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Why Sean Parker's "Screening Room" Is Dividing Hollywood

Filmmakers like Steven Spielberg and James Cameron are facing off over Screening Room, Parker's proposal for watching new movies at home.

[Photo: Flickr user Dick Thomas Johnson]

One thing we know for certain is that more and more people are not going to the movies, preferring instead to watch films in the comfort of their living rooms. But living-room viewing generally means Netflix or iTunes, which usually means movies that have been around for a few months or more. So how much would those folks pay to see a first-run film—a big blockbuster, say, or a prestigious indie with Oscar buzz—while it was still in theaters? Sean Parker, the Napster founder and early Facebook impresario, has an educated guess: $50. That's the proposition that he and his business parter Prem Akkaraju are making with a new start-up called Screening Room that the entrepreneurs are pitching around Hollywood. The reactions are nothing if not vehement both for and against the company, with A-list filmmakers like Steven Spielberg and Avatar director James Cameron facing off over Screening Room and its implications.

The basic idea behind Parker's proposal is that all those people not going to the cinema actually do want to see movies. They probably love movies. But they might be parents with kids for whom a night at the local cineplex means up to $120 once you factor in the babysitter and tubs of popcorn. What Screening Room offers is the chance to actually save money and not have to carefully choreograph a night out—getting the kids fed and bathed before the sitter comes, etc. After paying $150 for the special set-top box, which is said to be anti-piracy, plus $50 for the movie, you get to simply sit back and hit play. You have 48 hours to see the movie, and an extra two tickets are thrown in to see it in theaters later.

Besides worn-out parents, Screening Room seems to also be targeting people of means who perhaps have their own screening room, or at least a very cushy at-home viewing environment, who would have no problem paying the $50. Not to mention younger people who could feasibly host a group viewing party and have everyone chip in to pay for the movie.

So why all the controversy? Naturally, there's been a swift back-lash from exhibitors, who see this kind of disruption as yet another wrecking ball to their already ailing, brick-and-mortar industry. Although AMC, the Chinese-owned theater chain, is said to be close to endorsing the deal, the National Association of Theater Owners has dismissed the strategy this week, saying it kills the "event" nature of opening weekend, which is what drives downstream revenue streams. The lobby group also made a not-so-subtle jab at Parker, saying that while new distribution models are perhaps needed in the industry, they should be figured out by studios and exhibitors, not "third parties."

Another theater group, the Art House Convergence, which represents 600 specialty theaters, including the Alamo Drafthouse, laid out even more granular gripes with Screening Room. A letter from the organization questioned how the system actually prevents piracy and how its economic model works. The Screening Room pitch is that for every $50 movie sold, exhibitors will get a $20 cut. "At first glance, an exhibitor may think it represents a small, but potentially steady, additional revenue stream," the letter reads. "But how will this actually be divided among the number of theaters playing the purchased title?; will exhibitors who open the title receive more than an exhibitor who does not get the title until several weeks later (based on a distributor's decision)?; who will audit the revenue to ensure the exhibitors are being paid fairly?; does this revenue come from Screening Room or from the distributor? … these are just a few of the issues yet to be explained."

Indeed, the details behind Screening Room and how it actually works remain murky at this point. Some studios have reportedly not even seen the Screening Room presentation. And the piracy question, in particular, is a big one, considering what great lengths Hollywood has gone to to crack down on the illegal copying of its products. What, exactly, is an anti-piracy set-top box, and how does it operate?

Photo: Flickr user BMiz

For now, the dialogue surrounding Parker's proposition is mostly big picture arguments and commentary about how people do—or don't—watch movies in 2016. The filmmakers backing the project—Spielberg, J.J. Abrams, Ron Howard, Brian Grazer, and Peter Jackson—make the point that too many movies are dead on arrival simply because the people who would most enjoy them are staying home. And Jackson has argued that something like Screening Room won't cannibalize a movie's theater audience, it will simply expand the audience overall. His point being that the people buying a film via Screening Room weren't ever going to go see the movie in the cineplex in the first place.

But Cameron, Cameron's producing partner Jon Landau, and Dark Knight director Christopher Nolan argue for the need to preserve the sanctity of the theater viewing experience. Not just for art's sake but, as Landau has said, "the in-theater experience is the wellspring that drives our entire business, regardless of what other platforms we eventually play on and should eventually play on. No one is against playing in the home, but there is a sequencing of events that leads to it."

So far Parker hasn't shared his analysis of how exactly, his company, will affect the overall movie business. But it's fair to assume that if Screening Room is ultimately approved, it will not shatter the ecosystem. Already a number of small, independent films are released simultaneously in theaters and on VOD. And as Star Wars: The Force Awakens proved last winter, big blockbusters still draw people into theaters in impressive numbers. So what's up for grabs is all that gray matter in between. Those mid-sized films that are intriguing to filmgoers, but perhaps not intriguing enough to justify a night out. The question the industry is now asking is, how big is that audience and how much of it could be swayed by something like a $50 in-home movie option?

It's not the first time an offering like this has come up—remember the VOD fiasco over Tower Heist?—and it will certainly not be the last. As audiences continue to fracture and be lured by screens of all shapes and sizes, Hollywood players, exhibitors, and yes, Silicon Valley entrepreneurs, will attempt to come up with a win-win solution for all parties. Most likely there'll be no such thing, but rather an array of options that behoove different constituencies. Whether Parker and Co. will be one of them remains to be seen.

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