This Pandemic is an Existential Crisis for Cinema

With not enough cinemas globally open to show the tentpole content, studios are electing to release on their own streaming services. This is precipitating an existential crisis for cinema. [blog.mindrocketnow.com]

During Lockdown i, you might remember that Trolls World Tour made a splash by bypassing theatres and being released on streaming services only. I remember because spending on ads on the side of buses was pretty much frozen, so pictures of those little blighters lingered for a long time. AMC took particular umbrage (possibly not at the bus posters, but at being disintermediated) and black-listed NBCUniversal. 

But Trolls World tour made $95M in 2 weeks, which compares favourably with its $90M production costs. It compares very favourably if you think that NBCU didn’t have to share any of its revenue with the theatre groups (hence AMC’s outrage). Predictably, this strategy has been repeated with other high profile movies.

Disney elected to stream Mulan on Disney+ for £20 premier access - not PPV but a one-off fee to access a premier subscription tier comprising of a single movie. It became Disney’s lowest grossing of its live action remakes to date, and won't recoup its $200M budget (yes, there were mitigating factors in the freezing of China-US relations which made this movie a cultural casualty). 

Christopher Nolan’s Tenet wasn’t released online, only in theatres, made £347M in the box office (against $205M cost). However, that box office will be shared with the theatres so WarnerMedia didn’t recoup its investment; it was also Christopher Nolan’s worst-performing movie to date. 

Mulan will be judged a success and Tenet a failure. The reason is that Mulan drove increased takeup of Disney+ (Disney won’t confirm how many people took up a Disney+ subscription and paid the premium just to watch Mulan). So the cost of the movie can be somewhat offset by a reduced cost of acquisition of the new Disney+ subscribers.

So it’s not surprising to me Wonder Woman 1984 will be released in cinemas and online on HBO Max today (Christmas Day 2020). Not only will WarnerMedia not have to share revenue, but it’ll drive more people to its OTT service (which is fourth in a field of three so really needs to catch up). What is surprising is that WarnerMedia is not intending to charge a premium for it. 

It’s conventional wisdom that even in a recession TV survives household budget cuts. TV subscription is a recurring expense, and going to the cinema is an infrequent treat. Pricing PPV as the latter rather than the former is problematic. Charging a content premium when your market is suffering from increasing unemployment is a hard sell. When the Premier League tried to charge £15 per match, fans revolted. The best riposte to this price gouging was from Newcastle United fans. Instead of paying the broadcaster, they donated the same money to a local food bank, raising over £20k. It’s not necessarily the amount, but the context.

At £20 per view, each movie will have to cost the same as Trolls to break even. The pricing looks much more compelling at £15 with a complementary digital download later, or £20 one-off upgrade to a premium subscription, as long as there’s more than just the one blockbuster. If there isn’t an upgrade fee, if the new title is adding to the value proposition for the service, then the decision is a no-brainer. 

If you’re Disney or WarnerMedia or Amazon or Netflix, the pandemic has served to increase your addressable market for your OTT service. However, it seems clear that this pandemic has hastened the demise of the multiplex. We’re not going back to a tentpole movie filling up every screen in a multiplex on opening night. Indeed, we haven’t had that in a decade. 

Cinema is no longer the premium venue to see premium content - that is now your own home. Instead, I can see chains like Everyman and The Prince Charles Cinema flourishing, spending less on screening rights, and spending more on creating an experience for cinema lovers. 

Merry Christmas everyone, and see you in 2021!