The theater release business is in a slow but sure death spiral, and exhibitors will need to look to less traditional revenue streams like virtual reality experiences to survive, according to participants in an Oct. 10 panel discussion at Digital Hollywood in Los Angeles.
As admissions flatten and tickets and concessions run up against consumers' pricing limits, recent VR investments by IMAX Corp. and AMC Entertainment Holdings Inc., including AMC's partnership with VR startup Dreamscape, demonstrate the trend, said Schuyler Moore, entertainment attorney and partner at Greenberg Glusker. While some experts have called those efforts more gimmick than strategy, Moore credited these companies as being "ahead of the curve."
"At the end of the three years, what's going to happen is it's going to be a VR world, and the theaters that don't go bankrupt are going to shift to doing VR," Moore said. Just look at theater stocks to see where investors expect the future to go, he added. AMC, one of the worst hit, is down nearly 60% for the year-to-date.
However, before alternative technologies like VR become mainstream, digital content will continue to grow, potentially taking entertainment share from theatrical releases. Content creators would do well to focus on short-form, episodic or mobile-focused products, Moore advised. Where feature-length films are being created, his clients are more often cutting deals with Netflix Inc. or Amazon.com Inc. Creators may lose back-end residuals and royalties in these deals, but the large digital platforms typically pay a premium up front.
"I agree they're going to have to pivot to new experiences," said Seth Shapiro, governor of interactive media at The Television Academy. "I think inevitably it has to be some sort of immersive experience, some sort of location-based VR."
He compared virtual reality investment to the tech bubble in the early millennium. While some companies went bankrupt due to internet-based investments that did not pan out, the surge of interest in the sector at that time ultimately yielded business models like those of Alphabet Inc. and Amazon. Likewise, virtual reality needs to attract the resources and enthusiasm required to effectively launch a new medium, Shapiro said.