“Universal’s ‘Tower Heist’ VOD fiasco: What went wrong?”

Patrick Goldstein with the scoop:

Universal Pictures has ended up with egg on its face after the embarrassing collapse of its experiment to make the upcoming Ben Stiller and Eddie Murphy comedy “Tower Heist” available on VOD three weeks after its Nov. 4 theatrical release. The plan was to test market the Brett Ratner-directed film in two cities to see how many people would pay $60 to watch the movie at home in the comfort of their living room.

The plan backfired. A host of exhibitors, including Cinemark and National Amusements, announced that they wouldn’t play the film at all, arguing that the experiment would surely somehow cut into their ticket sales. Of course, the VOD plan was limited to two mid-market cities (Portland, Ore., and Atlanta), but by using the nuclear option, exhibitors wanted to make it very clear to Universal’s competitors that they would suffer equally dire consequences for any similar experiment.

What does it all mean? More after the jump:

There is a battle going on in Hollywood between movie studios and movie exhibitors. And what’s particularly interesting is this is a result of one of the business world’s cherished practices: vertical integration. More from Goldstein:

But here’s the real issue that created trouble for Universal. The studio’s new corporate bosses at Comcast were clearly driving this experiment because if VOD works, it will be a great way to take advantage of Comcast’s huge cable TV assets, giving them even more quality programming to offer their customers. That may help Comcast’s bottom line, but it creates all sorts of headaches for Universal with its talent relations. After all, it was the top executives at Universal, not Comcast, who had to field angry phone calls from exhibitors. And it was Universal that was under siege by talent reps for Stiller, Murphy and Ratner, all hysterical about seeing their new movie being used as a guinea pig in an experiment that could lead to substantially reduced box-office grosses.

It just goes to show: In the new vertically integrated entertainment universe, what works for one end of the business doesn’t necessarily work for the other. You’d think that Universal would have figured out what a potential mess this could be early on. But it clearly went ahead anyway. What’s the lesson here? Theater owners may be dinosaurs when it comes to embracing new technology, but here’s the thing about dinosaurs — when they stamp their feet, it can really knock you for a loop.

I don’t see a pretty ending to this battle. I remember conversations from the late 80s with studio execs, how their eyes would light up as they imagined being able to deliver movies directly to consumers’ homes, bypassing theaters entirely. Imagine the profits by cutting out the middle man! And now when companies like Comcast buy companies like NBCUniversal, combined with emerging digital technologies, this is becoming a practical reality.

However there is this number: 39,233. That is total number of movie screens in the U.S. according to NATO [National Association of Theater Owners]. Do you think those folks will go down quietly in this fight?

This skirmish over Tower Heist is an opening salvo. Much more to come.

For more of Goldstein’s article, go here.

Question: Would you pay $60 to see a movie in your home via VOD three weeks after it debuted in theaters?

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