As the pandemic shows no signs of letting up heading into 2021, the film distribution business, particularly in the hardest-hit US, is taking an enormous financial hit. Meanwhile, major studios are releasing tentpole features either direct-to-the-home or day-and-date to people’s homes and cinemas, without the exclusive window theaters have fought to preserve.
We take a look at what all these seismic changes might mean for theatrical exhibition as the pandemic recedes into memory:
The death knell has struck many times over the decades for movie theaters, with proclamations going back to the 1950s when Variety famously predicted television would finish movie theaters off. Since then “pay TV,” cable, video, DVD, and finally streaming were all expected by many to strike the death blow. While streaming services, particularly Netflix, have made enormous strides with films such as Roma and The Irishman bypassing wide theatrical release (winning Oscars along the way), theaters have still done solid business domestically and internationally through the end of 2019. And then that business, along with so much else, ground to a halt.
There’s no question that the pandemic has created a disastrous situation for theaters as it rages on. Indiewire recently reported “The average gross per complex, with 60 percent of these having eight or more screens, was around $4,000 or $500 per screen. That can’t even cover operating costs, especially with half of the revenue going to film rental.”
Christopher Nolan’s eagerly anticipated Tenet opened domestically to very tepid business (although it has grossed nearly $300 million worldwide) and a number of high-profile movies which were shot and finished with the “big screen” in mind — films such as Tom Hanks’s Greyhound and Disney’s live-action Mulan, and the recorded production of Hamilton — have skipped theaters and premiered on streaming services (in the case of the above, all were Disney +).
“Everybody makes huge conclusions about the death of theaters. I’m just very careful about it. Yes, their business is going to be much more challenging. We’ve seen bankruptcies and closures but I know that in the foreign market they do tremendously well and have a huge viewership and as China and other markets are opening up, they’re seeing a significant return of audiences.”
STEPHEN LIGHTHILL, ASC
Studios have either pushed most of their major 2020 releases back into 2021 or quickly moved them to premiere on home viewing platforms without any theatrical run.
One of the most recent developments has a lot of people in the industry wondering how important theatrical runs really are. Warner Bros.’ new installment of its leading franchise, Wonder Woman 1984 will be premiering simultaneously on HBO Max and in selected theaters on Christmas day, followed quickly by the additional announcement that the studio plans to follow suit with its entire slate, including expected blockbusters Dune and Matrix 4, premiering day-and-date on HBO Max and in theaters.
This announcement from Warner Bros., explains Variety, “is yet another example of just how dramatically the coronavirus crisis has shifted the power dynamic between studios and theater operators. Even with effective vaccines starting to be approved, the latest move by Warner Bros. suggests the balance may never return in favor of exhibitors.”
Not everybody believes that theaters’ situation during the pandemic portends anything significant about a Covid-free future. “This is all very serious,” admits John Fithian, President and CEO of NATO (the National Association of theater Owners), “but it is not a reflection of wider lack of interest in theaters.” He is quick to suggest the habit of going out to movies was very much a force just prior to the onset of the public health crisis.
Attendance, he says, has been as strong as ever, noting that 2019 broke records with $42 billion in tickets sold internationally and over $11 billion in the US alone. “And then we ran up into March! We ran head first into this pandemic and had to shut down everywhere in the world. In China it was earlier than that, but by March we shut down in the Western world and went many, many, months unable to make a dime.
“I don’t think any experience during a pandemic is an indicator of either long-term business model changes or the ways people will behave post pandemic,” he adds. “Families are excited to watch a movie with their kids at home when they are stuck there. That doesn’t mean that post-pandemic they’ll have the same interest in watching a movie at home. Of the many movies that were scheduled for theatrical release, about 80% of them were postponed for later theatrical release and a little under 20% of them just went straight to people’s homes, either through PVOD or through streaming.”
Fithian’s organization has been lobbying Congress to help offer some kind of bailout to theaters. Even filmmakers, such as Steven Soderbergh — an early and vocal proponent of day-and-date releases to theaters and people’s homes — was among those who signed onto NATO’s letter from leading directors and other major players asking Congress to throw the business a lifeline.
“There are two elements of this, the technology and the business model. The media block is the first elementary portion. But then we’ve got to find a way to convert that media block into a format that consumers can actually receive and display in their homes and as compliant as a secure and managed way as possible. If we can find a technology that meets together with our media block technology and in real time can create some secure distributable format that people can access with their home devices.”
BRIAN CLAYPOOL, EXECUTIVE VICE PRESIDENT, CINEMA
“I’ve known Steven for many years,” Fithian says, “and he is definitely one of those folks who makes a lot of content for streaming and he still also makes content for theaters. He’s one of 125 film directors that signed a letter to Congress saying, please help keep movie theaters alive. I want to put more movies in theaters.”
Regardless of what happens post-pandemic, theaters still have to survive to that point somehow and many have been finding other ways during lockdown lulls, besides showing new movies, since releases of any type are few and far between and big, expensive tentpole movies just aren’t going to be available. Alamo Drafthouse and AMC are among those simply renting out their theaters and showing older titles to people.
“When they were completely shut down, they were selling popcorn on the curb, for crying out loud,” Fithian says. “So they they’ve been trying everything to bring in some revenues. But it’s not going to save them. All this other stuff together maybe adds up to their 5%. They’re still losing money by operating and until they get good movies and until they get people’s confidence in safe environment it’s a losing operational prospect. The question now is: can we get them a bridge to get them to the other end of this?”
On the other side of this, can we tell who will last? “I think those ultra-premium kinds of presentation like IMAX are actually very well positioned to survive this,” says H. Loren Nielsen, Vice President Content & Strategy, DTS Inc./Xperi, a member of the HPA Board of Directors, and committee chair for HPA Women in Post.
Nielsen spends quite a lot of time thinking about these very questions which essentially all touch the work she does at DTS and at HPA. “Financially, all [exhibitors] have been struggling tremendously this year but the theaters that offer something exceptional such as environmental effects and motion seating, like 4Dx and many other offerings along those lines, will come out of this in a strong position. I’m not saying that there isn’t a lot that the [traditional] theater couldn’t do also to keep people coming but those that offer an experience that you can’t really get anywhere else will probably have the best chance, especially if they focus on brand awareness and making sure people know about these additional features.”
At some point, we will come out of the pandemic and lockdowns or fear of Covid will recede from memory. When that happens, we might see theaters, especially the largest chains, start to regain some of their former clout they brought to the big release window battles with studios. Those windows were already diminishing for reasons mentioned above but it’s hard to imagine inroads forged by studios today going away.
Variety recently posted an article about major international chain AMC’s deal with Universal, which enables the studio to release movies on-demand within weeks of their theatrical debut, is helping keep the chain afloat. The studio will debut six films during the fourth quarter, including The Croods: A New Age and News of the World, a drama with Tom Hanks. AMC gets a cut of the digital sales in return for allowing the studio to have greater flexibility about when its movies are available to rent.
“Financially, all exhibitors have been struggling tremendously this year but the theaters that offer something exceptional such as environmental effects and motion seating, like 4Dx and many other offerings along those lines, will come out of this in a strong position.”
H. LOREN NIELSEN, VICE PRESIDENT CONTENT & STRATEGY, DTS INC./XPERI
No matter how sound the chains’ bottom line becomes in a post-Covid world, it’s hard to imagine them putting the genie back in the bottle with the 90+ day window. But is streaming necessarily a zero-sum-game in which content providers either cut the theater out of the equation entirely or are pressured by the larger chains into keeping the type of windows exhibitors have previously fought for?
Some say no. Cypress CA-based Christie Digital Systems, a company with a long pedigree of manufacturing motion picture projection equipment for theaters and has introduced a significant amount of technology more recently for digital and laser systems, announced a patent this Fall for tech which enables exhibitors to stream movies directly to people’s homes. Their announcement says that this would lay the groundwork for exhibitors to supplement their existing business model.
“Working with Christie’s integrated media block (IMB), which is used by theaters around the world,” their announcement states, “the patented hardware and software package combines with the capabilities of Christie’s suite of streaming and networking products to enable Christie’s partners to deliver content over IP networks to those at home in real time, directly from the cinema to the sofa.”
This has not yet taken the form of any kind of product or service currently on offer but it suggests a possible future in which theaters could become part of the streaming food chain. “This wasn’t just a response we did to Covid,” Brian Claypool, executive vice president, Cinema, tells us. “It takes years between when the application starts and a patent is issued. It always bothered me that this threat of streaming was going to be something that the hurt the exhibition industry. This has been an issue that the exhibition industry would have to address.”
Speculating about possible implementation, he says, “There are two elements of this, the technology and the business model. The media block is the first elementary portion. But then we’ve got to find a way to convert that media block into a format that consumers can actually receive and display in their homes and as compliant as a secure and managed way as possible. If we can find a technology that meets together with our media block technology and in real time can create some secure distributable format that people can access with their home devices.
“Maybe one thing we can do is to say instead of having off of [a theater’s] screens at a physical multiplex, say One through 12 are but screens 13 through 24 are in a ‘virtual multiplex’ — an expansion of the physical brick and mortar space. This is not about sitting at home and paying money to see a movie. We don’t want to do that, because then that’s no different than Netflix or Amazon or a studio doing that with their content and bypassing the theatrical window altogether. So we need to arrange the patents around not just the technology, but also have a serious consideration for the business model.”
“I don’t think any experience during a pandemic is an indicator of either long-term business model changes or the ways people will behave post pandemic. Families are excited to watch a movie with their kids at home when they are stuck there. That doesn’t mean that post-pandemic they’ll have the same interest in watching a movie at home. Of the many movies that were scheduled for theatrical release, about 80% of them were postponed for later theatrical release and a little under 20% of them just went straight to people’s homes, either through PVOD or through streaming.”
JOHN FITHIAN, PRESIDENT & CEO OF THE NATIONAL ASSOCIATION OF THEATER OWNERS
The business model: It’s still very early days for anybody to really start implementing new ones while most players in the exhibition industry are treading water. But many people in the field giving that next step quite a bit of thought. Nielsen speculates that the streamers and theaters might find common ground with some stream-only programming taking advantage of the “big screen” experience. “I think some of the episodic content that’s being created now is if some of the best storytelling on the planet,” she says, “and a lot of that deserves a bigger experience. I see some of that kind of content, whether it’s a movie type format or episodic type format, also playing in theaters, maybe day-and-date with streaming, or maybe inside some special window.” She mentions alternative programming that companies such as Alamo Drafthouse were experimenting with in pre-pandemic times.
“I only mention them because I know they had success by offering content like Game of Thrones and some other things in a way and in an environment that fans just can’t get at home. It’s impossible to know at this point how it will turn out but there is so much content that deserves that kind of platform we’ve traditionally associated with the theatrical release.”
Curious about the thoughts of people who shoot all this content — composing frames that guide the viewer’s eye, utilizing space to inform the dramatic and aesthetic experience — we asked cinematographer Stephen Lighthill, ASC, who interacts with some of the most seasoned DPs as that organization’s president and with young, aspiring cinematographers as the head of the AFI Cinematography Discipline. “Everybody makes huge conclusions about the death of theaters,” says Lighthill. “I’m just very careful about it. Yes, their business is going to be much more challenging. We’ve seen bankruptcies and closures but I know that in the foreign market they do tremendously well and have a huge viewership and as China and other markets are opening up, they’re seeing a significant return of audiences.”
He’s seen multiplexes in more densely populated areas giving theatrical exposure to indie features and documentaries that might never have been seen on the “big screen” previously. At some point, he believes, the essential desire to see movies in a communal environment — a desire that has kept the industry going throughout all the perceived threats by home entertainment — will still exist in force when the pandemic is over. “It’s a little funny to call it the ‘big screen,’” he says, because these theaters are usually much smaller than the others in the multiplex but it’s still way bigger than what most people can see in their home.
“I have usually about twenty five cinematography students in each class, two years, 50 and I would say if you go and talk to those 50 students right now and ask them that question, each and every one of them is going to say, ‘I want to shoot features over the big screen.’ OK, they know that’s a bit of a struggle now, but that’s still something they’re focused on. As long as that’s the case, if they feel that way and audiences feel that way — and I think they do — then I think theaters will somehow find a way to keep going.”