The Death of Theaters?: New Release Strategies and Distribution Models Could Upend the Movie Industry (COLUMN)

Ready or not, a change is coming.

The ongoing crisis of COVID-19, which has rocked all facets of American culture and life since March, has seemingly become a catalyst for big changes in the cinematic world. Theater closings have led to mountains of uncertainty across the industry, and with the numbers of people infected with the novel coronavirus still skyrocketing across the country, the realities of theatrical releases have challenged the norms of film distribution.

Following the initial outbreak, when studios removed many of their films from the release calendar and shuffled their dates, some studios began experimenting with alternative release strategies. Universal Studios was among the first, and shook the industry with the unprecedented direct to VOD release for Trolls World Tour. It was, no doubt, a massive gamble, but it’s one that paid off nicely, pulling in $100 million in streaming revenue in the first three weeks of release.

As noted in the link above, the total revenue pulled in from Trolls World Tour was about $57 million less than the amount the first Trolls made in the same period. However, Universal was able to pocket a larger portion of that revenue than they would have from theatrical release due to the revenue deals studios have with theaters. With the market clearly there and the studio making roughly the same amount of money, the obvious question became, “Do we really need theaters?”

This is a question that, in years past, would have been absurd. But over the last few decades, home video technology has led to previously unprecedented film presentation accessible from the comfort of one’s home. While it’s true that nothing can quite compare with the experience of the big screen, modern technology, in conjunction to the realities of going to theaters, is getting closer and closer to rendering that argument moot.

Let’s face it, going to the movies can be a hassle. Not only do you have the skyrocketing price of movie tickets, you also have the cost of concessions, the crowds, people who refuse to turn off their phones during the feature, and the ever iffy quality of projection and sound in theaters. On that last point, actor Edward Norton made waves last year when he blamed the decline in theatrical revenue on movie chains. In an interview with The Daily Beast, Norton said, “It’s the theater chains that are destroying the theatrical experience. Period, full-stop. No one else. They are delivering crappy sound and a dim picture, and no one is calling them on it. If they were delivering what they’re supposed to be delivering, people would be going, ‘Wow, this is amazing, I do not get this at home.’”

Ostensibly in response to Steven Spielberg’s objection to Netflix films being in the running for Academy Awards, Norton makes a salient point about the realities movie lovers have been facing for years. Movie theaters, once the gold standard for cinematic presentation, have some stiff competition in the form of home entertainment systems. With the continued decline in revenue for the film industry, which, in 2019, saw 4.05% loss in revenue, despite a 3.7% rise in ticket cost, the so-called “death of cinema” has been much discussed in film spaces over the last few years.

Which brings us back to Trolls World Tour. The success found by the unconventional release strategy led to Universal CEO Jeff Shell announcing a possible expansion of this release strategy for future films. Theater chains were, of course, mad. Even floating the idea led AMC, the largest theater chain in the world, to threaten to boycott all Universal releases going forward.

Months of posturing between the two corporations culminated into another unprecedented development. On July 28 it was announced that AMC and Universal had agreed upon a deal wherein Universal would be free to premiere their movies on streaming platforms and on demand a mere 17 days following the theatrical release, with AMC getting a small cut of the streaming revenues. This is a big deal.

For those who don’t know, studios had, before now, been beholden to the “90-day rule,” which states that movies released theatrically would be exclusive to theaters for at least 90 days. That three-month window has allowed for theaters to maintain their tenuous hold on supremacy, but the new deal potentially threatens that reality.

It’s a deal that makes sense from a studio perspective. Most movies make their money within the first three or four weeks of theatrical release, with audiences largely moving on after that. Why should studios have to wait to receive the potential boon of on demand revenue? The 90-day window has become a bigger point of contention for studios in recent years, and it’s looking less and less likely that studios are willing to play ball.

Enter Disney.

The Mouse House has increasingly had an outsized portion of the movie market for the last few years. Between Star Wars, Marvel, Pixar, and traditional Disney releases, the studio has become a behemoth the likes of which we’ve never seen. In 2019, Disney released a staggering seven of the ten highest grossing movies. That’s up from five in 2018. At this point, the modern film industry is Disney. Theaters need Disney to survive. But does Disney need theaters? Maybe not anymore.

Their much-touted live action remake of Mulan, which was originally slated for release back in March before the COVID-19 shut downs, has been seeking a release date for months. Every few weeks, Disney would announce a new release date only to, once again, push it back as it became clear that theaters would not be able to open or, if they could open, not be able to produce the numbers Disney was used to.

Thankfully for them, they’ve got a shiny new toy to play with in the form of Disney+, their Disney exclusive streaming platform. This week, it was announced that Mulan, which had expected to be a box office powerhouse for 2020, would be skipping theaters all together and premiering on Disney+. There are, of course, some catches.

First off, customers will need to be Disney+ subscribers. Second, they’re not just going to dump Mulan on Disney+ like they did with Hamilton (another film which had been slated for theatrical release). Audiences will have to shell out an additional $29.99 in order to gain access to Mulan. While many have decried the exorbitant price point—Trolls World Tour was $19.99—it’s worth pointing out that $29.99 is still significantly less than it would cost for a family of four to go to theaters in most markets, and that’s not even factoring in the cost of concessions.

Disney has, so far, denied that this strategy will represent how they operate going forward. But if it pays off then why wouldn’t they consider it for future releases? Rest assured also that other studios will be watching this move closely. Already intrigued by the success of Trolls World Tour and the 17-day window plan between Universal and AMC, this deal could spell the end of distribution as we know it.

Right now, the studio most able to compete with Disney on this level is Warner Brothers. Released earlier this year, HBOMax is, simply, the WB answer to Disney+. Should Disney see success with Mulan, there’s no reason why WB won’t consider similar moves going forward. Added to that is the handwringing surrounding the release of Tenet, the latest mind-bender from director Christopher Nolan.

Originally slated for release in July, Warner Brothers has had similar problems to the ones Disney had with Mulan. The cold fact is that most theaters aren’t ready to open. Those that do open will be looking at theaters with 25% capacity, not to mention a populace that isn’t entirely ready to brave a potentially deadly virus just for the privilege of seeing a Christopher Nolan film. As of this writing, WB is standing by their commitment to release Tenet over Labor Day weekend, but, then again, they also stood by their commitment to release Tenet on July 17 and July 31 and…well, you get the idea.

Even supposing the film is actually released this time, many markets simply won’t receive the film. Nolan might have the desire to save the theater industry, but the prospects for the film’s gross aren’t looking as great as they might be under ideal circumstances. And even though Universal has its 17-day screening window locked in, Warner Brothers does not. If Tenet gets released and audiences don’t show up, they’re still committed to the 90-day window, meaning much of the American audience won’t get the chance to see the film until December, at the earliest.

All of this is hitting the movie industry, which was already on shaky ground going into 2020, like a perfect storm. The theatrical arm of the industry is getting less and less stable by the week—even AMC, again, the largest chain in the world, is fighting bankruptcy—and the longer the shutdown continues the worse it’s going to get. But does that even matter anymore?

Norton’s comments last year feel more and more relevant as 2020 continues. Theaters are going to have to step up their game if they want to compete with home entertainment options. If I took my family of four to see Mulan in San Antonio, I’m looking at paying upwards of $60 (depending on time of day) for just the tickets alone. And what does that $60 get me? Increasingly, not much. Add in the potential for catching a deadly virus and suddenly $29.99 feels like a fantastic deal.

The truth is that the theatrical model has needed overhauling for years now. And if Disney’s Mulan gambit pays off, theaters are going to have a lot less leverage going forward. At minimum, we’re looking at the death of the 90-day window. At worst, could this be the death of the theater?

I don’t think things will get that drastic. Even if the market for streaming releases proves as lucrative as studios hope, there will always be those who sing the praises of the theatrical experience. In some form or another, theaters will survive. (Interestingly, the decades-long law preventing studios from owning their own theaters was recently repealed, making the likelihood of studio specific chains even greater, perhaps lending credence to the idea that theaters and streaming can co-exist).

But perhaps we are facing the death of the megaplex. Within a short drive of my home in San Antonio there are no less than 6 multiscreen megaplexes, which feels somewhat ridiculous. Perhaps it’s time to return to a more boutique, intimate movie going experience, one where the focus is on both the quality of the presentation and the sanctity of the space. As it is, the giant megaplexes have neither the will nor the methods to police their audiences from staying on their phones or talking loudly throughout the film.

If theaters are going to survive, they’re going to have to adapt. And even then it might be too little too late. COVID-19 has changed what is possible for cinematic distribution, perhaps irrevocably. Frankly speaking, it’s been a long time coming.