Now Streaming at a Theater Near You: Exhibitors Embrace Streaming in a New Chapter for the Cinema Industry

Image Courtesy Adobe Stock

As pervasive as streaming is today, it was only in 2007 that Netflix—then known as a mail-delivery DVD rental service—began offering its users the ability to watch films through a high-speed internet connection. The timing couldn’t have been better for Netflix, which was in the midst of a fierce competition with its brick-and-mortar rival, Blockbuster Video, for supremacy of the home video market. At the time, most consumers in the United States streamed content on their desktop or laptop computers. That same year, however, Apple launched a revolutionary new product that would soon change the future of e-commerce and entertainment. The iPhone’s popularity launched the smartphone era in telecommunications, giving consumers the ability to connect to the internet instantly and almost anywhere. Being off-line and online were now indistinguishable. Netflix’s bet on streaming—originally considered a complement to, not substitute for, its mail-delivery service—was perfectly positioned to benefit from this sea change in consumer behavior. By 2010, as streaming solidified its dominance in the home entertainment market, Blockbuster Video had filed for Chapter 11.

Blockbuster’s bankruptcy solidified Netflix as the leading home entertainment player in Hollywood and accelerated the growth of streaming as the primary home entertainment distribution channel. In 2010, only two months after Blockbuster filed for Chapter 11, Cineplex, the largest exhibition circuit in Canada, announced the launch of its own streaming portal: the Cineplex Store.

As opposed to Netflix’s subscription video on demand (SVOD) model, the Cineplex Store adopted a transactional video on demand (TVOD) approach that facilitates digital rentals and purchases through their platform. Cineplex’s entry into the digital home entertainment market was never positioned as competition for Netflix but as an extension of their brand into the home. The circuit had already been selling DVD and Blu-Ray discs on their website; expanding into streaming was the logical evolution of those efforts. “When Canadians think of movies, we want them to think of Cineplex,” said Ellis Jacob, president and CEO of Cineplex, in the 2010 press release announcing the launch.

Branding alone wasn’t at the center of Cineplex’s foray into the home. The circuit was a pioneer in integrating its loyalty program, Scene, into digital transactions, linking moviegoers’ in-theater and at-home watching habits. Scene members could earn and redeem points across the circuit’s locations and its online store, further enhancing the value of the circuit’s loyalty program.

Two years later, in 2012, Mexico’s leading exhibition circuit, Cinépolis, launched its own TVOD streaming service, Cinépolis Klic. Despite launching five years after Netflix introduced streaming to its users in the United States, Cinépolis Klic appeared comparatively early in the adoption of streaming in Mexico.

Image Courtesy Cinépolis

“There was already a sector of the audience who was looking to stream content when we first entered the market,” says Marco García de la Cruz, managing director of Cinépolis Klic. “That was the first group of people we targeted after launching, which helped us gain a foothold with audiences primarily looking for commercial and independent movie releases. As the years passed, we reached new audiences through a wider range of programming for all ages and tastes. We now offer more than just a slate of films, with programming choices that have helped our business and [have] grown our user base.”

Rather than limit its selection of titles to just movies, Cinépolis Klic has since partnered with other content providers to offer television series and even sports programming through its platform. In this regard, Cinépolis Klic has grown to become one of Mexico’s leading over-the-top (OTT) media services, offering channel subscriptions to services like Starzplay, Paramount Plus, and HBO Max.

By the end of 2020, Cinépolis Klic counted on more than 4 million registered users in Mexico. The circuit expanded the streaming service to Chile, Colombia, Peru, El Salvador, Guatemala, Honduras, and Costa Rica last year. “We’re on a path to grow in territories where we already have a presence through our theaters, as we are doing now in Latin America, and we’re ready to pursue any other opportunities that arise along the way,” says García de la Cruz.

In Europe, where the streaming market is significantly more fragmented due to content licensing restrictions across multiple territories, major circuits have been more tentative in launching their own in-house services. The most notable exception is the United Kingdom’s specialty circuit Curzon Cinemas, which debuted its own TVOD platform, Curzon Home Cinema, in 2010.

Curzon’s early entry into streaming solidified its position in home entertainment among consumers. Its established reputation as an art house brand was reflected in its curated offerings, which included an array of eclectic and diverse titles that were harder to find on other platforms. Curzon began implementing an SVOD tier to Curzon Home Cinema in 2017, Curzon12, a rotating selection of 12 titles available to paying members of its loyalty program. The circuit revised its approach to SVOD earlier this year, adding credits for cinema visits or streaming rentals to its paid membership scheme.

Curzon’s approach to streaming is similar to the one employed by French specialty circuit Mk2 when it launched its own advertising video on demand (AVOD) platform, Mk2 Curiosity, last year––during the height of the Covid-19 pandemic. As an AVOD service, Curiosity is free to users and is monetized through advertising. According to Mk2 co-CEO Elisha Karmitz, the service allowed the circuit to stay connected with its audience by emphasizing curation at a time when home viewing habits were dominated by an overload of algorithm-driven content from the major streaming services. “Each week, we have a rotating selection of five to seven movies people can watch for free—a lot of these titles coming from our catalog. The goal is to propose some rarities, some curiosities, some movies that an algorithm would never show you,” he says. “While other streaming algorithms bring you more of what you already like, Mk2 Curiosity introduces you to movies that you may not know you’d like.”

Another pandemic-era innovation was La Vingt-Cinquieme Heure’s virtual theatrical platform, launched in France in March 2020, just as the country’s cinemas were ordered closed for the first time. As independent cinemas in the United States began experimenting with the virtual theatrical model in the first weeks of the pandemic, La Vingt-Cinquieme Heure’s platform allowed French cinemas to run their own virtual cinemas through geolocked digital screenings, streamed live during fixed showtimes. The earnings generated from virtual theatrical were far from covering the losses incurred by the pandemic, but they did provide an economic lifeline to independent cinemas during the closures—and could continue to generate supplemental revenue after the pandemic.

The art house sector has been an important source of innovation in bridging the streaming gap for European cinemas. In 2015, Germany’s Rushlake Media partnered with local art house cinemas for the 2015 launch of its TVOD platform, Kino on Demand. The service rewards users’ first and each fifth subsequent transaction on the platform with a €5 voucher to one of its more than 850 partner cinemas. Today, it has over 43,000 users in Germany and is also available in Austria and Switzerland.

Kino on Demand’s model was used as the basis for an upcoming partnership among four of Europe’s leading art house cinema circuits: Sweden’s Folkets Hus och Parker and Folkets Bio, Ireland’s Access Cinema, and Slovenia’s Art kino mreža Slovenije. The group, acting under the working title Project Cinnovate, will launch a streaming service based on Kino on Demand that will cover their combined 308 screens across the three countries.

“We are, of course, open to collaborating with many more cinemas,” says Jan Runge, the former CEO of UNIC, the European cinema trade association, who is acting as an independent consultant for Project Cinnovate. “Our partnership has already received €380,000 in innovation funding from the European Union to experiment with new content and digital tools to help European cinemas reengage with their audiences. We will design and test a range of solutions, including new gaming concepts, crowdsourced cinema screenings, online watch parties, virtual film talks, and cinema-driven VOD offers.”

“We strongly believe that now is the time for the wider film industry to come together and experiment with release strategies,” adds Philipp Hoffmann, managing director and founder of Rushlake Media. “It may sound watery, but we do believe in creating a win-win model and that this will ultimately help the theatrical community to rebuild an even more successful and sustainable exhibition business. The film industry should not create an internal competition between cinema and streaming but strengthen the film in a world where our viewers and fans have an overabundance of choices on how to spend their time.”

A similar concept that uses vouchers redeemable at partner cinemas was launched by the specialty SVOD provider Mubi in 2018. Originally piloted in the United Kingdom, Mubi Go acts as a premium tier for subscribers of the streaming service that includes a ticket for a specifically curated film each week at participating cinemas. Mubi Go expanded the program to India with PVR Cinemas in 2019. In January 2020, just before the pandemic wreaked havoc on the global cinema industry, Mubi representatives attended the annual Art House Convergence conference in Salt Lake City to discuss the concept with U.S. exhibitors.

Back in the United States, the second wave of streaming adoption among leading players in exhibition began in 2016, with digital ticketing giant Fandango’s acquisition of TVOD provider M-Go. The deal came amid an acquisition streak by Fandango that kicked off in 2015 and included a pair of digital ticketing platforms in Latin America—review aggregator Rotten Tomatoes; the YouTube channel Movieclips—and culminated with the 2017 purchase of rival ticket seller MovieTickets.com. At the time, Fandango’s acquisition of M-Go—rebranded as FandangoNow— seemed counterintuitive: the largest digital ticketing network in the world’s top box office market adding TVOD to its portfolio. On the whole, however, a streaming presence fit perfectly within Fandango’s ambitions to remain a leading digital hub for moviegoers. As was the case with Cineplex and Cinépolis, the intention was never to overtake or even compete with Netflix but to integrate the home viewing habits of their extensive user base of moviegoers in the United States. In 2018, the company launched a new loyalty program, Fandango VIP Plus, which also extended to users’ transactions on FandangoNow. It has even leveraged its streaming presence to assist with its digital ticketing business at cinemas through promotions like discount pricing on rentals of upcoming high-profile film releases. In 2020, Fandango acquired its second TVOD platform, Vudu, from Walmart.

Fandango’s entry into the streaming market in 2016 was overshadowed, however, by the launch of a controversial new company. The Screening Room, a startup backed by tech alums from Napster and Facebook, crashed into the market by proposing a PVOD release model for first-run movies to the home at a premium price point. Early reports pegged the PVOD rental price at $50 per title, with a portion of that revenue allocated to exhibitors who partnered with the service. Representatives from The Screening Room attended and took meetings with exhibitors at CinemaCon 2016, according to a source present at one of those meetings, but the company was never able to get off the ground. The Screening Room was dead on arrival, unable to get past contentious attitudes of the time around the theatrical exclusivity window, but it did succeed in sparking a conversation about how cinemas could share in profits of first-run PVOD rentals.

First-run titles weren’t available as part of AMC Theatres’ own streaming service, AMC On Demand, when it launched in the fall of 2019. Initially, AMC On Demand followed the general strategic blueprint of existing exhibitor VOD services: a transactional model integrated with its loyalty program, AMC Stubs. Once the pandemic hit, however, the circuit’s streaming presence was leveraged as part of its decision to sign a groundbreaking deal with Universal Pictures that reduced the theatrical exclusivity window to as little as 17 days. The AMC-Universal deal followed tensions between the two companies that had played out in the press, following Universal’s unilateral decision to push the release of Trolls: World Tour to PVOD in the early days of the pandemic. Eventually, the companies came to an agreement that resulted in AMC participating in the PVOD revenues of future Universal releases.

“Although the financial terms of the Universal agreement are confidential, I can tell you that the agreement allows AMC to participate handsomely in the entirety of the economics of this new structure, including receiving a share of each film’s PVOD revenue stream, whoever may be the retailer, as well as receiving considerable additional economics when the film is retailed on our own AMC Theatres On Demand service,” said CEO Adam Aron during the company’s second-quarter call with investors in 2020.

“Exhibitor VOD will help guard against inevitable cannibalization: how much can moviegoing and viewing increase with PVOD? As AMC will meaningfully share in that new revenue stream, this potential dramatic expansion of revenues should protect AMC against the cannibalization that admittedly will occur as some people shift from theatrical to home viewing. This is something that we have very carefully researched, very thoughtfully modeled, and that our company has been thinking about for almost five years,” he said.

The pandemic was the catalyst for several other top U.S.-based circuits to launch their own streaming services. “We had thought about it, but like a few different projects we had been considering, we took it off the back burner and put it on the front burner as we started looking for additional ways to engage with our customer base,” says Mark Malinowski, vice president global marketing at National Amusements’ Showcase Cinemas. The Massachusetts-based circuit—which also operates theaters in the U.K., Argentina, and Brazil—launched ShowcaseNow in the U.S. and Showcase at Home in the U.K. in 2020 through ScreenPlus, a service by Vista Group and Shift72.

Alamo Drafthouse signed on with the same service to launch Alamo On Demand in May 2020, only a month after starting to develop it. Tim League, the circuit’s co-founder and executive chairman, cites the influence of seeing Auckland, New Zealand’s, Academy Cinemas’ streaming platform, released in 2019, as one of the deciding factors that convinced him to move forward with the project.

“The central construct for us is that Alamo On Demand is a reflection of our tastes and an avenue for our curation,” says League. “I’m not out to compete against Amazon or Netflix; that’s a fool’s errand. We’re trying to offer something different. … we look at ourselves like a modern incarnation of a classic video store. Video stores were run by the movie-obsessed who live to make deep-cut recommendations and share the movies they love. I love Netflix, but that’s not who they are.”

Image Courtesy Alamo Drafthouse

Alamo’s approach to streaming borrows from the strategies employed by Curzon and Mk2 in Europe in prioritizing eclectic programming and specialized curation. It is an extension of the circuit’s identity as a cinema chain that can regularly pack houses across the country by booking obscure cult titles and niche genre films.

A chain with a specialty brand like Alamo Drafthouse stands in contrast to the Hollywood-driven catalogs pushed by the algorithms of the world’s leading SVOD streamers. Other circuits with more mainstream followings, like Showcase Cinemas, have found similar success in their TVOD platforms with content that wouldn’t necessarily sell out as regularly in their theaters, such as music concerts and documentaries.

Mark Walukevich, senior vice president of film and event cinema at Showcase, notes that the transactional nature of exhibitor VOD has helped drive additional web traffic to the circuit’s website while boosting films that would have otherwise struggled to keep consistent showtimes across the chain. “We aren’t going to compete with Netflix, Amazon … or any of those other guys,” he says. “We’re not a subscription service; it’s pay as you go. I think we’re finding out as people are getting roped into subscription services, they have too many and don’t want another one. Prior to the pandemic people might have had three subscription streaming services; now they’re up to six.”

Image Courtesy Showcase Cinemas

As Walukevich observes, although TVOD may not bring in revenue on a consistent basis, it doesn’t have the same need to retain subscribers as SVOD does. The pressure to avoid subscriber churn has ignited an arms race in exclusive content licensing and original productions among the leading SVOD platforms and rival upstarts from legacy studios—a fierce competition that now includes SVOD offerings from Disney (Disney Plus), Universal (Peacock), Paramount (Paramount Plus), and Warner Bros. (HBO Max).

That pressure was what led Warner Bros.’ parent company, WarnerMedia, to open its entire 2021 theatrical slate to the home simultaneously through its SVOD service, HBO Max, at no additional cost. It has also pushed simultaneous day-and-date PVOD releases of major Disney titles on Disney Plus throughout this summer. Some previously scheduled Disney movies, like Pixar’s Soul and Luca, were removed from the theatrical schedule entirely to become available at no additional cost for Disney Plus subscribers. In these instances, studios prioritized promoting their in-house streaming platforms at the expense of a traditional theatrical release while the box office continues to recover from the economic fallout of the pandemic.

“I certainly don’t doubt that consumers like day-and-date, I’m just not convinced it’s revenue maximizing—and I’m certainly not convinced studios or exhibitors want to go all-in on it,” says John Calkins, CEO of Row8, a company that provides streaming platforms for cinema chains, who previously held executive roles at major studios and circuits. “The forcing device on all of these discussions has been the collapse of the home entertainment window and the related economic problem in green-lighting all but the biggest tentpole movies. You have a world where the structure of the window limits economics for all but the top films, reducing film flow.”

Row8 signed its first exhibitor client, Southern Theatres, earlier this year. Southern’s streaming platform is linked directly to its loyalty program under the chain’s Grand Theatre and AmStar Cinemas brands. “Once the window structure is better established and understood, it will again raise the question: To what extent and how do exhibitors want to participate in the other 80 to 90 percent of their loyalty program members’ movie viewing behaviors that they currently don’t participate in? Exhibitors have relationships with the most valuable and interested consumers in the world—but they’ve historically limited engaging with those consumers once per month, at best, while turning a blind eye to all their other movie consumption.”

For that reason, Calkins says he believes that exhibitor VOD addresses a structural problem in a film industry increasingly reliant on global blockbusters. While the pandemic might have accelerated adoption of exhibitor VOD, its value isn’t limited to Covid-19 closures. If streaming can help more films find an audience at home, why wouldn’t cinemas want to be part of that transaction?

“The true power of the platform will come when we are back to normal operations,” says Alamo Drafthouse’s League, citing 2019 Academy Award winner Parasite as a case study. “We did really well on the film theatrically, but we know from our data that only about 30 to 40 percent of our guests who watched the trailer or visited the showtimes page for Parasite got out to the theater to watch the film. If Alamo customers have an opportunity to see films like Parasite when they enter the VOD window, and support their local cinema by doing so, we believe many of them will. And if we couple that Alamo On Demand screening with a great preshow, cocktail delivery, director Q&A, and additional content, we’ve given our at-home guests a version of the Alamo experience. We’re taking the same approach we have with the cinema to Alamo On Demand: craft and curate a special, memorable experience built around movies we love.”

The moviegoing experience is often cited as one of the main advantages cinemas have over the leading SVOD streaming platforms, and with the rise of exhibitor VOD, that advantage could potentially extend to the home as well.

“Let Disney, Warner, and Netflix worry about producing original content. Cinemas don’t need to be content creators, they just need to focus on creating experiences,” says Mihai Crasneanu, CEO of Beem, a streaming platform that helps cinemas organize co-watching events online. These events, billed as “Watch Parties,” allow users at different locations to host and attend feature film screenings that can include Q&As, moderated discussions, or live commentary. The co-watching feature gives users the chance to interact with other viewers as they watch content. [Disclosure: Beem’s co-watching events are offered to cinemas by Boxoffice Pro’s corporate parent, The Boxoffice Company.]

Image Courtesy The Boxoffice Company

“Movie theaters have the opportunity to deliver online experiences that are connected with physical experiences,” says Crasneanu. “‘Online’ is not a bad word. We as human beings, we’re both online and offline all the time. Each time you look at your phone, you’re online. And whenever you’re not looking at your phone, you’re offline. It’s not about offline versus online; it’s about reaching people where they are at any given moment.”

Crasneanu built Beem around the concept of eventizing home viewing, allowing venues to turn the saturation associated with streaming content into unique experiences through their brands. The service has been busy adding additional innovations to its platform, like the inclusion of non-fungible tokens (NFTs), or collectable digital souvenirs, of their co-watching events for viewers. If streaming at home can seem routine and anonymous, the equivalent of ambient television playing in the background, services like Beem are a way for exhibitors to leverage their status as experience-driven entertainment destinations to influence home viewership habits.

While co-watching events can occur either simultaneously with a physical event at a theater or be held exclusively online, Crasneanu doesn’t believe co-watching could cannibalize moviegoing. He views co-watching as a different type of communal viewing experience altogether. “Maybe I can’t go out that night for some reason: I need a babysitter, it’s too far from home, I’m sick, whatever. There is no reason why a movie theater can’t provide a version of that experience to the home. It’s a different experience, yes, but it creates additional engagement with their customers that can’t, or don’t, go out to theaters very often but still want to engage with their brand and participate in experiences from home.”

Alamo Drafthouse’s Tim League also sees a future in which exhibitor VOD complements, not supplants, the moviegoing experience. “We’ve always operated under the guiding principle that no matter how good your TV and sound system are at home, everyone wants and needs to get out of the house and have memorable experiences. Cinema is an out-of-home experience. We compete against bars, restaurants, comedy clubs, and the like,” he says. “I’m not naive enough to think the rise of streaming during the pandemic won’t have any effect. But we’re going to continue to focus on offering a great experience for a night out, and I am confident that we will return stronger than ever.”

Image Courtesy Adobe Stock

News Stories