Warner Bros. Just Broke The Movie Business – Can Theaters Rebuild It?

It will likely go down in history as a day that will live in infamy in the movie business. In an unprecedented move, the Warner Bros. movie studio has announced that it will send 17 films — including expected blockbusters like the “The Matrix 4,” “The Suicide Squad” and “Dune” – to its streaming service, HBO Max, on the same day they hit brick-and-mortar theaters.

The announcement follows previous news that the studio plans to release “Wonder Woman 1984” on Christmas Day to both theaters and HBO Max. Now, the studio has decided to push its entire 2021 film slate to streaming rather than wait for consumers to begin feeling comfortable enough to head out to see them on the big screen.

“We have these movies just sitting on the shelf,” Warner Bros. Pictures Group Chairman Toby Emmerich told The Hollywood Reporter. “Consumers are starved for content.”

The films will only be available for a limited, 31-day window on HBO Max. Warner Bros. claimed the move is intended to be a pandemic-only 2021 switch, not a permanent way of doing business going forward.

“It allows us to do a global release and a national release in what we think is going to be a checkerboarded theatrical marketplace for the bulk of 2021,” Emmerich told The Hollywood Reporter. “We think where theaters are open and consumers can go, that a lot of people will choose to go to the theater, especially for big movies.”

But according to PYMNTS data, a lot of people won’t go to theaters anytime soon. When surveyed by PYMNTS, 58 percent of U.S. consumers noted that it would take a vaccine being out in wide circulation before they would feel safe going back out into the world and resuming their old habits.

Reports on vaccines have been favorable over the past several weeks, but even the most optimistic predictions estimate that wide distribution won’t happen until well into 2021.

But CEO Ann Sarnoff of WarnerMedia Studios and Networks Group said it’s not the studio’s goal to bypass movie theaters for all time.

“No one wants films back on the big screen more than we do,” Sarnoff said in a statement. “We see it as a win-win for film lovers and exhibitors, and we’re extremely grateful to our filmmaking partners for working with us on this innovative response to these circumstances.”

The reality of the industry right now is that U.S. theaters will likely operate at reduced capacity throughout 2021, which means studios need creative solutions to keep their content in front of consumers who aren’t quite ready to go back to the movies.

But what negotiations are going on between Warner Bros. and movie theaters is still a matter of speculation, according to The Hollywood Reporter. The trade publication said that to avoid movie theater boycotts of its films, insiders suspect Warner Bros. will have to agree to a more generous split of revenues.

Theater operators, unsurprisingly, were less buoyantly cheerful about Warner Bros.’ announcement. Adam Aron, CEO and president of movie theater chain AMC Entertainment, noted in an email to media that Warner has clearly decided to triage studio profitability as a move to bolster its HBO Max streaming service.

“As for AMC, we will do all in our power to ensure that Warner does not do so at our expense,” he wrote, per The Hollywood Reporter. “We will aggressively pursue economic terms that preserve our business.”

Aron conceded that AMC had agreed to the streaming release to “Wonder Woman 1984” on Christmas due to the exceptional circumstances on the ground at present. But he wrote that an extension into all of 2021 with a vaccine apparently around the corner is a very different matter, and that AMC has already started an “immediate and urgent dialogue” with the studio.

That’s a strong-sounding statement of disapproval to be sure. But consider what Aron said in April, when NBCUniversal CEO Jeff Shell said that based on the studio’s success releasing “Trolls World Tour” to streaming services, the firm would consider other alternate release paths in the future. AMC called the move “unacceptable,” and Aron briefly launched a boycott of all NBCUniversal films.

“It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice,” Aron wrote at the time. “Therefore, effectively immediately, AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East.”

However, the two sides later came to an agreement under which NBCUniversal could stream movies after 17 days of theatrical release rather than 12 weeks or so. In return, AMC reportedly negotiated about a 10 percent cut of on-demand revenues, apparently having accepted the idea that collecting something from digital-only consumers was better than getting nothing.

So, theater operators certainly aren’t without power in this fight, as the belief persists that consumers will eventually want to get back out to the full cinema experience again. But where once they could make dramatic threats when threatened by streaming, now they can only demand urgent conversations about it.

That means theater operators have some serious rethinking to do when it comes to how they can come back in a post-pandemic world. It seems they’re entering a new reality where they no longer have the ability to protect their traditional theatrical-release window.

Getting something rather than nothing in that new reality is an attitude that theater operators – like retailers and restaurateurs – will have to get comfortable with in 2021 and beyond. Because some consumers, even when it’s safe from a public health standpoint, are going to prefer to keep streaming their entertainment at home rather than heading out where they’ll have to park, pay more and find a seat in the theater.

Warner Bros. might say its new plan is only for 2021 for now, but it will be interesting to see what it says at this time next year. If the studio enjoys the kind of big bounce that Disney+ saw this year by siphoning some of its biggest movie franchises directly onto its streaming platform, Warner Bros. might not be so eager to switch back.

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