Could Margin Call Upend the Hollywood Business Model?

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JoJo Whilden / Roadside Attractions / AP

Last weekend, Margin Call opened in movie theaters the same day it became available via video on demand. What happened next defied all expectations.

Between 56 theaters, the indie financial drama grossed a total of $561,904; on average, that adds up to a whopping $10,034 per screen (any movie that registers $5,000 per screen is generally considered a smash hit). But many of those who went to the theater on opening weekend also had a choice: Margin Call was simultaneously available for discounted purchase via Time Warner Cable, Blockbuster On Demand, iTunes, Dish, etc. In some markets, the VOD option was nearly 40% cheaper than the cost of a movie ticket.

It isn’t news that independent film distributors are increasingly turning to early video on demand as a means of reaching a wider audience and creating an additional revenue stream. But what’s revealing about the Margin Call episode is this: The conventional line of thinking among movie theater owners appears to be that if you offer moviegoers an alternative, they will abandon the multiplex. It is precisely this philosophy that sparked the recent firestorm over Tower Heist: Theater owners were outraged by Universal Pictures’ plan to release the movie for $59.99 via video on demand only three weeks after opening night. Several theater chains threatened to boycott, and Universal reversed course.

But the success of Margin Call raises the prospect that theater owners have it all wrong, that alternative ways of watching a movie actually increases the number of people who will pay to see it without subtracting from their coffers. “The video on demand component may have simply increased awareness and exposure for the film,” says Jeff Bock, an analyst with Exhibitor Relations. “I think it proves what a social activity filmgoing is; people say that piracy will hurt moviegoing, but the most pirated movie of all time is Avatar and that still did huge business at the theater.”

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That said, it’s easy to understand why theater owners are nervous. Box office attendance has been sluggish in recent years. In fact, the New York Times crunched the numbers and found that this summer marked Hollywood’s worst blockbuster season since 1997. Still, I have looked at these stats and trends and come to a much different conclusion. I believe the moviegoing public has already divided itself into two camps: There are now those who are eager to rush out to the movie theater during opening weekend, and then those who are perfectly fine just waiting for the DVD or VOD, whatever the window.

Hence Margin Call. There are people like me, who want to experience a film in the theater, and then those like my mother, who prefers to avoid the crowds. And if every movie adopted a day-and-date release strategy like Margin Call, it wouldn’t be cannibalizing its audience so much as adding to the pie, ensuring that both my mother and I could see the film on the same day.

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Of course, there are numerous caveats in the case of Margin Call: The video on demand release wasn’t heavily publicized, and the studio has said it won’t be releasing the weekend VOD numbers, meaning there’s no way to calculate the film’s total weekend reach. Also, at only 56 screens, it is competing in a different league than a wide release like Tower Heist. “Until a big project finally tests the waters, we won’t know if the theater owners are right to be worried,” says Bock. “Maybe Margin Call will send down ripples and finally get a studio like Weinstein to go out and be the first one out of the gate, marketing a nationwide day-and-date release.”

Until them, the film’s considerable success does leave one wondering if theater owners are operating under a flawed assumption. Extrapolating the Margin Call example, is it all that difficult to imagine an independent release finding success both via VOD in markets where it would never normally open theatrically and via major market art houses, where cineastes are committed to upholding the theatrical experience? And isn’t it possible that a blockbuster would find similar success? After all, there are those moviegoers who demand big screens, loud speakers and the opening night buzz of the theater, and then those who wait the 90 days for the DVD, in a bid to avoid the chaos and costs of the cinema.

It may not be conventional thinking among theater owners, but isn’t it possible that both summer blockbusters and indie darlings could find success with wider audiences via day-and-date?

Now all eyes shift to Nov. 11 and Melancholia. Lars Von Trier’s new film, starring Kirsten Dunst, has been widely available via video on demand since Oct. 7, but if its opening weekend theatrical receipts hold strong despite this unprecedented pre-release, Melancholia may be the strongest counterpoint yet to conventional VOD attitudes.

Steven James Snyder is an Associate Editor at TIME. Find him on Twitter at @thesnydes. You can also continue the discussion on TIME’s Facebook page, on Twitter at @TIME and on TIME’s Tumblr.

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