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Crouching hype, hidden master

By now, a lot of people know there’s a sequel coming out to Ang Lee’s classic “Crouching Tiger, Hidden Dragon.” It has a small budget, however, and won’t be directed by Ang Lee. Nor will most of the original cast be back, so keep your expectations in check.

We know about the film, however, because the New York Times and other outlets have done major stories on it, hanging them on the hook that the Weintstein Company film will make its debut in the U.S. not in traditional theaters but on Netflix, along with a handful of IMAX theaters (Regal Cinemas, Cinemark and Carmike have all said they would show the film in any of the IMAX theaters they operate because of the day-and-date release).

Over at CraveOnline, William Bibbiani dismisses the strategy as a stunt, meant to dress up what is essentially a direct-to-video release of second-rate movie by giving it a “ground-breaking” gloss, which is true as far as it goes but misses the point. Good, bad or otherwise, the film has a small budget, which means a small marketing budget as well. It was never going to get a lot of traction at the U.S. box office anyway because there would not be enough budget to buy its way onto enough screens to compete with major studio releases. That small box office gross would then inevitably translate into small DVD and pay-per-view sales because that’s the way the business works.

By giving Netflix an “exclusive,” the Weinstein’s get a (presumably) big check in a market where the film would have struggled for oxygen, and they get Netflix and the New York Times to do the marketing for free.

Back when Harvey Weinstein and his brother were running Miramax as an independent studio they were masters at the art of using other people’s money to market their films. Miramax essentially invented the trade-oriented Oscar campaign, for instance, spending a couple of hundred thousand in the Hollywood trades to hype Miramax films to Academy Award voters and then reaping millions in free promotion that comes from landing Oscar nominations (back when I was at Variety Oscar season made up more than half of annual advertising revenue and when the Academy cracked down on ostentatious Oscar campaigning the paper took a major financial hit).

Moreover, the movie isn’t being made primarily for the U.S. market. It’s more likely to find its audience in Asia, where there is no Netflix, so it will follow a more traditional route, and where most of the rights are probably already pre-sold or soon will be thanks to the hype generated by its U.S. release strategy.

As for the release strategy’s broader significance to the industry, that, too, is getting somewhat lost in the hype. The most notable element of the strategy is not that the films is going to Netflix at the same time as its (limited) theatrical run. By now, lots of movies have gone day-and-date in theaters and on VOD (or eschewed theatrical release altogether). What makes the “Crouching Tiger” strategy unusual is that the film is bypassing all transactional windows — from theaters to DVD sales and rentals to pay-per-view — and going straight into a subscription window.

The traditional sequence of windows has long been based on price. Movies moved from high-priced windows (theaters) to lower priced windows (DVD, PPV) to the lowest priced window (subscription) and finally to free (broadcast). It’s extremely rare, however, for them to reverse course and move back upstream. So by going to Netflix first, Weinstein is effectively writing off not only a theatrical release but most of the rest of the paid windows as well. Even if theaters were to agree to show the movie, in fact, a meaningful DVD or PPV release following Netflix availability would be a struggle.

How repeatable the strategy is with other films, therefore, is debatable. Filmmaking is an expensive process. And for all that consumer behavior has changed, it’s still a leap to imagine moviemaking can be sustained on free and subscription exhibition. While simultaneous, all-platform release may be what consumers crave, the loss of price segmentation would likely mean a severe hit to filmmakers’ margins, at least in the near term.

There are only so many big checks Netflix (or Amazon) will be able to write to make up the difference.