While the conversation has happened in fits and starts across the last year, movie studios haven’t ignored that audiences are increasingly favoring streaming movies at home instead of going out to the cinema. As streaming services continue to invest heavily in original programming, there are more and more reasons to stay in, and all you have to do is look at the stats to see how movie-watching behavior is changing.

While the box office had a record-breaking year of $11.37 billion in receipts, attendance was actually down, with that windfall assisted by increased ticket prices. But the real eye-opening statistic comes from the Digital Entertainment Group (via Variety) who reveal that 2016 was the first year that subscription streaming outpaced disc sales, with $6.2 billion for the former and $5.4 billion for the latter. It’s alarming only if you haven’t been paying attention, and companies are already adjusting, as even the boutique The Criterion Collection has seen the future and teamed with Turner Classic Movies, launching the service FilmStruck last fall. Even they realize sumptuous packaging of DVDs and Blu-rays won’t sustain them in the future. And studios, having likely seen their home-video revenues continue to drop over the past few years, are now growing itchy to take a bigger bite out of a growing streaming market.

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Early last year, reports flew that Napster and Facebook bad boy Sean Parker was gearing up The Screening Room, a premium VOD service that would offer theatrical releases to a home audiences, day-and-date, for $50 a pop. That seemed to have gone quiet, but just last month Bloomberg reported that Warner Bros. and Universal were already engaging theater owners in conversations about shrinking the time between theatrical release and streaming to as little as two weeks to one month.

“If you start with the consumer, they’re telling us very clearly they want it [earlier],” Warner Bros. CEO Kevin Tsujihara said. “That’s where all the pirating is occurring, right? And so we have to meet that demand with a legal solution. And so as I’ve said, we’re trying to work with our partners on the exhibition community.”

In case that statement wasn’t clear enough, studios are quickly realizing their bottom line depends on streaming.

Cinema owners have long pushed back against attempts to shrink release windows, arguing it would hurt their business model. But in an era when most blockbusters do their biggest business in the first few weeks of release, that argument is growing weaker. And for studios, giving theaters exclusivity on a title for months on end is making less sense, especially when eager to pivot to other revenue streams much sooner.

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This all leaves exhibitors in a tough position, but they do have one thing in their corner: Even with the most pimped-out home theater system, nothing beats the moviegoing experience. That said, the singular experience of being in a dark room, with a huge screen, has been the one asset theaters have seemed to neglect most of all. You don’t have to search very far to find someone complaining about high ticket prices; high concession prices; poor projection; and dismal, tiny shoebox-sized theaters to understand why theaters are seeing the numbers of tickets sold decrease.

While exhibitors will undoubtedly continue to fight shrinking release windows, it’s an inevitability that sometime in the future, audiences will have the very real option of choosing between watching Ben Affleck‘s “The Batman” (for example) in cinemas on opening weekend or four weeks later at home. So what can cinemas do to ensure they don’t see a mass exodus of customers? It’s not that complicated:

Lower prices, while doing everything to ensure the best experience possible.

If people feel the value of that ticket price reflected in every moment of the moviegoing experience, they will continue to come back, even if there’s more to choose from at home. Certainly, smaller chains such as Alamo Drafthouse base their entire business on making their customers feel pampered, and they’re successful and growing because of it. And there are pockets of arthouse cinemas across the country that are also thriving because they put a premium on making sure everything from the lobby to the projection is near-perfect. But these comments are pointed toward the bigger chains who must already be seeing the ground shift in the industry. Simply put, if they aren’t prepared to be flexible and adaptive, they are going to face trouble in the years ahead. Things may not be easy, but if exhibitors want to survive, they’ll actually have to start listening to their customers, just like the studios are doing.

  • bohmer

    Simple, don’t price every ticket 15$ and ask me to keep calm and watch 15 mins of adds (20-25 if it’s Star Wars). Because that’s gonna be a no no (polite GFY). I go to smaller venues where they show indie movies. Yes I like blockbusters too but if I can’t go on a thuesday afternoon with nobody in, I won’t go at all.

    • Josh King

      Omg you’re so right about the ads. It’s getting absurd.

  • John C. Lyons

    The distributors are not without fault. I live in a small city, with a single multiplex, and no other “typical” venue options within 2+ hour radius. I curate for two film series, one on a college campus, another in a beautiful art museum with adult beverage options. It has been a battle for titles from certain distributors year after year (a big mini-major and surprisingly a couple small boutiques) who won’t allow us to screen anything until it’s on home video, vod, streaming. When the pull to stay on the couch is at a peak.

    Our audiences are hungry for arthouse and alternatives (our screenings have had up to 200 attendees in a 175 capacity location) and they refuse to allow us licensed screenings. I’m sure I’m not the only programmer to get the standard, short responses of “Too soon.” or “Thank you so much for interest and support. Unfortunately due to the timing of this opportunity, we are going to have to pass.” Yeah, thank YOU for your support too.

    So while I agree the big corporate multiplexes need to up their game and improve the experience and presentation, distributors themselves need to get their heads out of their asses and these old models and understand basic demand/interest. They only hurt themselves.

  • Jason Ratigan

    There are myriad options available. Subscription services like MoviePass which chains could replicate or improve upon. Demand-based pricing. The idea that a ticket is priced the same on week one (and selling out a screen) as week five (when there are three people in the audience) is lunacy. Put those two together and you could see something like a $50 first week subscription and a $30 second week subscription. Up-to-the-minute relocation of films based on demand from smaller to larger screens. These are some things a theater could do but won’t out of inertia.

    If theaters approached their screens as real estate, which is what they are, you would naturally produce efficient outcomes that would, by definition, better please audiences. Instead, audiences are duped. Being socialized to believe 3D should cost more than 2D has inflated box office returns, which had inflated 2D pricing, and pushed demand to VOD, which of course harms their business.

    There are theaters, apparently, that are experimenting with this, but not aggressively. This is frustrating because it harms the audience as much as the theaters. People who go to the theater will go more often if they feel it’s worth their time. This is the basis, though I disagree with it, of more 3D and more comic book fare. Apply these forces on the negative side and you might see a full screening of smaller films at lower prices in less-served cities. They aren’t running the numbers because they’ve forced themselves into an inelastic market.