The Interview and economics

I typed up this whole reply, and then VentureBeat’s commenting system didn’t work and redirected me back to the homepage instead of actually posting. :(

http://venturebeat.com/2014/12/29/despite-making-18m-dont-expect-the-interview-to-revolutionize-digital-movie-distribution/


 

HI Chris,

I’ve got to disagree. This may not be a single key moment that changes online video distribution for Hollywood, but it is a hugely important one. A widely known movie was distributed online and it generated returns similar to one in theaters, while charging far less per viewer. That changes the conversation. Every online distribution discussion is going to reference this movie.

Of course, we’re all speculating until Sony sits down at their Q1 numbers. Still, speculating is fun, so I’m joining in too :)

In this case, the movie benefited from extraordinary publicity. By the time Christmas rolled around, it was safe to say just about everyone in the U.S. had heard something about the movie given that even President Obama felt compelled to weigh in on the drama surrounding its release. A typical release online would have an incredibly difficult time getting such attention or even much respect given that people tend to view movies that get VOD-first releases as a sign the movie is weak.

The Rogan&Franco&Greenberg style has been around for a while now. They’re a known quantity. People who like them know it, and people who don’t like them know it too. The movie may be unimaginably famous, but the fame may be a red herring. Since they are such a known quantity, the publicity is not likely to have made someone who wouldn’t have been a customer become one. On top of this, if you are a fan of the trio, you already knew this was coming out, so the added publicity from the hack may not have affected the actual returns. My gut says there’s no more than a 15% bump, which still leaves the current returns over the $15m mark.

“…given that people tend to view movies that get VOD-first releases as a sign the movie is weak” — perceptions of VOD-first is a trailing indicator. “The Interview” is a leading indicator. Imagine the discussion: “would I watch a movie on my PS4/Apple TV/Kindle Fire? Yeah I would. I remember my friend telling me how much cheaper it was to watch that Interview movie at home. They sat on their own sofa and got to eat their own food…cheaper and healthier!” — how many cultural trends just got tapped there?

More than that, the actual amount of revenue generated is a meaningless measure. What matters is the underlying terms of the revenue deals that Sony struck with distributors like Google and Apple.

As to the economics of the distribution: you’re right. No one knows what the revenue split was between streaming services and Sony. I’d venture a guess that the services were excited to make this deal happen, and were willing to offer nice terms. That being said, the more important issue is that running a streaming service costs far less than operating a physical movie theater. The streaming services have a structural advantage in the long run when it comes to offering desirable terms.

Again, let’s all wait and see what happens once viewer’s wallets have had their time to vote over the next few months.

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