Hollywood's Hard Times

For as long as man can remember, observes CBS News Sunday Morning contributor David Pogue, the world has swayed to certain inexorable rhythms: First the winter, then the spring. First the infant, then the child. First in theaters, then, four months later, on DVD.

But, suggests Pogue, brace yourself: That last part is about to change.

In coming months, you're going to see movies coming out on DVD, on television, and in theaters, all on the same day.

"Has Hollywood completely lost its mind, I mean, more than usual?" asks Pogue, who's with The New York Times.

It's a long story, he says, that starts with Paul Dergarabedian, president of Exhibitor Relations.

"We track and analyze the box office and what's going on with movies, on a daily, weekly, monthly and yearly basis," Dergarabedian explains.

And, notes Pogue, he knows better than anyone how many people aren't buying movie tickets these days.

"The summer of 2005 wound up, down, in terms of attendance, around 12 percent down," Dergarabedian reports. "And that's a huge downturn from the previous summer."

That would make 2005 the third straight year of declining attendance, Pogue points out.

What's causing the slump?

There are all kinds of theories, Pogue says: Maybe the movies were especially bad this year. Maybe iPods and the Internet are eating up our leisure time.

And maybe the movie theaters are suffering from the rise in popularity of home theaters.

After all, Pogue reminds viewers, when you watch a movie at home, there's not a bunch of commercials before the movie starts, you don't have to pay eight bucks for the popcorn, and there's never some idiot talking on their cell phone during the movie.

James Theobald, Vice President of Sales and Marketing for Theo Kalomirakis Theaters, a leading designer of high-end home theaters says, "Ten years ago, we used to do anywhere from half a dozen to a dozen theaters a year. And now we can do anywhere from 60 to 100 theaters a year.

"We really try to design rooms that harken back to a time when movie palaces were really a destination. … You know, nowadays, some of that's lost. You go to a local multiplex, and it's a square box."

His company's home theaters, Pogue observes, are anything but square boxes.

Says Theobold, "We had a client who had us recreate a Tuscan village."

John Fithian is president of NATO (No, not that NATO!), the National Association of Theater Owners.

As you can probably guess, the movie theaters he represents aren't exactly thrilled about the rise of the home theater.

"The cinema-going experience," Fithian says, "is a cultural, shared experience. It's teen date night. It's parents getting away from their kids. It's the kids getting away from their parents. You notice when other people in the audience are laughing or crying or being bored. It's very much a cultural, out-of-the-home, shared experience."

And what does the home-theater industry think?

"There is," concedes Theobold, "to a certain degree, something that you do take from listening to other people watch a movie on a large scale, in a commercial space. But you know, I think that's something that most people can really get over."Of course, Pogue points out, movie theaters aren't sitting still. They've got all kinds of ideas for fighting back, like letting you order gourmet food and alcoholic beverages.

"What they're trying to do, I think, now, is make going to the movies a destination, an entire evening for a couple or a family or an individual where you can go to one place, see a movie, have a drink, have dinner and have a great time," says Exhibitor Relations' Dergarabedian.

In other words, Pogue interjects, even as home theaters are becoming more like the cinemas, the cinemas are starting to feel a lot more like home.

Hollywood is also offering movie experiences that you can't have at home, Pogue notes.

Last year, "The Polar Express" made 25 percent of its money on 10-story-tall Imax screens. And this fall, you'll be able to see Disney's "Chicken Little" in either plain or 3-D versions.

Regular movies will soon start looking better, too, thanks to digital projectors.

According to Landmark Theaters owner Todd Wagner, reel-to-reel projectors aren't just old news, they're expensive old news. If it costs $2,000 per reel to ship movies in the usual film format to theaters, and it's a widescreen release, some 4,000 screens, that can be six or $8 million dollars for nothing more than to ship a film.

"If it were digital, you avoid almost all of that cost."

"I'd love to tell 'ya that (digital projectors are) super, super exciting. But (they're) …. basically just hard drives. Think of them as a sophisticated PCs."

But the biggest changes in movieland have yet to come, Pogue says. They have nothing to do with bars or big screens, and everything to do with windows.

"We call them windows between the releases," says NATO's Fithian. "Movies go first to theaters. Then they go to DVD and video, video-on-demand, and eventually, cable or television."

Don't look now, Pogue remarks, but those windows are collapsing. The wait for a film to come out on DVD is getting shorter and shorter. It's down to three months for most movies.

Last year, the DVD of "Ray" came out while the movie was still in theaters.

If you ask Wagner, the whole idea of movie windows is outdated.

He says, "These windows really, there was no science behind it as much as just, 'Hey, this, we think, will maximize our revenue streams, right? We'll sell it once, we'll sell it twice, we'll sell it three times.' "

Actually, Pogue says, Wagner's not just a theater chain owner. With his partner, Mark Cuban, he also owns two high-definition TV channels. There's also a movie studio; they produce films such as, "Good Night and Good Luck."

Starting in January, they plan to close those windows completely. Every movie they produce will be available on DVD, on TV, and in the theaters, all on the same "day and date."

Just like we do in the music industry," Wagner points out. "I can buy it at retail, I can download it, I can do all those different things. And they're available in all those media at the same time."

The day-and-date system might seem crazy, Pogue says, but for the movie studios, it has some distinct advantages.

Explains Wagner, "Advertising has gone from one big spends to two big spends: a spend to try to get people to go to the theater, a spend in another five months to try to get you to buy the DVD. So, if you could do it once and have an efficient advertising spend, perhaps that's not so bad."

Surprise, surprise, comments Pogue: The other theater owners don't much care for Wagner's idea.

"We operate on fairly slim margins," says Fithian. "And if a certain percentage of the movie-going public will just stay home and watch DVDs because they're released on the same day as theaters, that would eliminate some of the theaters in this country."

Director Steven Soderbergh has already agreed to direct six movies under Wagner's plan. The first, called "Bubble," premieres in January, in theaters and on DVD.

Theater owners are watching the experiment like hawks, but most say such a drastic change in the way things are done is unnecessary.

Movie attendance may have taken a three-year summer dip, but Fithian says the larger trend is another story: "The fact that we've had a bit of a slump this year is not any structural concern for the theater business as a whole. During this whole advent of new technologies and videos and DVDs, people are going to the movies more often now than they did before they had those choices."

According to Dergarabedian, the dawn of the digital age is just another bump in the road: "When home video hit in the early '80s, everyone thought that's the death knell for the movie theater. It didn't happen. Going to the movies has always survived this onslaught of technological advances and it has survived. And it's thrived as well."

Says Wagner, "The technology will change. Demands will change. How the movies look will change. And we have to be ready to move with it."

But, Pogue concludes, there's one thing everybody seems to agree on: The curtain hasn't fallen on the great American movie house just yet.