Exhibs leery of TCI-Carolco PPV
Indeed, the idea of presenting one of Carolco's trademark event films simultaneously or even before a theatrical release wreaks havoc with Hollywood's economic order.
Investors clearly are keen on the idea. On Thursday, TCI stock jumped $ 1.25, nearly 7%, to $ 19.25. And Carolco's long dormant shares crept up 25 cents, or 10%, to $ 1.375.
The new PPV window "could change the economics," said Jessica Reif, an analyst with Oppenheimer & Co. "They have a sunk cost for the film and get paid up front. Getting more money faster is positive."
The sum is enormous. TCI would offer as much as $ 100 million to Carolco in return for films to play in its PPV window. While the financially struggling indie would reap tremendous upfront rewards, TCI would bring in a hefty harvest. The nation's largest cable operator expects to mount a promotional blitz to its 11 million-plus subscribers.
In addition, tie-ins with TCI-related programmers, like the QVC Network, would start hawking T-shirts, soundtracks and other film merchandise. In exchange for buying the PPV showing at upward of $ 30 a pop, TV viewers could also get a premium package of merchandise.
The first film readied by Carolco for this extravaganza likely would be Paul Verhoeven's "Crusade" starring Arnold Schwarzenegger. It is slated to start production -- at an estimated budget of $ 75 million to $ 85 million -- in the spring of 1994.
Though he wouldn't confirm details or even if the deal was firm, Michael Garstin, an investment banker advising Carolco, outlined the arrangement's broad strokes -- beginning by noting that it wouldn't roll out until late 1994 at the earliest. In an effort to defuse the harshest reaction by theater owners, Garstin insisted that a well-planned PPV event would increase the overall revenues for a big picture to everyone's benefit.
"We realize this is an emotional issue," he said. "A lot of people find it threatening."
To start, TCI is contemplating a very small list of films, not more than four. The cable franchiser's promotional work should also pay off with a higher box office.
"If you have cable really pushing a big-time picture for six months, with huge promotion, linking up with QVC selling merchandise, you'll have gadzillion dollars spent on P&A," Garstin argued. "You'll have the highest awareness of a picture ever known. Distributors can save on P&A because, frankly, it'll be done for them."
But exhibitors aren't buying this argument. Any tickets sold to watch a film on TV is a lost sale at the box office, said Bill Kartozian, president of the National Assn. of Theater Owners.
"Any theater owner that showed a picture with PPV or afterward would be committing financial suicide," he said. "I doubt that many theater owners would show a film after it's been on TV."
The move would also turn the formula of film revenues on its head. As it is, the box office represents just 35% of total revenues, according to Oppenheimer's Reif. But it is this early figure that determines the fees a movie fetches in the rest of its forms, from video to foreign cable.
"Theatrical drives your pay numbers and are contractually tied to it," said Joe Cohen, president of indie producer Largo Entertainment. "All your deals to HBO and Showtime (are based on) a percentage from the rentals."
Without the exhibitors on board, Carolco and TCI may run into trouble.
"The exhibition community still has the clout to determine sequencing," said Stuart Brotman, an entertainment industry consultant in Lexington, Mass. "That's the key hurdle."
But Garstin countered that TCI wouldn't be entering into this venture without a firm understanding of its fallout on the theaters. TCI is a major shareholder in UA Theaters, the nation's biggest chain. UA executives were unavailable for comment.
