Imagine how much money they could make if they released a 1080p HD version online, globally, 4 weeks at most after the launch in cinemas, and for a price of $5.
That may or may not kill the cinemas in the long term, depending on how hard they fight to become more competitive and unique compared to watching the movie at home, but it would definitely not hurt the studios and movie makers. If anything, they stand to make a lot more money on average for every released movie.
Lets take a recent blockbuster. The first Twilight movie made $392,616,625 in the box office, $194,881,773 in DVD sales for a total of $587,498,398 (almost 600M - pretty good rake)
In your $5 they'd have to sell 117,499,679 of those $5 streams in order to make that equivalent revenue (so roughly one in every 60 people in the world need to buy a stream).
For more fun take the last Twilight Movie (Eclipse) which was a bigger draw ($826,423,724 total revenue). Then you'd have to sell 165M streams to get to those numbers.
Considering the $5 stream scenario could be shared across a family - I honestly am not sure your assumption that a studio could make more money is correct. The real X-Factor here is the cut the various distribution chains take.
I'm not sure your price point is right, but would you perhaps pay $20 for the same stream?
EDIT: Also I don't think the 4-weeks after theatrical release is going to work I don't think theaters are going to show your movie if you're going to kneecap them 4 weeks out.
I think the grandparent post meant this as a replacement to DVD, not all sales. So you're replacing the 120M component of the total, not the total 500M. So we're talking closer to 40M people who feel the film is worth $5.
(Admittedly grandparent did acknowledge that this could affect the theater ruin, but to suggest it would supplant it is a bit much. Conversely let's consider some may sample it at $5 who may not have otherwise. The people who usually wait for rental or cable. Those people now have the opportunity to go see it in IMAX 3d or whatever.)
Why delay it at all? Frankly they shouldn't care how we want to watch a film, just that we want to and are willing to pay for it.
I like films but have small kids so I can't get to the cinema as often as I'd like. By not letting me give them money to watch their film (and I won't pirate it, I'll just do something else) they're throwing money away. Get me while the publicity and hype are out there, when I can discuss it with friends and colleagues. By the time it's out on DVD the moment could well have passed and my money has gone.
The cinema done right is a great experience and personally I don't think it's going anywhere. It doesn't matter how big my TV gets, I'll never have that social experience, the fact of getting out of the house where the phone won't ring and the door won't go, where I won't be tempted to pick up the iPad or whatever.
Watching at home, if done right, is a complementary market as much as it is a competitive one. And if it is competitive one then hey, what do they care if they're charging for it?
It's not going to be $5, probably more like $20 (think a couple of people, a couple of tickets equivalent, perhaps figure in the fact they can't upsell you popcorn and subtract some lower costs), but so long as the price seems fair next to the multiplex cost I'm fine with it.
Why delay it at all? Frankly they shouldn't care how we want to watch a film, just that we want to and are willing to pay for it.
If you watch the latest blockbuster on the day of release at home on your mega projector that you bought with all the money you saved by not going to the cinema, with your wife, your three kids, and your neighbours (5 more people), you pay for just one stream/ticket.
If all those people go to the cinema, they pay for 10 tickets.
A few people will do this but most won't. The fact a few people game a system rarely stops a business model. It doesn't have to work in every specific instance, just overall.
Actually I think most would - perhaps not at a 10x multiple, but at least 2-3x, maybe 5x. If I were to download a brand new movie that just came out today I would definitely watch it with at least my girlfriend, but possibly invite a few friends around for a movie night. Or some friends would invite me (I hope!).
I would end up watching a lot more movies, but providing much less income to the movie industry for each.
As I said in the original post, you wouldn't charge at a single ticket rate, you'd price it based on what worked. My assumption would be that most people would watch with maybe one other person and that the price would reflect that.
As I also said they lose the ability to up sell you highly profitable popcorn, you lose travel costs, the lose some overheads (but gain others) - there are a whole bunch of things to figure in. The release day cost of a movie rental wouldn't be a single cinema ticket price and it certainly wouldn't be a current rental cost. Off the top of my head I think you'd be looking somewhere around two to three times average cinema ticket prices, possibly varying by time (weekend evenings might cost more).
The last sentence is a good thing for them though not a bad one. If you watch 3 movies a week instead of one and pay on average $5 instead of $10, they've still got $15 instead of $10. Their costs will likely only be marginally higher with three movies vs. one (most of it being the infrastructure) which means that their overall profit is likely up.
You don't optimise a business for revenue, you optimise it for profit.
Sell it the same day as release, as well as DVD and Blu-Ray copies. The home and theater versions then become effective cross-promotions for the other, plus you hit the market at the peak of your advertising campaign. Nobody's had the guts to try this sort of thing though.
720p or 480p would be more realistic; the bandwidth costs for serving 1080p would chew through that $5 pretty quickly. (Assuming reasonable video bitrates) Besides, a very large chunk of consumers own machines that cannot handle 1080p.
Before you scream bloody murder, remember DVDs are only 480p.
Let's assume that a 1080p movie encoded for streaming using H.264 ends up at 8GB (a generous overestimate for most movies). At entry-level datacenter pricing of $0.10/GB, bandwidth costs will leave $4.20 for the rest of the supply chain.
$0.10/GB is way more than market rates for bandwidth. Dedicated server hosters such as 100TB.com charge about $200 for 100TB, ie. $2/TB or 0.2 cents /GB, resulting in a grand total of 1.6 cents for a 8GB movie stream.
They've already embraced it. Major retailers devote much less floor space to DVD than they did in the past. The entire industry is well aware DVD is on the downslope.
That may or may not kill the cinemas in the long term, depending on how hard they fight to become more competitive and unique compared to watching the movie at home, but it would definitely not hurt the studios and movie makers. If anything, they stand to make a lot more money on average for every released movie.