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Will the ‘Veronica Mars’ Movie Change the Hollywood Distribution Model?

By John Casteele - Feb 25, 2014 at 9:40AM

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Time Warner's Warner Bros. Pictures is breaking new ground with a dual release of "Veronica Mars," letting fans see the film in theaters or streaming online on the same day. Will it work?

Little about the Veronica Mars feature film has followed the traditional Hollywood script. So it's not surprising the upcoming release is breaking new ground.

The movie began its life as a project on Kickstarter, the crowdfunding website where backers pledge financial support to a wide range of projects in exchange for rewards. Originally trying to raise $2 million, the project reached that goal in its first 12 hours and went on to collect $5.7 million in pledges, breaking a few Kickstarter records in the process. That success was a testament to the "Veronica Mars" fanbase, especially given that the campaign started a full six years after the show's cancellation.

The film is being distributed by Time Warner's (TWX) Warner Bros. Pictures, but the distribution method is anything but conventional. In addition to getting a theatrical release, Veronica Mars will also be available to buy or rent as a video-on-demand title online.

A unique distribution model
In most cases, such a dual release wouldn't be possible. Previous attempts at early non-theatrical release have been shot down by theater owners, who hold a significant amount of power over the studios.

In 2011, for example, Comcast's (CMCSA -2.73%) Universal Pictures canceled plans for a $60 day-one rental option for one of its films because theater chains threatened to drop the film completely. Bear in mind that the $60 trial was only going to run in two cities (and that it was the poorly received Ben Stiller/Eddie Murphy comedy The Heist), as this shows the lengths that theater groups will go to protect their new-movie turf.

In fact, theaters typically require studios to provide them with a 90-day window of exclusivity after a film's theatrical run, which obviously would rule out the dual-release format. But Warner Bros. has found a way around this -- while Veronica Mars is getting a theatrical release, it's far from a traditional one.

Renting the screens
To allow it to show the film in theaters and offer it for on-demand streaming, Warner Bros. has rented screens from AMC Entertainment Holdings (AMC -13.91%), the second-largest theater chain in the United States. This will allow Warner Bros. to show Veronica Mars at 260 AMC locations (as well as 10 independent theaters) without the pressure of a theatrical exclusivity window. AMC's interests are covered by the rental fee, and Warner Bros. has a theatrical release in well-established theaters in important markets in addition to its on-demand release.

Renting the locations was a smart move for Warner Bros. It not only allowed it to avoid exclusivity pressure, but it also negated the primary argument against same-day video offerings. Theaters claim that same-day at-home availability would cannibalize their sales, but as yet this hasn't been tested to see what impact it would actually have. Warner Bros. eliminated the threat to AMC's income and set itself up to break new ground with the dual release.

Beating Netflix at its own game
One company that's likely going to pay close attention to the release is Netflix (NFLX -1.85%). It was only a few months ago that Netflix chief content officer Ted Sarandos suggested that the company might be interested in getting in to original movies and film distribution. In a speech for Film Independent, Sarandos said "What we're trying to do for TV, the model should extend pretty nicely to movies. Meaning, why not premiere movies on Netflix, the same day they're opening in theaters?"

Now, instead of trying to find a way to bring about this innovation, Netflix is sitting on the sidelines watching how it plays out for another company.

This isn't the first time that Netflix has been burned by "Veronica Mars," either. While the company is known as one of the major homes for binge-watched content, Amazon.com (AMZN -1.85%) scored the exclusive rights to the TV series for Amazon Instant Video and began streaming it last month.

Of course, it might be for the best that Warner Bros. is testing out this strategy first. While Netflix has been expanding into film with the acquisition of several documentaries, it could be years before it's ready to fully implement its distribution plans. Though Warner Bros. is the first to provide a dual release like this, Netflix will have an opportunity to study the Veronica Mars reception and adjust its own plans accordingly if and when it does make the jump to theatrical distribution in the future.

John Casteele has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Netflix. The Motley Fool owns shares of Amazon.com and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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