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Business Impact

Bubble May Burst Hollywood

The release of Bubble simultaneously in movie theaters and on cable television may change the way entertainment is served up.

Do you have plans tonight? Feel like going out to a movie or just staying in and watching something on cable? For director Steven Soderbergh and entrepreneur Mark Cuban, your answer is irrelevant. They have a movie for busybodies and homebodies alike, and their experiment may help change the way film and television shows are released.

Today is the release date for Bubble, a new film directed by Soderbergh and released by HDNET Films, an upstart film company cofounded by Cuban. Setting Bubble apart from, say, Nanny McPhee and Big Momma’s House 2, two other films debuting on Friday, is that the film will be available in cinemas and on the HDNET cable channel on the same day. What’s more, just four days later, it will be out on DVD. In other words: there will be no “window” between its theatrical release and its availability for home viewing.

The gap between theatrical release and viewership on cable and home video sales has been shrinking steadily for some time. In 1993, the average time between theatrical debut and availability on video was 191 days. By 2003, it had shrunk to 155. Occasionally, poor-performing titles will be rushed to DVD, to capture any remaining interest in them; but Bubble’s release is the first time a film is set for both a theatrical and cable television release.

Soderbergh and Cuban aren’t the only ones compressing that sacrosanct window of time: at the Sundance Film Festival this week, the Independent Film Channel (IFC) announced a program called “First Take”, whereby the company will release 24 films throughout 2006 that will open both in theaters and on on-demand channels available through most cable companies.

Not surprisingly, these simultaneous release dates have riled many in the theater industry. In a press release, John Fithian, president of the National Association of Theatre Owners, argued against eliminating the “$25 billion-plus worldwide theatrical window without a very solid assurance that even more DVD sales will make up for the lost theatrical revenues.”

But theatrical revenues have been diminishing steadily as a percentage of overall revenues for the movie industry. In 1980, 55 percent of industry revenues came from theatrical showings. In 2005, the trend was in full swing: roughly 85 percent of revenues came from home video sales. As a result, the time before a home-video release has shrunk, as DVD revenues have encompassed more and more of the movie industry’s overall revenues and profits. And, of course, studios are rushing to collect those home video sales.

The potential audience for Bubble – an independently released, cinema verite movie shot with no big-name actors – is likely quite small. But consumer interest in gaining greater flexibility in how they view any media is huge.

And that flexibility is becoming increasingly possible, in large part, because of technological advances and the new business models made possible by these advances.

Consider the success of video sales on Apple’s iTunes Music Store. The company hasn’t released total video sales figures since October 31, 2005; but on that date it announced sales of one million video files – less than 20 days after the video store launched. What’s more, those sales have been touted by some studio execs as the reason behind the sudden ratings increase for two television shows available on the store: The Office and Lost.

Whether that particular relationship is correlational or causal is debatable – but not the popularity of free video services offered on sites such as YouTube and on the major networks’ sites. A case in point: the short humor clip “Lazy Sunday” first aired on Saturday Night Live in December, then quickly reached water cooler status when it was posted on the YouTube site, where it has been viewed more than four million times in one month – with no promotional effort.

Meanwhile, with broadband adoption in the United States now at more than half of all households, media companies such as NBC and CNN are flooding their sites with free video – and selling lucrative ads around the content. Miss an episode of The Daily Show? No problem: catch the entire show on ComedyCentral.com the next day. It’s a 180-degree turnaround from the previous model of forcing consumers to pay to view the clips online.

This loosening of the gatekeeping role traditionally held by media companies of all colors and stripes marks a profound shift in the relationship and expectations held by consumers about media consumption.

“Consumers understand the immediacy of content distribution through experiences with e-mail attachments, downloads, and streaming,” says Cuban. “If you can e-mail me the video or picture of your kids 10 minutes ago, a studio can make content available just as quickly.

“Convergence is over; we are now digital,” Cuban says. “One hundred percent of content can now be distributed digitally.”

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