Bringing the movie theater experience home for the 1%

WEST HOLLYWOOD, Calif. >> Fred Rosen, the retired Ticketmaster tycoon, was eating a melted ham-and-brie sandwich at the exclusive San Vicente Bungalows and spouting forth about belts.

Yes, what people use to hold up their pants. You can buy one at Walmart for $4, he noted. Or you can get one at Gucci for $1,500. “Every product I can think of has a luxury version, which got me thinking,” Rosen said. “Why not movies?”

It’s an idea that has captivated one entrepreneur after another over the years: For a high price, allow tech billionaires, Wall Street titans, professional athletes, Russian oligarchs and other ultrawealthy people to rent movies — as soon as they come out in theaters — for viewing at home. Think of it like Netflix for 1-percenters. But such upstarts have always sputtered, including one backed by Best Buy in 2013 that charged $500 per movie on top of $35,000 in setup costs. Film studios, fearful of angering theater chains, have been reluctant to participate. Piracy has also been a concern.

Rosen, 75, and a septuagenarian golfing buddy, Dan Fellman, who is Hollywood’s foremost film distribution expert, may have finally figured out how to make it work. They have quietly founded Red Carpet Home Cinema, which rents first-run films for $1,500 to $3,000 each. Red Carpet has contracts with Warner Bros., Paramount, Lionsgate, Annapurna and Disney’s 20th Century Fox and Fox Searchlight divisions — resulting in some 40 movies annually, including blockbusters like “Aquaman” and “A Star Is Born.”

Those partnerships reflect entertainment-industry relationships that Rosen and Fellman have cultivated over decades. Most studios do not see them as disrupters from Silicon Valley, something that has stalled startups like Screening Room, which has tried without success since 2016 to speed first-run movies to homes for a premium price. (Sean Parker of Napster and Facebook fame is behind that one.)

Red Carpet also arrives at a time when the movie industry is undergoing sweeping change — not the least of which involves the manner in which Netflix is challenging the traditional way that films are released. For the most part, theater owners insist on a three-month period of exclusivity to play new films. Netflix has started to chip away at that practice, offering theaters an exclusive window of three weeks or less for films like “Roma” and “Bird Box.”

Most studios see broader distribution change as inevitable, noted Harold L. Vogel, author of the textbook “Entertainment Industry Economics.”

“Consumers want to have more control,” Vogel said.

Even so, studios are treading carefully. None of the film companies that have signed on as Red Carpet partners would discuss the venture publicly. Several major movie operations, including Universal, Sony Pictures and Disney’s other labels, are Red Carpet holdouts. They also declined to comment.

“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.”

Theater owners, in the meantime, seem to be taking a wait-and-see approach to Red Carpet.

“I have no take on that,” said Adam Aron, chief executive of AMC Entertainment, the dominant theater chain in the United States. In contrast, Aron has readily criticized startups like MoviePass, the subscription ticketing service.

The folksy Rosen, who took over Ticketmaster in 1982 and helped turn it into a goliath, and Fellman, who started his studio career in 1964, worked out details for Red Carpet over rounds of golf at the well-to-do Hillcrest Country Club in Los Angeles. The luxury service operates a bit like a private club. There is a rigorous application process, and participants must have a credit card with a limit of at least $50,000. Those who become customers must buy a $15,000 box that connects to a home theater system (installed by a technician) and comes loaded with piracy protections.

Prices for rentals are set by the participating studios, with higher fees for blockbuster-style movies like “Shazam!” and lower costs for dramas like “The Shape of Water.” Each rental allows for two viewings in a 36-hour period.

How big could Red Carpet get? There are more people who can afford it than you might think. Nearly 46,000 Americans have annual income of more than $2 million, according to Social Security Administration data from 2017. Rosen and Fellman, however, insisted over lunch in mid-March that they were not interested in size.

“We’re not even looking for 10,000 people,” Rosen said. With fewer than 4,000 customers, Red Carpet could have $300 million in annual revenue, according to Fellman’s projections.

Red Carpet, which counts Sherry Lansing, former chief executive of Paramount, as an investor, has been operating in about 25 homes as part of a beta test since December. “I’m recommending the service to my friends,” the Red Carpet website quotes Lansing as saying.

Fellman added: “I’m not interested in starting a business that is disruptive to the theatrical experience. Maybe we get 400 homes in New York and LA. Maybe 100 in each of the 30 biggest cities in the United States.” (Celebrities and Hollywood big shots have long been able to see first-run films in their homes — free — as part of something known as the Bel-Air Circuit. Studios allow a limited number of preapproved VIPs to “borrow” copies of new movies.)

“We told studios, ‘You set the terms,’” 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.’”