How ironic that North Korea, of all places, was responsible for the film industry’s biggest leap into the future this year. The simultaneous release of The Interview in theaters and online may be unorthodox, but with movie theater attendance falling and streaming video rising, such arrangements will undoubtedly become the norm soon enough.
In the meantime, The Interview serves as a natural experiment of what that the next few years may look like. With some obvious caveats—not all films will be the subject of state-sponsored digital espionage—here’s what we know and what it might mean for the future of internet video.
1. The best movie theater is your living room
Amid the chaotic release, Seth Rogan told his fans, “I need to say that a comedy is best viewed in a theater full of people.” Some took the star and director of The Interview at his word and saw the movie in one of 331 independent theaters in the United States, spending $2.8 million on tickets in the first four days of release.
But that figure was dwarfed by the $15 million spent on rentals and purchases of the movie in its first four days online, according to Sony, which created the film. Of course, the comparison isn’t fair because all of the major American theater chains chose not to screen The Interview, citing safety concerns. But it shows that people don’t necessarily agree that movies are best seen on big screens with big audiences.
Some critics even argued The Interview was better on the couch, that jokes “landed better in a quiet, half-distracted room than they might have in a crowded theater.” (Of course, most critics just disliked it.)
2. Streaming has a natural rhythm
Sony only said The Interview was rented or purchased online more than two million times between Christmas Eve and Dec. 27, generating more than $15 million in revenue. But here at Quartz, we had access to more granular data. That’s because my story, “How to watch ‘The Interview’ online,” is the top result on Google when some people search for that phrase (which was, of course, our intent). Here’s what traffic to the piece has looked like since it was published on Dec. 24, when Sony announced the The Interview would go online starting at 1pm EST:
After an initial surge, interest fell into something of a rhythm, peaking at 8pm EST on Christmas, when a lot of people might have otherwise gone to movie theaters. (Plenty did that, too.) The peaks and valleys paint a picture of a relaxed, four-day weekend: Saturday (Dec. 27) streaming started earlier, and interest fell off a cliff Monday (Dec. 29).
These data hardly capture all interest in streaming The Interview, but seem like the best view we can get. They also suggest that Apple’s tardiness—iTunes only started carrying the film on Sunday, Dec. 28—may have cost it most of the action. New Year’s Eve and Day are likely the next big opportunity, but interest in the movie may be fading.
3. People will pay for video on YouTube
Google hasn’t had much success arguing that YouTube, which it owns, isn’t just for short clips and amateur videos. Few people even know YouTube is in the business of renting and selling movies, like iTunes. The Interview presented an opportunity to fix that impression, and it seems to have worked: The “vast majority” of the movie’s revenue online revenue has so far come from YouTube and the Google Play store, according to various reports.
We can see this, too, with data from ”How to watch ‘The Interview’ online.” Among the links in that piece, there were 12,680 clicks to Sony’s dedicated site for streaming the movie, 12,107 clicks to the YouTube version, and 8,356 clicks to Google Play. (There was no link to the version available on Microsoft’s Xbox Video store.)
4. Renting is better than owning
As media moved online, people initially tended to replicate their libraries of DVDs and CDs by purchasing digital files. But just as streaming is overtaking downloads in the music industry, owning movies is becoming passé, as well. Subscription streaming video services like Netflix are growing in the popularity, and for video that’s only available a la carte, like The Interview, rentals are proving more popular than purchases.
The Interview costs $6 to rent for two days or $15 to purchase for viewing whenever you want. Sony didn’t break out the popularity of each option, but we can infer it from the data that were released: Rentals accounted for more than four-fifths of legal downloads of The Interview (and about two-thirds of the digital revenue).
5. Netflix’s Reed Hastings watched it—closely
Among the two million people who watched the film online in the first four days was Netflix CEO Reed Hastings, who wrote on Facebook: “Thanks to Google and Microsoft for offering The Interview. Courage well invested. What a creative story! 5 stars. Funny, wild, and meaningful all at once.”
Meaningful, indeed. Hastings’ taste in movies notwithstanding, it’s notable that he streamed The Interview and made a point of publicizing it. Sure, Google, Microsoft, and Apple are among his competitors for digital video revenue, but Netflix only stands to benefit if the film’s nontraditional release is seen as successful.
Netflix has tried to shorten the time, or “window,” between the theatrical release of movies and when they are available online. It has signed comedian Adam Sandler to a four-movie deal this year, and angered theater chains by planning to stream a sequel to Crouching Tiger, Hidden Dragon at the same time it hits theaters next summer. What happened with The Interview seems like at least partial validation of Netflix’s contention that the film industry needs to move faster toward online distribution.
Still, The Interview isn’t all good news for Netflix. The company was reported to be negotiating for the rights to stream the film itself. That it hasn’t happened yet may suggest Sony thought it could generate more revenue from rentals and purchases than streaming licenses. Certainly, a large portion of people who paid for the movie online would have watched it at no additional cost if Netflix were offering it. The $15 million generated in four days by digital rentals and sales is almost certainly more than Netflix would have paid to stream the film for a year. Netflix spent nearly $3 billion on content licensing this year as studios have tried to extract more revenue from its deals with the company.
6. Piracy can be combatted by making it easy to pay
The two million legal downloads of The Interview in four days compare to 1.5 million illegal downloads of the film in two days. Sony has only made the film available in the US and Canada, so the rest of the world would have had to resort to piracy, which was aided by some loopholes left open by sites offering the movie.
TorrentFreak, which tracks piracy of digital media, said the data were “comparable to that of popular blockbusters, but they’re certainly not exceptional.” Piracy may be inevitable, but the early data suggest it can be mitigated with widely and easily available options to pay online. That’s something HBO will be watching closely next year: Its Game of Thrones was the most-pirated TV show of 2014, but in 2015, people will for the first time be able to pay for an online-only version of HBO. Will people happily pay up? It’s one of next year’s biggest questions.