Movie theaters face an uncertain path ahead, but there’s a growing consensus that the theatrical distribution landscape will be forever changed once it’s safe for people to go to cinemas again.
John Stankey, chief operating officer of AT&T, the parent company of Warner Bros., predicts there could be a gravitational shift in consumer behavior and expectations when the coronavirus pandemic subsides.
“We’re rethinking our theatrical model,” Stankey told investors Wednesday on an earnings call.
Under normal circumstances, middle tier movies — often based on original content and not part of an existing properties — were already struggling to make a profit at the box office. Audiences in recent years had been going to the movies to see new installments from big franchises or nothing at all.
While stuck indoors under lockdown, consumer have grown even more accustomed to streaming movies from the comfort of their home. Executives suggest those habits could make moviegoers more unwilling to buy tickets to midlevel films in the future.
Warner Bros. was in damage control mode later that day, walking back the statement and saying, “We remain supportive of the theatrical experience and our exhibition partners.” However, Warner Bros. CEO Ann Sarnoff still stressed the films they had the most confidence in are “tentpole titles, including ‘Tenet’ and ‘Wonder Woman 1984” — an acknowledgement that only seemed to bolster Stankey’s earlier point.
When theaters are able to turn their lights back on, executives will be tasked with finding new release dates for blockbusters that were shelved during the global health crisis. The focus for studios, understandably, will be on major tentpoles that come with expensive brand partnerships, toys and other ancillary perks. Smaller-budgeted movies, the kind that have the potential to become Oscar bait or an embarrassing blemish, could in turn be left by the wayside.
“The longer this goes, the more consumer behavior changes,” said Rich Greenfield, a media analyst at LightShed. “The more movies you can watch on Netflix, Amazon or Disney Plus, the harder it’s going to be to get people back to movie theaters.”
For now, analysts say that anything with the potential to sell $1 billion in tickets — “Wonder Woman 1984,” “Mulan” and “Black Widow” to name a few that were pulled from their initial release dates — likely won’t end up on their parent company’s streaming service before a standard run in theaters. Doing that would leave too much money on the table for studios.
But it’s possible that there will be less incentive to plant flags back in the calendar for films that might have already been a gamble. With each major movie delay, the box office lineup only gets more crowded — and competitive.
For Warner Bros. and other legacy studios, that could spell trouble for the future of anything that’s not expected to be a blockbuster. Already, some Hollywood companies have relegated movies that might not have been theatrical triumphs — like Disney’s sci-fi adventure “Artemis Fowl,” Paramount’s romantic comedy “The Lovebirds” and STX’s comedy “My Spy” — to traditional streaming services.
Universal’s “Trolls World Tour” and Warner Bros.’ “Scoob” won’t wait for theaters to reopen either, but will instead premiere directly on digital platforms, where customers will have to shell out for individual movies rather than paying a monthly subscription fee.
To be fair, “Trolls World Tour” is a follow-up to a hit film and “Scoob” is a reboot based on Scooby-Doo characters. However, these are hardly pieces of intellectual property that rival the likes of Star Wars or Jurassic Park. They don’t carry “Avengers”-like budgets, but they can still hurt a company’s bottom line if they flop at the box office. Every studio has been impacted in recent years by the widening gap between hits and misses.
And yet, even though the public health crisis has further imperiled this subset of theatrical release, it’s made them ever more vital. With theaters closed, they represent a rare source of income for studios cut off from a major revenue stream.
Universal announced last week that “Trolls World Tour” landed the biggest debut for a digital release. Privately, many question that superlative given the lack of context or data to back it up. Some believe “Trolls World Tour” performed better than it would have ordinarily given the amount of people at home with nothing to do. In any event, the animated musical sequel essentially became a digital blockbuster for parents with young kids, thanks to its exclusivity and a higher production value than many made-for-streaming titles.
“Families have been confined to their homes for weeks. We know this is helping the television, [video-on-demand and] streaming business in general,” said David A. Gross, who runs movie consultancy FranchiseRe. “‘Trolls’ and ‘Scoob’ direct-to-VOD make sense under these unique circumstances.”
Analysts point out that these measures might not last when life returns to normal and people feel comfortable revisiting theaters. It’s unique now to watch a new movie from the comfort of your couch. But that novelty might subside once studios are again able to showcase their flashiest offerings on the big screen. And how often are patrons going to be willing to spend an extra $20 when there are other entertainment options available?
In the meantime, studios are still scrambling to adapt to a crisis that has little precedent. But hostility from theater owners, who have long resisted any alterations or amendments to the amount of time a film exclusively plays in cinemas, might not disappear anytime soon.
“The tension over the length of the theatrical window has been simmering for years, and it will continue to simmer,” Gross predicts. “It is going to be especially unsettled while theaters are operating at less than full strength.”
That means that cinemas may make a big stink about all these new digital releases, but they don’t have the leverage they did pre-pandemic. They’ll be desperate to something — anything — to get people back in seats. That leaves studios holding the cards.