Mr. Cuban has shaken foundations. An over-the-top cheerleader for his own team, he's been fined more than $1 million by the NBA for courtside rants in the five years he's owned the Dallas Mavericks. He's now taken his outspokenness to the blogosphere, using it as a forum for his opinions on referees to politics and recently, to debunk reporting in a New York Times story that claimed he was angry that Register.com, in which he is the second-largest shareholder, sold for too low a price.

Now Mr. Cuban is turning his rabble-rousing to the film industry. "He creates disruptive models-he stirs the pot," said Curt Marvis, CEO of CinemaNow, a video-on-demand broadband service that sells films, music and TV shows. "And he's had great success at doing that."

Mr. Cuban argues there is money to be saved in marketing a film once, not twice. He believes there's money left on the table by entertainment companies not willing to cater to a consumer- and technology-driven environment. And while he does not think simultaneous releases will cannibalize movie-going, he says it would open up new revenue streams from the huge percentage of the population that regularly stays away from theaters.

"There's an analogy with sports. The more you put games on TV, the more people go to games," Mr. Cuban said. "It's a different experience." He's also willing to share ancillary revenue with theater owners who show his movies, giving them a cut of DVD proceeds that major studios have never offered. It's more efficient to market a feature release and its DVD at the same time, rather than spending for each life stage, and it's cost effective to shoot a movie in high-definition digital format, Mr. Wagner said. The approach eliminates print costs, which can run into the millions of dollars, and shaves time from start to finished product. In the space of a year, 2929 has 10 films completed and nearing completion, a fraction of the time the process takes at a major studio.

`How do you know?'

The studios have always followed the sequential release pattern-theatrical, DVD, pay-per-view, airlines and so on-because executives think it wrings the most money out of a property. Mr. Wagner isn't convinced. "How do you know?" he asked. "These are public companies, though, where people are afraid to take risks because they could lose their jobs."

The subject of simultaneous release is practically verboten at Hollywood studios because executives do not want to ruffle the feathers of their front-line clients, the theater owners. They will admit, however, that they're watching Mr. Cuban and Mr. Wagner's company closely.

"It's a totally interesting and exciting approach," said Jeff Blake, Sony Pictures Entertainment vice chairman. He's not ready to make the leap, though he said day-and-date releases could work for certain smaller pictures. "We're still betting on being able to create events in theaters that will draw in audiences, and then sell that movie in subsequent platforms," Mr. Blake said. A simultaneous-release strategy could hack into the life of a movie, where "they'd come and go very quickly," Mr. Blake said. It could work for some films, but not for an entire major studio slate, he said.

Paul Dergarabedian, president of box office tracking firm Exhibitor Relations, said theater owners see the new model as a slippery slope. "They think it could be the first step toward the end of their business," Mr. Dergarabedian said. "At the same time, the consumer wants more freedom of choice. We're really at a crossroads and headed for a major tug of war."

Upgrading environment

2929 Entertainment's clout will depend on the movies it releases, said Stuart Litman, president of FilmMovement.com, a company that's sort of a cross between Netflix and Book of the Month Club for art-house films. "As soon as they have a big hit, with critical notices and awards, then theater owners will be calling them, wanting that movie on thousands of screens," he said. Consumers already know that a movie will be available on different platforms eventually, and Mr. Litman favors studios selling DVDs at theaters so a fan could buy the title on the spot, making the most of the marketing dollars spent to open the movie and capitalizing on its top-of-mind status.

The simultaneous-release issue could drive Hollywood to produce more special effects-driven, must-see-in-a-theater movies. It could also spur theater owners to upgrade the movie-going environment, where consumers complain about pre-movie ads, high ticket prices and rude patrons. "Is it an experience or just a venue?" asked Mr. Litman.

Although there's some skepticism, no one is dismissing Mr. Cuban & Co. What is likely to tip the scales is the signing on of a brand-name director like Steven Spielberg to the simultaneous release plan or a monster-hit delivered that way from 2929 or another company.

Mr. Cuban is steeped in the financial and strategic side of his company, but he also has become enamored of the creative process. He reads all the scripts at 2929 and personally greenlights the movies the company will make, with recommendations from Mr. Wagner and his team.

In true Hollywood fashion, he's working on a script, but he's keeping the details close to the vest. It was bound to happen. After all, it was on the list.

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