The Possible Death of Movie Theaters

Going into 2020, Disney’s live-action Mulan was set to be one of the biggest films of the year. Disney’s live-action remakes make serious bank in movie theaters every year. Mulan is also a Chinese-set film that cut many elements from the animated film to appeal more to Chinese audiences. Essentially, Mulan would serve as a supposed hit at the Chinese box office, currently the second-biggest movie market, and Disney furthering their reach in the region.

Since then, things have changed. COVID-19 rages on, and Disney lost billions this past quarter. Theatrical releases and theme parks are their biggest revenue sources and both are only just now starting to open up. Only streaming has seen any sort of value for the company this quarter. So in a shocking move, Mulan went straight to Disney+. Specifically, subscribers can purchase Mulan for $29.99 and get early access for the film months before regular users can.

An anticipated $200 million tentpole releasing like this is an unheard of move, and is devastating for theatrical exhibitors. A film that was set to be an easy source of revenue for theaters is completely gone. At a time when theaters are at death’s door due to this pandemic, this just makes things even worse.

It’s too early to read into Mulan‘s performance on Disney+, but it signals a shift. And a scary one at that. As theaters try to reopen and studios continue to delay their big tentpole projects, film distribution will change. However, this change will not be a good one for cinemas.

The 800-Pound Mouse in the Room

Even before the pandemic, Disney’s success in movie theaters is arguably a factor for the potential closures of movie theaters around the world.

Strange to say when you look at Disney’s box office numbers. With the Mouse House earning billion-dollar hit one after another, wouldn’t theaters be stronger than ever? While Disney has kept theatrical distribution alive, their success has created dangerous implications. Over the years, Disney’s film strategy has been cultivating the biggest movie franchises in the world. They have the money to spend and the properties people love. Marvel, Star Wars, Frozen, Toy Story.

Therefore, they have found success with a simple strategy. Release the fewest movies, but every movie they make will be a low-risk high-reward blockbuster. Pour millions of dollars into an Aladdin remake or a Marvel movie and make crazy profits.

This came to the massive detriment of smaller movies Disney was known for. In between their major animated hits, Disney would have small-scale family comedies or adult-oriented dramas from Touchstone to fill out the other months. This strategy worked, but once Bob Iger became CEO and looked to expand the company, he became aggressive.

With so many franchises, both grown and acquired, Disney’s executives began to realize the potential there was to offer the biggest fish in the theatrical pond. So as time went on, movies like The Princess Diaries or Saving Mr. Banks appeared less, while films like Maleficent and Captain Marvel appeared more.

The Studio Catch-Up

This strategy of “low-risk high-reward tentpoles” has its obvious downsides from a creative standpoint. But like it or not, it worked.

Disney has consistently earned some of the highest-grossing films every year, and have made it so that almost every film they release becomes the dominant talking point in pop culture upon its release.

Last year saw Disney earn a record $13.1 billion at the global box office. As theater attendance drops year after year, Disney’s strategy has made them the dominant media company. That put the other studios into a predicament. How do you compete when the Mouse House controls so much of the theatrical market? As the saying goes, if you can’t beat them, join them!

Over the years, the other big studios have tried to follow in Disney’s footsteps to somewhat similar success. Jurassic Park came back to roaring success. DC Comics has multiple film adaptations every year. Jumanji’s reboot saw massive rewards.

But unlike Disney, Warner Bros., Universal, Paramount and the like still invested in midbudget releases. However, the box office potential of these movies has diminished over the years. Because WB has to put in so much money producing and advertising Fantastic Beasts, these $40 million productions got left behind. There was no room for a big marketing campaign, and these movies can’t sell toys, so they suffered.

Apart from awards hopefuls like Parasite, it’s hard to find major success in original, non-IP fare these days. Midway, Ad Astra, Five Feet Apart, Little, Crawl. All came and went with no noise last year. In 2009, films like The Hangover and The Blind Side were in the box office top 10 next to Star Trek and New Moon. In 2019, they would have been lucky to get $100 million.

The Haves and Have Nots

Despite the shift from all studios over focusing entirely on big-budget franchise fare, the box office divide between Disney and everyone else is still startling.

In 2019, Disney was the biggest thing in movies. Their domestic market share totaled 33.12%, 37.48% including Fox. All thanks to a murder’s row of films from their live-action division, their animation studios, Marvel Studios and Lucasfilm. This also saw Disney earn seven of the top 10 for the year. Eight if you count Marvel Studios’ Spider-Man: Far From Home.

For everyone else, it was a bit of a different story. Apart from Joker and Jumanji: The Next Level, both based on major film properties, nothing came close to Disney’s reign. It: Chapter Two was the only film to land in the $200 million range domestically. Sequels like The Secret Life of Pets 2 dropped dramatically from their predecessors. Franchise starters like Men in Black: International went nowhere.

Rising ticket prices have made it harder for people to sit down to watch something. Streaming has filled an entertainment void for small movies. Disney conditioned people around the world to only seek out blockbusters. At this point, the studio competition had to follow suit. But to quote Disney’s The Incredibles, when everyone’s super, no one is.

Regardless, there was nothing else studios could do. They want to be in the mainstream conversation and tentpoles seem like the only option. So again, midbudget features are losing more and more value to the studio heads. Ironically, this push towards “all tentpoles all the time”, in an attempt to push maximum profits from the theatrical business, could very well lead to the downfall of the theatrical business itself.

The Curious Case of COVID-19

Movie theaters were hit hard by COVID-19. In fact, they were one of the first industries to see such pain.

As said earlier, China is the second-biggest movie market and American studios rely on them for big grosses. However, in late January, movie theaters across the Middle Kingdom closed. The rest of the world then followed suit in February and March.

This was a major blow to theatrical exhibitors and studios. Almost all movies were pushed back for months, so theaters couldn’t make any money. Studios need movie theaters to pay off all these big-budget epics, so they lost a massive revenue source.

While some studios abandoned any hope the 2020 box office could return to normal, there was still optimism for July. There was hope the curve would be flattened enough it was okay to open theaters again worldwide. Albeit, with social distancing measures and limited capacity in place. And so, Tenet, Mulan, and Wonder Woman 1984 were all set to be the glorious return of multiplexes.

However, while most countries were able to flatten their curves, America, for several reasons, was the opposite.

Because America makes up such a large part of a tentpole’s box office, more and more movies got pushed to 2021. As for the overseas markets who were ready to go, they got the short end of the stick. They couldn’t play the tentpoles they have become dependent on, because studios need the United States to make a profit. So apart from local content, all they had were old movies that people can watch comfortably at home.

And even when Tenet did release, while the film saw solid business in Europe, America’s performance made things worse. With only $20.2 million in about 11 days, the film’s performance in the US was so bad, Warner Bros. delayed Wonder Woman 1984 to Christmas one week after Tenet’s American debut. Even with overseas doing fine, there’s no hope to make money back on these films until America gets it together. And with little releasing in the weeks after Tenet’s debut, it’s fair to say theaters have nothing worthwhile to show and may face heavy closures, barring government bailouts.

If the studios cared about small movies, we wouldn’t have this problem. Obviously it wouldn’t save theaters. However, there would still be a solid stream of movies for studios to make money from. Studios don’t have to worry as much about losing U.S. profit on a smaller title and opened theaters get something new and exciting to play to keep the lights on. But with a couple exceptions, studios have nothing to show for themselves. If anything, studios have abandoned their small titles, putting them on streaming.

While Europe has done alright business, with so little major content on the horizon because of America, who knows if their movie theaters can handle this lack of major content any longer?

The Home Entertainment Disruption

March 17, just days after theaters shut down worldwide, Universal changed the game forever.

On that day, CEO Jeff Shell announced Trolls World Tour, the animated sequel set to release that Easter, would come out on April 10. However, it was only available through premium video on demand or PVOD. For $20, people could rent a brand-new movie from their home for 48 hours.

It was a risky move for sure. $20 for a limited time is not an ideal price for everybody, and being on demand makes it more susceptible to piracy. However, Universal’s experiment seemed to have worked. Bloomberg estimated about $200 million in gross from the animated flick. Not as much as what 2016’s Trolls did in theaters, and the lack of theaters as a revenue source does hurt.

However, considering Universal earns a greater share from VOD and Trolls is a merchandising machine, the money made was very solid. This opened the floodgates for more premium on demand releases, mainly from Universal. Such examples include the Pete Davidson comedy The King of Staten Island and the Dakota Johnson/Tracee Ellis Ross vehicle The High Note.

The recently released Trolls World Tour has created a situation where films are now On Demand or streaming at home. Even the Trolls stars are doing it. Artwork courtesy of David Weimer
The recently released Trolls World Tour has created a situation where films are now On Demand or streaming at home. Even the Trolls stars are doing it. Artwork courtesy of David Weimer

Alongside films like The Lovebirds and Hamilton moving straight to streaming, all of this indicates the future of movies. Big-budget hits stay in the theater. Cheaper animated titles, midbudget dramas, star-driven comedies or regular action movies are either straight to Netflix or $20 premium rentals. A hierarchy was in place about what was “worthy” of the big screen. Unless you cost $100 million or more, you don’t deserve theatrical play.

Of course, this was all before Mulan, but we’ll talk about that much later.

Shrinking the Theatrical Window

Over the years, the theatrical window, the time between a movie’s release in theaters and it popping up on digital stores, DVD, television or streaming, has shrunk. The 70s and 80s often saw movies play for at least a year in theaters. There was no other way to watch it outside of TV airings after all. But with the advent of VHS, television and Netflix, where studios had a greater control on profits and release, the window got smaller and smaller. In 2019, a movie played in theaters for about 90 days before becoming available on digital or physical media.

This is a problem for theaters because they got the short end of the stick with this window. The box office revenue distribution works like this: the first couple weeks, the majority of the box office is given to the studios. As the weeks go on, theaters see a larger share. So the best kind of movies are movies that open big and continue to bring in the crowds, staying in theaters for months. As much as theaters love films like Endgame, films like Frozen or Get Out are ideal.

But with movies coming home sooner, there’s less money coming in for theaters. And with Universal just making a deal with AMC, and likely other major chains, to put some of their movies On Demand 17 days after its debut on theaters, things become even worse. Independently-owned theater owners are already against this deal, believing a shorter window will lead to their demise.

Granted Universal has said it would be a case-by-case basis, where movies that continue to make massive money after two weeks won’t go to VOD. However, in the current theater culture, it only further conditions the idea of small movies as unworthy of the theatrical experience.

Disney’s Bombshell

Tenet, Mulan, and Wonder Woman 1984 were all serving as the grand return of theaters. Yet as time went on, the former two were the most adamant on opening first.

Tenet would serve as the first release, as its director Christopher Nolan is one of the strongest supporters of the theatrical experience and a devoted fan following. One week later was Mulan, a highly-anticipated release from Disney that prides itself on epic action that needs to be seen on the big screen. Both movies had immense hype and served as great relaunch pieces to get people interested in going to the movies again.

However, things changed last month. After posting a near $5 billion loss, Disney’s only real success story this past quarter was their streaming division. They needed something to slow down the money they’re bleeding and grab some extra cash. So in an unprecedented move, Mulan is going straight to Disney+. Albeit in an unheard of format for a streaming service.

Instead of just putting the film on the service as an exclusive, Disney+ users must pay $30 to unlock early access months before everybody else. After that $30, users keep that movie forever, so long as they still keep their Disney+ account. It will then become free to all users months later.

This release strategy angered theater owners.

While Tenet is playing in theaters now, there’s a huge piece missing in the gradual reopening of multiplexes. Tenet has the box office to itself, apart from a few releases like The New Mutants and Death on the Nile, but there’s nothing else major coming down the pipeline to keep momentum going. Mulan going away stings and loses a major piece of theater chains’ strategy.

And after Tenet’s poor domestic performance, who knows if we’re getting any new major films in theaters soon? Theaters need a variety of blockbusters to sustain themselves, and when no other studio is playing ball, there’s nothing to keep momentum going. One movie can’t keep pulling people in for months. To say nothing of the risk of opening a big-budget film during a pandemic, where cases can rise at any time.

Will Disney’s Gamble Work?

Of course, saying all this begs the question: will Mulan’s $30 price tag work?

There’s been plenty of online backlash about having to pay $30 for one movie. Especially when this is only for people who are part of a certain service. Yet the one ace in the hole is one word: family.

This price point wasn’t chosen for single viewers but the family audience Disney is known for. Disney+ has found its biggest success with this audience. With the cost of ticket prices nowadays, a family outing to the theater can cost quite a lot, even without concessions. And it’s not like forcing your kids to wear a mask for two hours is all that easy.

So if you have kids, especially kids who love Disney Princesses, paying $30 for a family viewing and for your kids to enjoy again and again in the coming months is a pretty decent deal. Even watching with roommates or an online watch party can make that $30 worth it for many.

And looking at Disney’s success at the box office before the pandemic, it isn’t wise to doubt the company here nor their strategies.

Don’t think that Disney won’t stop with Mulan either. While CEO Bob Chapek stated this pricing experiment is a “one-off”, it’s hard to believe such a thing. Why would Disney make such a bold strategy for one single movie?

As of now, there is no concrete data in terms of revenue Mulan has generated with this strategy. Only very vague information from third parties has been out there. And at the moment, this release strategy isn’t a complete slam dunk. Mulan is in theaters in countries that don’t have Disney+, but box office in those regions are poor and piracy is rampant. To say nothing of the film’s political controversies.

However, judging by app downloads, word from executives, and even Disney stock gains upon its release, it seems like it’s doing okay. A perfect replacement to theatrical exhibition? No. But it’s not crazy to say there’s a decent market of people willing to pay premium to make it worth it on Disney’s end. At least, during this pandemic. And Disney’s non-Mulan slate has far more baggage and financial potential. Don’t be surprised if Disney+ Premier Access happens to films like Marvel’s Black Widow or Pixar’s Soul.

And with the countless other streaming services owned by studios (HBO Max, Peacock, CBS All Access), just about all the major players have the infrastructure to do this kind of Premier Access where they get all the profits. They obviously don’t have the large subscriber counts, nor a large enough international pool to pull it off just yet. But it’s clear streaming is important, and these studios want that money. A DC Comics movie being on HBO Max Premier Access in the next few years? Not as crazy as you think.

The Crumbling Mountain

But even after the biggest movie company decided to bypass the theatrical market entirely, arguably the biggest bombshell for theaters came from the termination of the Paramount Decrees.

For those unaware, in the Golden Age of Hollywood, movie studios could outright own movie theaters. There was a time when Universal or Paramount took over your local multiplex, which obviously had its issues. Studio-owned theaters gave their own movies advantages, whether it be exclusive play, or refusing independent films from being exhibited. One of the most infamous practices was block booking. When theater owners got films from their corporate owners, they often had to buy packages of numerous titles. This forced theaters to play lesser quality titles from the same studio as the anticipated, high-quality releases people wanted to see and studios ensuring they’ll make a profit on shoddy product.

While not every movie theater was studio-owned, the problems were obvious.

For independent productions, they were mistreated and underrepresented, making it hard for niche films from people outside of the studio system to be seen at all. And when it came to choices and variety, it was tough for consumers, was anti-competitive, and resulted in worse results for everybody.

This resulted in the Justice Department accusing eight studios of violating antitrust laws and monopolizing the exhibition business. In 1948, the Paramount Decrees were signed, forbidding studios from owning theaters and taking part in these anti-competitive tactics. This in turn changed the Hollywood system, as studios made less money and focused on quality over quantity when it came to their yearly film slate. Independent studios and producers also managed to find a way to put their foot in the door. This would continue for decades, allowing a diverse pool of films a chance to make their mark in pop culture.

Yet recently, the Justice Department has terminated the decrees that have stood up for so long. Disney already commands the theatrical market as is. Just imagine what would happen if they controlled AMC or Regal. Having said all that, it’s debatable studios struggling during this pandemic and looking to find more revenue will buy struggling theater chains right away.

However, the very idea a major corporate studio is now allowed to own a distribution center and take part in anti-competitive activities is toxic. We could return to an era where studios control what we watch at multiplexes again. And as the big studios get richer, studio tentpoles will continue to reign supreme, while independent releases and smaller features get left in the dust.

The future of film distribution and release looks to be one where only a few large companies survive to the detriment of quality films itself. Artwork courtesy of David Weimer
The future of film distribution and release looks to be one where only a few large companies survive to the detriment of diverse quality films. Artwork courtesy of David Weimer

Spiritually Dead

And that’s the tragedy of all this. Tentpoles commanding over movie theaters, failing to give the little guy a chance.

Despite the title, movie theaters won’t permanently go away. Similar to vinyl, there’s enough of a niche for people who would go out to see something in theaters. Even if it’s readily available on streaming or On Demand, some people will go to theaters as a preference. I know I will.

Yet after this pandemic subsides, movie theaters will change. And honestly, I don’t think it’s for the better. If anything, it’s only accelerating the issues movie theaters have had for nearly a decade. Why spend a large marketing budget promoting a small movie that will be at home in 17 days? Why not buy a theater chain and use it to promote your streaming service? With closures

We’re heading towards a future where movie theaters are nothing more than corporate commercials and are only home to expensive four-quad features. All the while, small movies, experimental features, independent productions, and other films that allow burgeoning and creative filmmakers have to go through more hurdles to see solid distribution. Or worse, not even get the movie made at all.

To Sum Up…

After icon Martin Scorsese got fanboys angry over saying Marvel movies aren’t cinema, his thoughts became misconstrued.

People thought the man hated them because it was popular. It was cool to hate on it. But really, his frustration was with the system Marvel is a symptom of. Say what you will about Marvel, and frankly almost all other blockbuster franchises, but it’s easy to say they have a sameness to them. A bad kind of sameness.

They often follow rigid rules set by producers and executives, and are pretty much the only game in town if you want to make huge money. There are exceptions, but Knives Out didn’t gross anywhere near Captain Marvel numbers. Marvel, among other big franchises, has created a culture where if you want to be seen in the industry, you have to be part of a big-budget property designed to sell merchandise. And with all studios facing money losses, this will only be accelerated.

This pandemic will hurt risky ventures and smaller projects. There’s far more risk, and the insurance costs during COVID are astronomical, so unless it’s a surefire hit like Jurassic World, or from a Hollywood legend, it’s going to be tough for movies, especially risky ones, to get greenlit. Studios won’t have the same finances they used to, so why spend money on something that isn’t guaranteed to make millions? And while mini-majors still exist and are willing to pay for these small features, this doesn’t mean they will find a place in the multiplex.

Disney, among others, gamed the system and conditioned a majority of people to only see and only talk about blockbusters in theaters.

While PVOD and Netflix help get certain movies made, small movies really need theaters. The cinema allows for a unique shared experience and an attempt to really capture yourself into the world the filmmaker created. By taking it away, it’s debatable if films like Uncut Gems or Parasite would have the fandoms they have now.

The movie theater is changing. It changes all the time in a way. However, this new change, one that seems to promote a toxic idea on what’s deserving to play in theaters? One that treats theatrical moviegoing as rigid and corporate as possible? That excludes and alienates people uninterested in sci-fi action? The appeal of a shared experience being taken from those that most deserve it?

Simply put, even if movie theaters come back after all this, will they really feel as alive or as special as they once were?

Special thanks to artist David Weimer for the colorful and humorous illustrations.

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