Disney Picks a Fight With ‘Alice’

The theatrical window is the third rail of the movie business. Touch it, and you’re likely to get burned. With the upcoming release of Tim Burton’s “Alice in Wonderland,” however, Disney (DIS) isn’t just touching it, it’s grabbing on with both hands and defying anyone to pry them off.

The studio plans to open the movie, which was filmed in 3-D, in theaters worldwide on March 5. It then plans to bring out the Blu-ray and DVD just three months later, rather than the usual four. While U.S. theater owners apparently have acquiesced in Disney’s plans for “Alice,” many in Europe are manning the barricades.

In Holland, the four largest theater chains, Minerva, Pathe, Wolff and Jogchems, which together represent roughly 85 percent of screens in the country, have declared they won’t exhibit the film. In the UK, the Odeon, Vue, and Cineworld chains, which claim 95 percent of -3D screens in the country, are also threatening to boycott the film.

According to Disney officials, the move is necessary to shore-up slumping Blu-ray and DVD sales and will ultimately benefit theater operators.

“We feel that it’s important for us to maintain a healthy business on the exhibition side and a healthy business on the home video side,” Disney’s distribution president Bob Chapek said in a statement last week. “We think this is in the best interest of theater owners, because a healthy movie business is good for them and allows us to invest in high-quality, innovative content.”

Though neither side has backed down yet, there’s little doubt who will win this particular battle in the end. Disney obviously picked this fight now because it knows it has the leverage. “Alice in Wonderland” will be one of the biggest grossing films of the year, with or without wide theatrical distribution in England and The Netherlands, and the studio has “Toy Story 3″ in the wings, which will be even bigger. Ultimately, the theaters need Disney movies more than Disney needs screens.

The bigger question for Disney, as well as the other studios, however, is whether the war is worth the battle. Sales of packaged media are falling, and have been for at least two years, for a lot of  reasons, only some of which are related to the theatrical window. Moving up the DVD/Blu-ray release may address some of the pressures being put on DVD sales — like piracy and consumers’ growing expectation of ubiquitous access to media content — but it won’t address all of them, and its overall effect on DVD and Blu-ray sales is far from certain.

DVD sales are also falling because of consumers’ shifting perception of their value, which is a function of price more than timing. The broad shift in consumer behavior away from purchasing DVDs in favor of renting them, whether from low-price Redbox (CSTR) kiosks or via a Netflix (NFLX) subscription, isn’t likely to be reversed by moving up the home video window by a month, even if it were done for all movies.

DVD sales are also being undercut by competing entertainment options, and by the ever-growing number of ways consumers can access long-form video content. Neither of those factors are likely to be affected by shortening the theatrical window.

What might restore consumer spending on home video would be to restore consumer value to purchasing home entertainment content. That means not just an earlier home video window, but a repriced one as well. And probably one that allows consumers greater flexibility over how they use the content they buy than DVD or Blu-ray can accommodate. Until the studios figure out how to deliver on that, squeezing theater owners may just cause more trouble than it’s worth.

Question of the week

Are exclusive release windows still the most effective distribution strategy for the studios?
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Paul Sweeting

Principal Concurrent Media Strategies

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