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As 'Interview' Takes Streaming Plunge, Hollywood Tests Waters

Fans line up at the Silent Movie Theatre for a midnight screening of "The Interview" in Los Angeles, California, Dec. 24, 2014.
Fans line up at the Silent Movie Theatre for a midnight screening of "The Interview" in Los Angeles, California, Dec. 24, 2014.

Consumers paid $15 million in just four days to watch “The Interview” from the comfort of their couches, building expectations that other hot, new films might also make their debut online.

But Hollywood is not quite ready to give that to viewers, experts say. Even so, Sony Pictures' initial success streaming its controversial comedy will add momentum to the industry's slow adoption of same-day theater and video-on-demand (VOD) release.

The experiment, a last-ditch effort by the unit of Sony Corp to keep “The Interview” alive despite a cyberattack on the studio and threats to movie theaters, has shown the technology works and people like it.

That outcome could embolden studios to shorten wait times between theatrical release and VOD and put more small films on same-day distribution. New platforms could muscle their way into movie streaming after seeing a relative VOD novice such as Google Inc.'s YouTube Movies score with “The Interview.”

Two big obstacles stand in the way of a rush to emulate distribution of “The Interview”: close ties that have developed over the years between movie theaters and Hollywood studios, and the fact that movies still make a lot of money in theaters.

“The vast majority of revenues will still be generated three or five years from now at the theater,” said Hal Vogel, the chief executive of Vogel Capital Management.

Analysts are uneasy about reading too much into the online success of a comedy that is now in a class of its own because the movie triggered a cyberattack that the U.S. government blames on North Korea.

But studios have experimented with shortening the so-called “theatrical window”, which now averages three months and 14 days compared with nearly six months back in 1997.

“You look over the next five, 10 years you're going to see a lot of change,” said Daniel Ernst, an analyst at Hudson Square Research. “You're already seeing the windows change and a lot of the windows that exist don't make sense to consumers, let alone digital natives.”

Bigger cut from streaming

Studios do normally take a bigger cut from online purchases, about 70 percent of the revenue, compared with 50 percent when they show in a movie theater. Sony has not disclosed the terms for “The Interview.”

But it is hard to know how good of a business VOD could be because studios do not typically say how much they earn from streaming over sites or on cable.

“There's not transparency in the same way there is on box office,” said Phil Contrino, chief analyst at “Normally, we don't even hear about what VOD releases do... I'm sure that will change, hopefully soon.”

Aside from “The Interview,” studios have stuck to small-budget movies for same-day releases in theaters and on-demand. They include dramas such as “Snowpiercer” from The Weinstein Company's Radius-TWC division, and “Margin Call” and “Arbitrage” from Lions Gate Entertainment Corp's Roadside Attractions.

The low-budget “Arbitrage” grossed about $8 million at U.S. theaters but took in $14 million over VOD.

Theater chains objected in 2011 when Comcast Corp's Universal Pictures planned to sell comedy “Tower Heist” through video on-demand just three weeks after its debut in theaters. Universal dropped the idea.

But the idea keeps hovering, especially as teens and young adults go to the movies less, according to recent studies from Nielsen and the Motion Picture Association of America.

“In March will be CinemaCon, the theater owners' convention where the studios and the theaters will be and you bet this will be a big topic,” said Paul Degarabedian, senior media analyst at tracking firm Rentrak.

Fortunately for the industry, 2015 is expected to be a great year for the movie theater experience, with big films such as the new “Star Wars” installment, “Avengers: Age of Ultron” and the seventh “Fast & Furious” movie all targeting young viewers.

But projections may begin to change after the consumer experience with “The Interview.”

“It all goes back to consumer expectations, and what are you creating if you start telling people you can't get them [movies] in your home quicker?” Contrino said.