NEW YORK (TheStreet) -- U.S. theater chains can see the fuhttp://www.thestreet.com/story/13181268/1/disneys-pixar-hopes-inside-out-rekindles-box-office-magic-after-year-off.htmlture, and it isn't pretty.
Currently, movie theater owners are enjoying boffo ticket sales driven by summer blockbusters like Jurassic World and Inside Out. The surge comes as even more viewers, both young and older, are turning to digital platforms for their entertainment.
Yet streaming services and video-on-demand platforms are increasingly offering first-run movies at the same time, or even prior to when they appear in movie theaters. This strategy, known in the industry as a day-and-date release, offers distributors a chance to stimulate greater interest for a film that might not be as well publicized as a Jurassic World or an Inside Out.
Netflix (NFLX - Get Report), which is leading this transition, is financing films from independent producers that will premiere on its platform at the same time as -- or even before -- they open in theaters, according to the site Deadline Hollywood.
In June, Netflix acquired the distribution rights for War Machine, a military comedy starring Brad Pitt that the site estimates cost $40 million or more to produce.
DirecTV (DTV - Get Report) and movie production company A24 are also producing films to be exclusively shown to the satellite operator's subscribers during a 30-day window prior to its theatrical debut, according to a DirecTV spokeswoman. To date, the program has released eight films, including Revenge of the Green Dragon with Martin Scorsese as its executive producer.
"The theaters will absolutely resist this to death," said Wedbush Securities managing director Michael Pachter. "They rely on being the only place to see newly released movies."
Pachter has a buy recommendation on theater chains AMC Theatres (AMC) and Carmike Cinemas (CKEC), and is neutral on Cinemark Holdings (CNK - Get Report), Regal Entertainment (RGC) and IMAX (IMAX - Get Report)
Theater owners last year threatened to boycott the martial arts film Crouching Tiger, Hidden Dragon 2: The Green Legend because it would be streamed on Netflix the same day it opened in movie theaters. The film will now be offered on Netflix and only in Imax theaters.
Theaters also refused in 2011 to show Tower Heist when Universal said it would make the action comedy available on-demand to cable subscribers of its parent company Comcast (CMCSA) three weeks after it opened in movie theaters. Universal later abandoned the idea.
Hollywood's biggest studios largely steer clear of early digital releases for fear of losing the largest profit-generating outlet for often hugely expensive films. Studios also rely on theatrical distribution to generate the word of mouth "buzz" for their films.
"There has always been a market for straight-to-video movies, and [early digital releases] are just another straight to video film," said Patrick Corcoran, vice president and chief communications officer of the National Association of Theatre Owners. "If they want to spend money on it, they can. We still people want to get out of their house and go to a movie theater."
Even so, attendance at movie theaters has largely stagnated over the last decade, as video-on-demand and digital delivery options increased. The numbers of tickets sold at theaters in the U.S. and Canada declined from 1.38 billion in 2005 to 1.27 billion in 2014, according to the Motion Picture Association of America.
Ticket price increases during that period helped boost box office revenue to $10.4 billion from $8.8 billion.
Theater chains may be relenting, however. Viacom's (VIA) Paramount Pictures said on Wednesday that it would give digital outlets two of its October releases, Paranormal Activity: The Ghost Dimension and Scouts Guide To the Zombie Apocalypse, 17 days after the numbers of domestic theaters in which they're playing drops below 300.
In return for showing the films, theater owners will be given an undisclosed percentage of the studio's digital revenues.