Speculation on Changes to the Movie Industry

[Ikoma]

WARNING: Stream of consciousness theorizing about what's happening to the motion picture industry. This isn't a place to argue about COVID-19. It is what it is. This is about it's impacts on a specific art form and industry. For reference, here is a [urlhttps://en.wikipedia.org/wiki/Impact_of_the_COVID-19_pandemic_on_cinema]useful wikipedia article[/url] summarizing a lot of the information.

So... March 2020 and the pandemic makes a big impact on the US. It hit China in January but I'm gonna focus on the US and the broader western world.[1] Everything shuts down: schools, businesses, sports leagues, and theaters (among lots of others). At first, it was about flattening the curve. Now... who know's? China tried to re-open theaters and re-shut them down the next day. All I know if TENET has been... well, delayed three times and finally they just gave up. They cancelled it's latest August 12th release date and they have no real plans. I am sure Nolan wants this on the big screen. I want it on the big screen. And I really worry this pandemic is going to kill movie theaters. Dead.

Let me back up. I'm not worried this will kill movies. Netflix, Amazon Prime, Hulu, Disney+, and other streaming services will step in and keep the industry alive. Kinda. But it's gonna change. It has to. And I know, change isn't always bad. On that level, I have faith that visual storytellers will continue to tell compelling, interesting, and exciting stories. And that silver lining keeps me from getting too bummed out about the death of the movie theater.

As it is, movie theaters were operating on the edge of financial profitability even before the pandemic hit. Distribution studios were squeezing as much as possible out of the theater. AMC was already in financial distress when all this hit. But they could get through that. And other theater chains and individual theaters were surviving. The pandemic is turning out to be something of a nuke to the traditional 'meat space' film distribution model. Theaters pretty much made their profits on concessions. Concessions take bodies. Profit margins were finely tuned to match the amount of patrons the theater could expect every weekend. Well, public health responses to the pandemic shut off the flow of bodies. And it's not all the government response. Who knows what the public's response would be even IF movie theaters were open (with whatever accommodations local government would require or the business would implement on their own). Maybe enough people wouldn't go to the movies even if they could to keep movie theaters afloat. Last survey data I saw said only 20% of people feel comfortable enough to go to a theater. It's clear movie theaters are scared. AMC, Cinemark, and Regal Cinema are suing New Jersey (as of a couple weeks ago). I don't think they sue if they are not scared silly.

But even IF they could open up, AND enough people want to go, who knows if studios would release their movies? I mean, whoever goes first isn't going to sell out screenings. Even if cinephiles head out to the theater, there are more than enough people who will not risk it (and I'm not here to convince them they should) that whatever movie goes first will not rake in all the cash. On top of a skittish potential audience, every state/country I have seen are going to have restrictions in place that will severely impact on the number of people who can be in the theater even once they are allowed to open. Best estimates I have seen are saying audience caps will be somewhere between 25% and 66%. Oh, and since every state/country is different, there is no way ALL the possible theaters open at the same time. So why would WB release TENET if they literally CANNOT release in New York or California or other big states? I mean, last I read, only 17% of the theaters in the US were open as off last week. 17% x 66% means the potential audience is limited to 11% and that's assuming the best of the estimates. Industry buzz indicates studios don't see theatrical release being worthwhile until mid-2010! At least, that's all my opinion. Maybe I'll be wrong. Maybe demand will be pent up and enough people will go see WHATEVER comes first that it will break records. I just don't see it.

Rent costs aren't going away. Labor costs can be slashed (and have been) but even there you have minimum labor to keep the business running. Movie theaters that are still open are showing old titles. But come on, who wants to risk their health to see Jaws... again? (As an example, and I love Jaws, it's just a local example.) And money isn't coming in fast enough. Movie theaters are caught in a real chicken or the egg problem. Movie theaters need patrons to survive. Patrons will not go to the theater unless there are good 'new' movies to see. Studios will not release movies when they don't see patrons going to the theater. Movie theaters cannot get patrons without movies. And they can't get movies without patrons. So... sooner or later, theaters are going to crash. They cannot last 12 more months.

So, can the rest of the world keep the movie theater experience alive for that year. International box office is typically 60% of the profits for the average movie. And while international markets might be better off, I don't see any evidence they are anywhere near back to full cinema operation.[2] And more importantly, what does an international only release to with regards to piracy? There is no way Americans sit around while something like TENET gets released to international markets and don't find 'ways' to watch it. Same for Mulan, or Wonder Woman '84, or Black Widow. Hollywood has to know this. And that's another strike against a partial world release.

That leads us to digital release. Which a few films have already done. And done well, see Trolls World Tour. But nothing on the scale of the four movies I mentioned before. What if things don't look good for theatrical release when No Time To Die is (rescheduled for) release? Do they give up and go digital? I know they won't make as much money as they would have with a 'normal' theatrical release. But they make more than the nothing they are making at the moment. These studios have spent this cash. Paid stars, cinematographers, built sets, etc. They need cash coming back in or they will die. I don't think the studios want to cut the movie studios out, but they cannot wait forever. Remember, they make more money on theatrical release. And they grew up going the theater. Movie makers love movie theaters. But if it comes down to Hollywood surviving, they have to go digital. Netflix, Hulu, et.al. will keep releasing new movies into a sparse market they can keep dominating.

I'm afraid that by the time June 2021 rolls around, enough movie theaters have been shuttered that it's never in studios best interests to even consider that as the primary market again. I don't think theaters would go away. But they won't be the driving force in people seeing new movies. Again, even before the pandemic, there were pressures that were forcing things that way. This is just speeding things up. But there is no way Disney+ make 2.8 billion dollars on a digital only release of Avengers: Endgame. So... do movies like that not get made in the new world order? Does the movie theater experience survive by a thread? Or get rebuilt over the next decade? I don't know. I'm nervous about it.

Anyway, this is long. I'm gonna stop now. But I promise you I will have more thoughts on this...

[1] I'm not an expert on China. Hell, I'm not an expert in Europe. I live in the US.

[2] I would love feedback from actual international booters here...

[Azhrei Vep]

Industry buzz indicates studios don't see theatrical release being worthwhile until mid-2010!

Uuuhhmmm..... you might want to check your figures there.

[Ikoma]

Thx... mid-2021

[Ikoma]

And now we have a source[1] saying Wonder Woman 1984 is coming straight to streaming. On top of the Regal Cinemas shutting down, this is not good news for movie theaters. At all.

[1] A single source, but one that apparently provided intel that has checked out in the past.

[John]

I'm ready for the final leap into the internet as the default method of distribution. It was destined to happen from the moment someone built two computers that could spit binary to each other. The plague probably accelerated it by a decade or two but it's coming, let's just do it.

If these studios think there will still be a domestic theater industry to speak of at the end of 2021 when they finally start releasing their precious sequels and remakes and comic book movies, they're delusional.

[clintmemo]

I'm ready for the final leap into the internet as the default method of distribution. It was destined to happen from the moment someone built two computers that could spit binary to each other. The plague probably accelerated it by a decade or two but it's coming, let's just do it.

If these studios think there will still be a domestic theater industry to speak of at the end of 2021 when they finally start releasing their precious sequels and remakes and comic book movies, they're delusional.

I think you are 130% wrong.
By the end of 2021 there will be a huge demand for "get me out of this house!" entertainment. People are going to go see movies that they would have waited to see on TV in any other time. That feeling will taper off quickly, but for a month or two, movies are going to sell every ticket they print.

[Ikoma]

See, I kinda agree with both of you...

I agree that some people will have a pent up desire to get out 'there' and start doing things again. I know I am. Those people are going to want to go see movies (along with other things). We'll come back to whether they will be able to or not. But I also know people for whom this whole pandemic and the government/media response to it has caused them real, significant phobias and psychic damage. Perhaps using the word phobia is too extreme, I'm not trying to necessarily imply any kind of diagnosable disorder. But I know people who get serious, stomach cramp inducingly afraid at the reality they have to go to the store to buy groceries. I know people who now have panic attacks if too many people start walking around the track at the local park while they are using it. (And I'm not talking hundreds of people.) I have seen people start crying while watching old TV/movies when they see crowded spaces, not because they miss it, but because it create genuine fear and panic in them. I could go on with additional examples. Those people? Are well on their way to mild or perhaps even severe consequences going forward.

But those people are a minority (a significant minority in my experience). The problem is that there may not be a theater space to go back to IF government mandated lockdowns and restrictions, along with general societal nervousness/phobia, keep a majority of people away from theaters. It's not employees or even hard physical costs. It's the chicken and the egg problem. Limited audience attendance (whether that is government mandated or the result of the masses making individual decisions) means limited profits for both theaters and studios. Studios will not release movies into theaters where they will bomb. (Yeah, I know Tenet is up to $300 million in box office. Trust me. That's not enough for a movie that cost $200 million just to make. And Tenet is the BEST case the movie theaters can put up.) Movie goers won't go to theaters (in decent numbers) unless there are good new movies to see. Under those circumstances, you will see more and more studios blink and release their films into the streaming space. Mulan is the big one so far but certainly not the only one. Now Wonder Woman 1984. (Maybe) While that certainly gets the studios back the money they spent on making those movies, that only increases the fiscal pressure on the actual theaters. All those people uncomfortable going back into public spaces do not have to. All those people who (like John) prefer the home theater space face no societal pressure to see the latest 'hit'. (Whether they succumb to that pressure in the past is another question.) And the theaters cannot survive on the minority of movie goers who will go.

[John]

Right Ikoma. That's what I meant about the studios. The theaters will not be able to pay their bills for another year of nothing getting released that puts butts in chairs (mind you we're over half a year into this already and they're already in severe distress), even if half+ of the moviegoing population of the Before Times is ready to get back to it. Even if the theaters stop paying the kid at the popcorn counter for a while, they've all got debt and leases and taxes and such that are just going to pile up.

Clintmemo I don't disagree that there will be a rush of pent-up activity once this thing is really over (if we assume that large theaters marketing to general audiences are still there to open back up when it happens). Maybe a month or two, sure. But when the market starts giving people the option to stream at home for 20 or 30 bucks because it has to, millions of people are going to go that direction and never come back.

[clintmemo]

Let's assume that every theater in America closes down by Christmas. What do you think will happen to them? Do you think they will all get immediately demolished?
No.
Worst case scenario, some vulture capitalist firms will sweep in and buy them for pennies on the dollar - and just sit on them until the Pandemic is over.

Also, in America anyway, every business is looking for that magic homerun, that 95 yard pass play, that (pick your favorite sports analogy), that mythical low investment / high return product.
When the pandemic is winding down the first studio to put a movie in the theater will make all the money.
And there will be a race between studios to get there first.

It won't matter how many people would rather pay $30 to steam something when the product is no longer offered that way. Do you really think Disney is going to keep releasing movies for $30 to stream instead of putting them in theaters first?

[tombombodil]

It won't matter how many people would rather pay $30 to steam something when the product is no longer offered that way. Do you really think Disney is going to keep releasing movies for $30 to stream instead of putting them in theaters first?

Considering the vast majority of Disney's revenue comes from resorts, parks, and hotels, I'd say they have bigger problems. Disney as a movie studio has only ever been a workshop/acquisition house for shit they can turn into rollercoasters (from a business perspective).