Movie Theaters Are Screwed

Illustration for article titled Movie Theaters Are Screwed
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A long-standing debate about movies at home versus in the theater is reaching a tipping point. At the heart of the debate now is a public pissing match between AMC, one of the U.S.’s largest movie theater chain, and Universal Pictures, one of it largest production studios, over premium video on demand and theaters’ rights to exclusivity. Coronavirus has given studios an opportunity to bypass theaters entirely, and it’s triggered a fight that could change the way we see movies forever.

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Netflix’s major content push over the last five years has led larger and more traditional studios to reconsider the streaming space they’ve repeatedly written off. Right now, people have more, high-quality content (and some very, very low-quality drivel) available to them at the click of a button. So studios have been snapping up or launching streaming services to host their created and licensed content.

Traditionally, movie theaters have had agreements with studios to allow the theaters to screen films for specific periods of time before studios put them on the small screen. If you want to see a movie without waiting for one or two months, you have to go see it in a theater. But the coronavirus crisis has created a situation where that is no longer possible. Instead, studios are experimenting with offering their films directly to consumers at home at premium prices—which, if allowed to continue post-covid-19, would devastate the theater industry.

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But this isn’t a surprise, it’s more a worst-case endgame for movies. Big publically traded companies like to vertically integrate as much as possible. Instead of spending money negotiating for the rights to properties, or the rates to screen content in theaters, they can dictate everything themselves and never have to split the profit. But while total vertical integration is built into the business model of companies like Apple and Netflix, others like Disney, NBCUniversal, and WarnerMedia have all previously claimed that a vertically integrated streaming service was just one element of their business strategy and that movies screened in theaters were still a thing they want to do. The major theaters have, coincidentally, said they see no problem with these vertically integrated streaming services full of original competing content. For years now, the studios have chipped away at theaters and the theaters have smiled pleasantly and said it was fine, despite a long slow decline in ticket sales.

Covid-19 changed that.

As the coronavirus pandemic pummels the theater industry, studios have turned to direct-to-consumer releases to make money off films that would otherwise be unreleased. Two months ago, I would have scoffed at the idea of paying $20 to watch a film at home that I’d planned to enjoy at Nitehawk or Alamo Drafthouse in Brooklyn, which gives a far superior viewing experience to the projector setup I have in my basement. And yet, after having spent well over a month sheltering at home, I reluctantly coughed up two Hamiltons to stream The Invisible Man in my own home in early April.

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And right now, during this unprecedented time, I’m not the only one willing to hand over a previously unthinkable sum to rent a new movie at home. Trolls World Tour, the shit-stirrer at the center of the public tiff between multiple theater chains and NBCUniversal by way of its studio Universal Pictures, made an absolute killing on its direct-to-VOD. So good, in fact, that NBCUniversal chief Jeff Shell told the Wall Street Journal that the release “exceeded our expectations and demonstrated the viability of PVOD.” According to the Journal, Trolls World Tour stacked $95 million in rentals in just three weeks—more than the original Trolls earned in its first five months in theaters.

“As soon as theaters reopen, we expect to release movies on both formats,” Shell told the outlet.

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His comments were not well received by the theaters Trolls was originally expected to premiere in. In an utterly brutal public letter to Universal Studios Chairman Donna Langley on Tuesday, AMC Entertainment president and CEO Adam Aron said the theater chain “will no longer play any Universal movies in any of our theatres” globally.

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“This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat,” Aron said. “Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes.”

The National Association of Theatre Owners stepped in on Tuesday too, with NATO president and CEO John Fithian stating that Universal doesn’t “have reason to use unusual circumstances in an unprecedented environment as a springboard to bypass true theatrical releases.” And on Wednesday, Regal Entertainment owner Cineworld Group—the second-largest theater chain in the U.S.—threw its weight behind AMC by stating that it “will not be showing movies that fail to respect the [agreed upon] windows as it does not make any economic sense for us.”

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Reached by email on Wednesday, a NATO spokesperson declined to comment further on the matter other than to say its “position was spelled out in the letter.”

Theaters were already going to be some of the last establishments to open after lockdown orders are lifted and will already have to significantly scale back capacity when they do, impacting per-viewing sales for things like concessions. And trying to compete with simultaneous theater and PVOD releases in a new, post-covid-19 world won’t cut it. It’s possible that Universal could reverse its position and make this right by theaters, which would be the non-shithead thing to do to protect the industry and try to insulate it from further harm than what’s already been created by the present economic crisis.

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But the move was never really about theaters to begin with. Studios seemed to be waiting to seize on an opportunity to pivot to PVOD to keep up with streaming, theaters be damned. Coronavirus just created the perfect cover.

Do you have information or experiences you would like to share with us? Contact ckeck@gizmodo.com.

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Editor’s Note: The previous image at the top of this article detracted from the article’s subject matter. We’ve replaced the image as to better illustrate the article’s thesis.

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DISCUSSION

imnotdedyet
David E. Davis

Man...if only there was a theater option where we see the movie on a big screen but easily social distance at the same time...