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Movie Studios, Theaters, and Streaming

  • 9 min read

How the relationship between Movie Studios, Theaters, and Streaming Services is Changing.

The relationship between movie studios, movie theaters, and digital streaming has been steadily changing in recent years, but the effects of COVID-19 has accelerated the process in several ways. 

Depending on your location, some movie theaters may be open (with reduced seating capacity) or closed. Both established and pop up drive-in movie theaters are doing brisk business (even Walmart is getting into the act), providing a safe place to go for an entertainment-starved populace. 

However, most of the movies being shown during this time period are usually older releases mixed in with a scattering of newer, but lower budget or less hyped current films. Without many new releases, indoor movie theaters are struggling until they can fully reopen and get access to new movies that will fill their seats. 

How Movie Studios Are Handling New Releases

Movie studios are assessing their relationship with movie theaters and are holding back on most previously scheduled blockbuster movies for 2020 release and rescheduling them for 2021 or 2022. Also, the production of new films has been stalled or proceeding cautiously at a much slower pace. 

Some films, such as Disney’s Onward, Universal's Invisible Man, and Universal/Dreamworks Trolls World Tour were released to theaters just as the COVID-19 lockdown was implemented but were quickly moved to online streaming rental or purchase early to maintain availability and revenue generation. All three films have since been made available on physical media as well.

In another move, Apple acquired the streaming rights for the WWII action thriller, Greyhound from Sony Pictures/Stage6 Films, and made it available to subscribers of its Apple TV+ streaming service (bypassing theatrical release) at no extra charge. 

Disney has positioned The New Mutants (a film from the 20th Century Fox acquisition) as a wide release at the end of August 2020, despite movie theaters in New York and Los Angeles (the two largest markets) being closed. Warner Bros is releasing its potential blockbuster Tenetin August and Sept 2020 to theaters (depending on location) as it is contractually obligated with director Christopher Nolan to release it in movie theaters first before being allowed to be available online. 

However, instead of postponing the theatrical release of its live-action version of Mulan, Disney is allowing Disney+ streaming subscribers "Premier Access" beginning Sept 4th, 2020. If you are a subscriber to the service, you can "unlock" access to Mulan for $29.99.

$29.99 may seem a steep price to pay, but here are some possible benefits for Mulan: 

  • If you have a family, the $29.99 cost is less than you would normally spend on 3 or 4 tickets to see it in the theater. 
  • You can watch the movie anytime or as many times as you want. 
  • You don't have to spend extra for movie theater snacks - just make them at home. 

However, Disney’s Mulan solution raises additional questions:

  • Although Disney touts that once you pay the fee, you will always have access to the movie, can this be guaranteed for the long term future? 
  • If this model turns out to be successful, which movies will be offered in this manner in the future, beyond the current COVID-19 situation? 

The key thing for Disney is whether its release plan for Mulan will recoup its $200 million budget and also post a profit without a wide theatrical release. However, Disney is offering Mulan as a limited theatrical release in countries where Disney+ isn't available but at least some movie theaters are open.

AMC and Universal

As a more "permanent" solution, Universal has initiated a move to shorten the movie theater-to-streaming window. AMC Theaters has agreed to a deal with Universal that shortens the time a movie needs to be in theaters from 60 to 90 days down to 17 days after which Universal has the option of making the movie available for online VOD (Video on Demand) rental or purchase.

This means that if a film is filling seats, it may stay in the theater longer than 17 days, but if it falls off drastically or doesn't fill enough seats, to begin with, Universal has the option to pull the movie out and send it to streaming via online purchase, rental, or subscription. Universal will cut AMC on a share of initial streaming rental/purchase revenue to compensate them for the shorter theatrical window.

This agreement is not going over well with AMC's competitors and is not being received positively by the numerous independent theater owners. If the AMC/Universal Agreement turns out to be a success, it opens up the door for other studios to require similar agreements with AMC and other home movie chains and independents. 

Why Movie Studios Need Movie Theaters 

You may be asking yourself if movie theaters aren't open and the studios want viewers to see their movies, why not just release them all on streaming? 

Although this would be very convenient to the viewer, there are reasons why this doesn't make good business sense for movie studios in most cases:

  • Revenue: Although releasing some lesser and independent films on streaming or video-on-demand may be a good fit, blockbuster movies can take in anywhere from 500 million to 1 billion dollars or more during a movie theater release. Unfortunately, as popular as streaming is, it won't make up for that loss. 
  • Ticket Sales vs Streaming Income: When you see a movie in a theater, every person has to buy a ticket, whereas on streaming you pay a subscription, rental, or purchase, then fill the room with your family and friends at no extra cost to you. The movie studios lose that extra revenue as only one person in your group has to pay for that "ticket".

What Movie Studios May have to Do

One long-term solution that may lessen the impact of the movie studio to movie theater disruption is a recent court ruling that has repealed a long-standing law that prevented most movie studios from owning movie theaters. This option could insure that studios can manage when, for how long they want to make their movies available in theaters without the costs resulting in negotiating terms with a third-party, but the ruling doesn’t apply to all studios.

In the near term, if movie fans don't return to movie theaters after the COVID-19 situation dies down, movie studios may have to, out of business necessity, limit the amount of money spent on high-profile franchises or blockbuster movies and find ways to make blockbuster movies at a lower cost. 

One indication of how this may be done is to use filming techniques used in the shooting of Disney's The Mandalorianto give the illusion that the production is bigger in scope without spending a lot of money. 

Also, the new normal might end up being releasing movies that have less mainstream appeal, such as independent and art films, other lower budget films direct to streaming, depriving moviegoers of a big-screen experience for those movies.

However, even for big blockbusters, as indoor movie theaters reopen, will moviegoers want to sit in a room with recycled air for a couple of hours having to wear a mask and possibly not being able to buy and eat snacks? Will theaters be able to make any money operating as 25 or 50% capacity?

Re-releasing Previously Popular Films

Another trend that has surfaced is that areas of the U.S. and other countries where movie theaters may be open have been showing previously popular “legacy films” to attract moviegoers. 

One successful example is Harry Potter and the Sorcerer’s Stone. Upon its recent re-release in China, it has taken in over 13 million dollars, which has pushed its all-time gross just passed $1 billion

Releasing older films back to mainstream movie theaters every so often was common in the days before home video, perhaps it will make a comeback to fill the gap until movie production gets going full-steam again.

The Netflix Factor

Even before the COVID-19 situation, Netflix was making a big impact by spending lots of money and attracting noted stars and directors to make movies for their streaming service, bypassing theatrical release. Also, Netflix, so far, has been offering these films to their subscribers within their current subscription fee (no extra unlock charge). 

Although Netflix (and most streaming services) don't release specific viewing numbers for their content, their move has made an impact as its subscriber numbers keep increasing.

However, Netflix has taken on lots of debt to finance their movie productions to take on the movie studios, but they are hoping to gain possible long term benefits of keeping people home to watch. 

Movie Studios and Physical Media

In addition to movie theaters and streaming, and exclusive of COVID-19 issues the relationship between Movie Studios and physical media has been changing for several years. This is a result of the growth in popularity and convenience of streaming, which is filtering down to movie studio marketing and distribution decisions. 

It has been revealed that Disney won't be releasing older classic films (referred to as “catalog titles”) from the Disney or 20th Century Fox film library on UHD Blu-ray (no word on DVD and standard Blu-ray). However, new films will continue to be released on physical media as Disney sees the demand.

As a business strategy, Disney is pushing its Disney+ streaming service hard, and releasing its film library on that venue means more subscribers. 

This not only weakens UHD Blu-ray, Blu-ray, and DVD as viable home entertainment formats but also changes the concept of consumers being able to own and collect physical copies of their favorite movie. 

Also, physical Blu-ray and UHD Blu-ray provide a higher-quality viewing experience due to higher bit-rate signal transfer. Streaming services have to compress Blu-ray and UHD quality video data more in order to feed it through the internet pipeline available to most subscribers. However, available internet speeds continue to increase and with innovations such as 5G, this difference will diminish provided it is widely available and affordable for most viewers. 

If you buy a digital version of a movie, do you own it? Despite reassurances from movie studios, the movie you "buy" may no longer be accessible in the future. Also, unlike buying a physical media copy of a movie, a digital version can be altered, censored, or removed from accessibility (think about changing political or cultural attitudes). 

Similar to owning a printed copy of a book, if you have a copy of a movie in a physical format, as long as you have a device that can play it and a TV or video projector, you can watch it.

One thing that may extend the life of physical media is the several independent companies that specialize in releasing classic and cult films on Blu-ray or Ultra Blu-ray discs. It's possible that Disney and other studios that don't want to release their content on physical media themselves may license releases through these independent companies. 

Some studios have been doing this, especially for niche and rare titles. Disney is highly protective of its content but may be willing to license some or all of its 20th Century Fox film library for physical media distribution. 

Some companies involved in this form of distribution are: 

Although physical media is on the decline, it still generates about 12 billion dollars worldwide. 

Continuing Questions

With or without the COVID-19 situation, the relationship between movie studios, movie theaters, streaming, and even physical media will change, but the following questions don't have easy answers.

  • How many movie theaters are needed? How many people will return even if it is safe?
  • What movies will movie studios feel deserve a movie theater release? 
  • Even though streaming continues to grow, how many streaming services can consumers afford to pay for to access content?
  • Will physical media finally disappear, or will it survive as a niche viewing and collection option similarly as vinyl records?

What Happens If Movie Theaters Go Away

One of the attractions of "going to the movies" is that it's a social experience. You see the movie the way the filmmakers intended, on a big screen (such as IMAX), with great sound, and the experience of sharing your reaction with others. You also get to see it first in the theater. Finally, you aren't distracted by other things going on at home while trying to enjoy your movie.

On the other hand, when viewing movies at home, you don’t have to put up with people in the audience talking and texting on their smartphones, and you don’t have to pay for overpriced concessions and individual movie tickets for all the members of your family. For a great home viewing experience, you can invest in a large screen TV or video projector and a home theater system and a media streamer (if needed) that provides access to the movies you want to watch at your convenience.

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