And the future of movie theaters is…

What is the future of movie theaters?

This is the question that has perplexed film fans and insiders alike for the past year amid the pandemic. An obvious side effect of COVID-19 has been the forced closure of theaters both domestically and internationally. With movies not being shown in theaters, money is lost all around. Box office ticket sales keep the theaters in business, they represent a valuable revenue stream for independent producers (and studios to a lesser extent), and create the hype and buzz around films that can only be generated through communal viewings. Only recently have theaters begun to open their doors again for limited capacity viewings, but as we are slowly seeing unfold, the return to normal seems quite far away for several reasons.

1) Studios are experimenting with PVOD release and VOD release windows. We have seen this with Time Warner announcing that Warner Bro’s entire 2021 theatrical slate would be released simultaneously via its VOD (Video-On-Demand) platform, HBO Max. In the past, movies were typically released in set windows. Theatrical would always come first, meaning the movie would play exclusively in theaters for a set period of time, say 90 days, and only after that period was completed could the movie then be viewed through a different method such as VOD. The idea behind this being it incentivizes people to go to the theaters to see the movie before its available anywhere else. With TimeWarner removing that exclusive window as a solution to the pandemic, you are removing consumer need to see a movie in theaters since it is available directly at home through an HBO Max subscription. More recently, Disney announced it would be releasing Black Widow simultaneously with PVOD (Premium Video-On-Demand), meaning you can watch it the same day it comes out in theaters through Disney+, but you have to pay a premium fee of $30 to view the movie. This represents another way studios are experimenting with releases given the pandemic closures and rise of streaming. We can likely assume that various models will be tested out in the coming months to determine what is most profitable for studios and producers alike. As with most things in this industry, I predict decisions will be made on a film by film basis to determine if sole theatrical release is viable versus a direct VOD release.

2) Consumer demand for theater experiences is uncertain. No one can shake a crystal ball and understand what post COVID behavior will be like. Some believe it will be like the roaring 20’s all over again. Everyone will be out and active, looking to experience as many real, in-person activities as possible after being trapped in our homes and on our screens for a year straight. Others believe consumer behavior has permanently changed. Even before the pandemic, individuals were consuming more and more content from the comfort of their homes over in-person experiences. Why go to the movies when you have thousands of films at your disposal on the numerous streaming platforms available. I personally believe the former scenario is more likely and that in person experiences such as movie theaters are going to make a huge comeback. But, given that is not guaranteed, studios are likely to be cautious moving forward so as not to get burned.

3) Filmmakers and talent will want big screen time back. I think there will be inherent pushback from filmmakers and talent regarding simultaneous VOD and PVOD releases taking away from theatrical. These people got into the movie business to have their names and likeness showcased on the big screen, for the premieres, the buzz and everything that goes with the movie business. Streaming is essentially tv in terms of the amount of content being showcased on it. While the production value may have gone up in the past few decades, a big Netflix or Amazon movie is nothing more than a glorified TV movie in my opinion. It comes out, gets an initial reception, and then gets washed way in the thousands of other content pieces flooding these platforms and the consumer. I believe there is too much of a desire among actors, directors, and producers to have their films be showcased in theaters for it to be abandoned as the stand alone initial release window.

4) New benchmarks away from box office. Lastly, I think removing the theatrical window will lead to benchmarking complications that need to be addressed. Perhaps this is worthy of its own post, but films are typically measured or evaluated via “comps” or “comparables”. These comps typically look at how similar movies, with similar cast, budget, genre, etc. performed at the box office. By taking away box office results, the industry is going to be forced to establish new ways of benchmarking the success of finished films and the financial viability of prospective films. This doesn’t so much effect whether theaters will come back or not, but rather it brings up a point around why theaters have been so valuable to the industry. Moving forward, streaming metrics will likely be incorporated into comps as well in order to give investors a more complete picture of films that were released via VOD or via dual theatrical/VOD.