Everybody both within the entertainment industry and outside of it has been buzzing with the recent news that Warner Bros will be releasing every title on its entire 2021 slate (currently 17 films) on the HBO Max streaming platform simultaneously with a theatrical release.
This effectively eliminates the magical “theatrical window” (usually up to 90 days) that most exhibitors demand between the date that a film premieres in their theaters and its release on other media, whether that is home video, a streaming platform, or anything else.
It is this window that has kept cinemas dominant within the industry, and which has provided a profitable model for both theater chains and the studios. So, this move is naturally a huge blow on the nose to them.
The Death Of Cinema?
Although there have been a few select titles whose distribution plans were changed at the last minute in 2020 due to the pandemic (most notably “Mulan” premiering on Disney Plus, and then “Wonder Woman 1984” on HBO Max), these were seen as one-offs under exceptional circumstances. That Warner Bros has now actively decided to pursue this as a distribution policy for the next year is widely seen as a game changer.
But really… is it? Is this the death of cinema? Will this change our funding and distribution models forever? And how does this affect filmmakers like you and the projects that you are currently working on?
The simple answer to these questions is: I’m not sure. Nobody is sure. And that’s part of the issue. Many people have written eye-catching headlines about this that are designed to be newsworthy, go viral, and get people talking. Social media has been abuzz with huge proclamations about this being a defining moment for the world of cinema and all filmmakers going forward.
But the truth is, nobody really knows just yet what the outcome will be. There are still more questions than answers, and it’s going to be fascinating to see what happens.
There are lots of parties at play here, each with their own interests. How this plays out may depend in a large part on the alliances that each of the parties can form with - or against - one another.
AT&T: A Media Conglomerate
This deal cannot be taken in isolation and without context.
Towering over this news is AT&T, who in 2018 purchased Time Warner to create a media conglomerate that includes both Warner Bros and HBO Max. The latter, a specialized platform that launched earlier in 2020, has not quite been the success its owners had hoped, initially returning subscriber numbers that are much lower than had been predicted, particularly in light of the investment that had been made in it.
So, despite it being run as an entirely separate entity, it’s quite normal that AT&T would spot an opportunity to boost HBO Max by directing Warner Bros to use its power and give it a kickstart.
AT&T is not a movie studio. And while none of us know their precise thinking, it’s likely that their revenue models revolve far less around a customer walking into a cinema and paying $15 to see a Warner Bros movie, and more about gaining regular subscribers to their streaming platform. Not only does this offer a more predictable and steady revenue model for their shareholders, but it also provides a means of gaining valuable customer data.
They can then use that information to cross-sell any number of other products from companies that fall under the vast AT&T umbrella. I believe that that is where the true value lies for them.
And while Warner Bros and HBO Max are both huge players within the entertainment industry, their models are dwarfed by the mobile phone business. If AT&T can entice customers to use its mobile network and buy its products by offering a free year’s subscription to HBO Max (now with Warner Bros’ new releases available on the same day that they appear in cinemas), this could be hugely attractively to customers and send their user numbers - and profits - soaring. It’s a potentially brilliant marketing campaign.
For this reason, many people do not seem to believe Warner Bros when they say that this is a one-off move for 2021 in light of the current pandemic. This is surely a testing ground for them going forward, and, if it is successful and profitable for their parent company, it is hard to see how they could ever abandon it and completely return to their previous distribution model.
Rival Studios
Perhaps the greatest unknown here is how the other traditional studios in Hollywood, such as Universal and Sony, will react to the Warner Bros strategy.
Will the move be such a success that all the other studios decide to copy their model by partnering with a streaming platform for their own day-and-date releases, or perhaps even acquiring or starting a new one themselves?
Or will they instead see this as an opportunity to partner even more closely with the exhibitors and cinema chains to counter the Warner Bros/HBO Max model through sheer volume of marketable projects, possibly with discounted pricing to keep their customers happy? This is a strategy that could potentially push Warner Bros out of the theatrical market for years to come, even if their HBO Max gamble does not prove a success.
Many analysts think they know the answer to this, but they really don’t. My guess is that the other studios have been studying such a model for a long time now, but they were still likely caught unawares by the Warner Bros announcement to make it a reality. They’ll be watching very closely to see how this project goes, and then use this information for their own purposes.
How they choose to play their next hand - either individually or collectively - could be what makes the game.
The Artists
The artists and content creators may also have a large part to play in this.
Several have been vocal about their displeasure at the Warner Bros deal, most notably Christopher Nolan. While some have taken his arguments with a grain of salt given his previous insistence that consumers should go and see his last film, “Tenet”, at the cinemas in the middle of a global pandemic, his point is not lost in terms of the effects that a straight-to-streaming model has for artists.
This is not only for the prestige of a theatrical debut and the artistic merits of watching a film on the big screen, but also for the incredibly attractive back-end deals that most big industry names command, which is where the real riches lie for them.
Artistically, we have been here before. When Netflix first started splashing the cash in an effort to produce its own films and premiere them on their platform, many A-list names initially shunned them on the basis that they were “killing cinema”. Now, a few years later, we see the likes of Martin Scorcese, David Fincher, Alfonso Cuarón, and many others happy to take lucrative deals from streaming platforms.
So, for some filmmakers at least, a theatrical release is clearly no longer the dealbreaker it once was, and even the most steadfast of filmmakers can likley be persuaded if a model proves successful.
Financially, it might be more complicated. This is not the same as making a film for HBO Max and negotiating a deal on that basis. Instead, the artists negotiated their deals with Warner Bros with significant box office bumps and benefits dependent on their films’ theatrical performance, possibly at a reduced base salary on that basis. If there is to be no theatrical release, those artists likely have a legitimate cause for concern at how they will be compensated for their work.
Warner Bros was able to pull out this deal under exceptional circumstances, which apparently came as a surprise to the artists who had, by and large, already completed work on the films in question. So, many of these artists - not to mention their agents, managers, lawyers, and everybody else who is relying on them - will naturally feel that the goalposts were moved at a incredibly late stage, and they will need to be made whole on their deals in some way and kept happy with respect to their prospective earnings.
Should any of the other studios pivot to this model too, they will likely have to disclose that to the artists when making these deals from now on. And whether it is part of their current plan or not, studios know that every content creator is eagerly watching the deals that Warner Bros makes with its disgruntled filmmakers and actors, and the precedents that they set.
The fallout could be spectacular, or - the more likely scenario - it will get sorted out quietly and efficiently, and everyone will get what they want - on this occasion at least.
In short, there should be fewer surprises for the artists going forward, whichever model the studios adopt. Artists will know the deals on offer upfront, and can choose either to take them or leave them.
What About The Cinemas?
The one player in this entire discussion that really seems to have been left behind are the cinemas themselves. Despite what the artists seem to claim, the cinemas are surely the real victims of this move.
Or are they? Despite the heady proclamations that this is “the death of cinema”, it could actually spell a greater opportunity than ever before…
We’ll look at that in our next post!
Ricky Margolis has over 15 years' experience in the entertainment industry and has been involved in the finance, development, production, marketing, and/or distribution of over 30 titles.
Want to know more about film & TV financing and production? You can find our series of books by clicking here.
Commentaires