June 04, 2017 at 06:12PM
Last year, the tech billionaire Sean Parker made headlines with his latest startup: a streaming service called Screening Room that would give users the ability to watch major movies still in theaters from the comfort of their homes for $50.
Instantly, people online said Parker was about to change the movie business as he did with the music industry 18 years ago, when he helped create the file-sharing service Napster.
Hollywood power players began to take sides. Steven Spielberg, Ron Howard, J.J. Abrams, and Peter Jackson have all praised the forward-thinking philosophy of Screening Room. (They all also happen to be stakeholders.) Meanwhile, other filmmaking giants like Christopher Nolan and James Cameron, along with Kevin Tsujihara, the chairman and CEO of Warner Bros., have spoken out against it, voicing the importance of an exclusive theatrical experience.
But since the initial rush of news and analysis about the venture, the buzz around Screening Room has nearly disappeared — on the internet, but also, more importantly, in Hollywood. And now it looks as though the project may be a flop.
Though Parker and his cofounder, Prem Akkaraju, have promoted the company for the past two years at CinemaCon — an annual event in Las Vegas where studios and exhibitors showcase top titles and innovations — it has gotten little traction because of competition, the industry's naiveté, and the decadelong discussion between studios and theater chains about how to move forward with premium video on demand, or PVOD.
"Everything you've heard in the press about studios and theaters wanting to explore a PVOD window, nothing about that revolves around Screening Room," a source close to the talks told Business Insider.
Hollywood has its own big ideas
Screening Room's main pitch to studios and exhibitors has been that it can bring added revenue to all sides of the equation. (Jackson has said that Screening Room could bring in $8.5 billion a year for the film industry.)
Of the proposed $50 rental fee, which would make a movie available to a viewer for 48 hours, 20% would go to the movie's distributor, a participating theater chain would get up to $20, each customer would receive two tickets to see that rented title at their local theater. Screening Room would take 10%.
Sources told Business Insider that all the bells and whistles Screening Room was selling wouldn't matter until the studios and theaters agree on a PVOD window.
We're not going to share anything with the theaters.
Premium VOD is a term for titles that would be available to rent or buy before being made available on most streaming services or through Blu-ray and DVD releases. Industry players don't want movies to be available on PVOD simultaneously with theatrical releases because the first two weeks of a theatrical run are still when studios and exhibitors get most of a movie's income.
It's more likely that a PVOD window would be established in the period when movies are out of most first-run theaters but haven't yet shown up on streaming services, known in the industry as "the dark zone."
Though PVOD hasn't happened yet, many insiders believe it's only a matter of time. The only service that streams movies while they're still in theaters is the ultra-high-end Prima Cinema, which costs $35,000 to install and $500 a movie rental.
"Eventually, I would imagine — I'm speaking as an observer — the studios will need to find their own platforms and create our own direct-to-consumer opportunities," Stacey Snider, the studio head of 20th Century Fox, said at a conference at UCLA in March.
Fox and Warner Bros. have reportedly considered a $30 rental fee for streaming movies after they've been in theaters for 30 days, while other studios have suggested slightly different options. Disney has said it's not interested in shortening the theatrical-release window.
The holdup is the debate between studios and exhibitors on some major issues, specifically what the price point for PVOD will be and how soon after a movie opens it will be available to stream. Once those questions are answered, Screening Room will be on the minds of those in the industry.
But there's another hurdle: Parker's company isn't the only game in town.
"There are about three other systems out there that are doing similar things and going around talking to theater owners and studios," a source said.
And some studio executives aren't too keen on Screening Room trying to muscle in as the exclusive streaming destination when a movie hits the PVOD window, or its plan to split sales with theaters.
According to one source, a studio head said of Screening Room's proposal that theaters would get up to $20 of each rental fee: "If Screening Room wants to pay it out of their cut, go ahead. We're not going to share anything with the theaters."
Screening Room was frozen out by theater chains
Then there are the struggles Screening Room has had in trying to build relationships on the exhibition side.
According to sources, the company no longer has a deal with the multiplex giant AMC Theaters. And an attempted meeting with the National Association of Theater Owners, which would be a huge ally in starting a dialogue between Screening Room and the major theater chains, stalled after Screening Room wanted the association to sign a nondisclosure agreement. The organization declined to sign it, as the only reason it would want to meet with Screening Room would be to relay the information it received to theater owners.
AMC did not return Business Insider's request for comment, and the association had no comment for this story.
Twist also questioned how beneficial Screening Room could be for theater owners. (Like the major studios and exhibitors, Art House Convergence is against the idea of movies being available on Screening Room or any other service when titles first show up in theaters.)
"There's obviously the piracy issue, but also the economics," Twist said. "They say, 'We'll give the person who rents a title two movie tickets,' but how would they determine the person's main theater they go to? Commercial multiplexes and art houses occasionally show the same titles — who are they going to preference? Same for the rental-fee split. Moviegoers are often loyal to multiple theaters."
However, Twist said her organization, which is made up of a community of 400 independently owned theaters across the country, would be open to sitting down with Parker and Akkaraju.
"We would welcome a discussion along the lines of them saying: 'We have this idea. We would like to help the moviegoing population see more movies. How can we work with you?' rather than a PowerPoint presentation," Twist said.
The elephant in the room: 'iTunes is the logical choice'
Studios don't want to share any of the money they get from Screening Room, exhibitors aren't feeling the love, and there's that issue of piracy — though Screening Room reportedly touted "refined" security measures at CinemaCon this year.
But that's not all: iTunes might make Screening Room obsolete.
For years, iTunes has gotten dibs on movie titles for home viewing before all other providers. Sources say that whenever studios and exhibitors want to go down the PVOD path, they most likely would put their trust in a service they already work with, like iTunes — or build an internal PVOD streaming service — rather than a newcomer like Screening Room.
"If an earlier window gets put in place, iTunes would probably have some say in being part of the earlier window," a source said.
Apple has been in talks with studios about making movies available on iTunes two weeks after theatrical debuts, Bloomberg reported in December. Apple did not respond to Business Insider's numerous requests for comment.
"I think iTunes is the logical choice," said Jeff Bock, the senior box-office analyst for Exhibitor Relations. "It's what everybody has, and if the price point is right, Screening Room is cut out. Nobody needs them. And to build that infrastructure with Screening Room would take a long time. Screening Room has a really tough hill to climb."
Parker did not respond to Business Insider's multiple requests for comment. Screening Room attorney Skip Brittenham had no comment for this story.
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