According to former Ticketmaster head Fred Rosen, “Every product I can think of has a luxury version, which got me thinking. Why not movies?” His reasoning is that money should be able to buy you a private screening of a new film, a feat that has been attempted in the past by companies like Best Buy, which charged $500 for new releases as well as $35,000 for the setup.
The concept, however, worries film studios, who don’t want to alienate theater owners or risk piracy. Rosen, 75, and Dan Fellman, 76, former President of Domestic Distribution at Warner Bros., have recently founded Red Carpet Home Cinema, which rents first-run films for $1,500 to $3,000 each. Red Carpet, which has agreements with Warner Bros., Paramount, Lionsgate, Annapurna, and Disney’s 20th Century Fox and Fox Searchlight, releases roughly 40 movies a year, including blockbusters like Aquaman and A Star Is Born.
Rosen and Fellman, both longtime Hollywood insiders, hope to fare better than previous start-ups like Screening Room, which unsuccessfully tried to make first-run films available for home viewing for a premium price. Red Carpet, however, seems to have chosen an opportune time to test the waters since Netflix is changing the film release landscape by affording theaters an exclusive window of three weeks or less to screen films like Roma and Bird Box.
“Consumers want to have more control,” said Harold L. Vogel, author of the textbook “Entertainment Industry Economics.”
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Studios, so far, have tried to keep their deals with Red Carpet under wraps, while others like Universal, Sony Pictures and Disney, have resisted the urge to sign a contract. Rosen and Fellman, however, have no interest in rocking the boat. They simply want to offer a luxury product to those who can afford it.
“I feel pretty comfortable that we can gain more studio partners,” Rosen said. “We are a niche offering — I’m too old for disruption — but even if a studio makes $25 million to $50 million annually from us, that’s found money.”
In the meantime, theater owners are waiting to see how the experiment plays out. “I have no take on that,” said Adam Aron, chief executive of AMC Entertainment, the leading theater chain in the US. On the other hand, Aron has been quick to disparage start-ups like MoviePass, a subscription ticketing service.
The reason is that Rosen and Fellman hope to limit access to the luxury service by enforcing a demanding application process and demanding a $50,000 credit card retainer. In addition, Red Carpet customers must purchase a $15,000 box that connects to a home theater system and is equipped with piracy protections. The prices for rentals will be set by the studios, with higher fees for big-budget films like Shazam! and lower fees for prestige dramas like The Shape of Water. Each rental will allow films to be viewed twice in a 36-hour period.
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Red Carpet’s success depends simply on demand. There are nearly 46,000 Americans with annual incomes of more than $2 million, according to Social Security Administration data from 2017. Rosen and Fellman, however, are not looking to go big or go home.
“We’re not even looking for 10,000 people,” Rosen said. With fewer than 4,000 customers, Red Carpet could generate $300 million in annual revenue, according to Fellman’s estimates.
Red Carpet, which also includes Sherry Lansing, the former chief executive of Paramount, as an investor, has been running a beta test in 25 homes since December. “I’m recommending the service to my friends,” Lansing said.
“I’m not interested in starting a business that is disruptive to the theatrical experience. Maybe we get 400 homes in New York and L.A. Maybe 100 in each of the 30 biggest cities in the United States,” Fellman added.
The concept of having exclusive access to first-run films is not exactly new. Hollywood A-listers have long been able to preview new films at home for free as members of something known as the Bel Air Circuit, which allows VIPs to borrow a limited number of new movies from studios. Red Carpet would simply extend that privilege to mere mortals with millions in the bank.
“We told studios, ‘You set the terms,’” Mr. Fellman said. “They appreciated that. What doesn’t work in Hollywood is going in and wagging a finger and saying, ‘This is how it’s going to be.’”
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