| July 14, 2020
You know how you were 12 and the entire world was going to notice that zit on your nose and never see you as anything but a troll forever and ever?
That is the spirit that the authors of most of the coverage of Hollywood’s COVID-19 problem are embracing.
I mean… yes, the entire world could end and we could all end up in oxygenated cubbies with skin as pale as our genetics allow, eating highly nutritious meals out of vacuum-packed packages like toddlers. It could happen!
And every major exhibitor could be forced to declare bankruptcy… for the first time since the early 1990s… which is when the multiplex as we now know it took hold, because those exhibitors got out of leases through bankruptcies and rebuilt theaters with a lot more screens with big screens and fewer seats with better sound. How tragic!
For the record, movie theaters have gone through two further paradigm shifts, with digital projection and then enhanced seating pushing the ball uphill, not to mention the emergence of IMAX and the coming, and mostly going of 3D.
For movie journalists, the world is forever on the edge of high drama, because as the old joke goes, the stakes are so low.
And the stakes aren’t low for the people who make their living in whatever area of the industry at whatever time they are under attack. I don’t want to take the suffering that may/likely-will occur lightly. But… perspective.
Disney is the king of the theatrical jungle. Well, last year. But undisputed champs. $11.1 billion in revenue, including $4.7 billion in theatrical rentals on nearly $13 million in worldwide grosses.
So Disney has the most to lose in this COVID-19 drama, right? Probably so. Still, The Parks generated $26 billion in revenue last year. The company’s cable networks generated $16.5 billion. And ABC added another $8.3 billion.
Disney Parks have the very real possibility of losing billions, if not more than $10 billion during this. One month of revenue, even an off-month like March-into-April, is probably $2 billion.
Cable and ABC may actually increase earnings over this period, as there is no other game in town for advertisers, although obviously, the overall amounts being spent will surely be lower, especially for retailers. So maybe breakeven. Maybe a small loss.
Which brings us to the Movie division, which is facing a disruption, at minimum, of four rescheduled movies (Mulan, Black Widow, Artemis Fowl, Soul) which cost about $850 million to produce, would cost about $700 million to market worldwide, and were expected to generate more than $3 billion at the box office between them. At that low end box office estimate, the four films would break even in theatrical and generate profits in all post-theatrical revenue streams, plus ancillaries, plus having great pre-established value, eventually, on the streaming platform.
So of course, the obvious response would be, “Uh… just throw them on the app!” (Did that sound like a brain-damaged Cro-Magnon? It was meant to.)
Let’s do the simplest math. How many subscriptions would Disney+ have to sell to make up for the production cost alone, staying signed up for six months for these four titles? That would be about 18 million.
As far as I can tell, Netflix has never added more than 16 million subscribers in any two quarters… and they are selling to almost every country in the world.
Let’s move on to the “Put them on Pay-per-View” argument. Not a new one. Universal is trying it with Trolls World Tour. But do you know that no film has ever grossed as much as $50 million in PPV/VOD? Not one. And this has been a format for over a decade… and VOD has has a multiple week head-start on DVDs for years now. And yet… no.
But there are people who believe that Trolls World Tour – four years and a bunch of Netflix content since the modestly successful original film – will just casually triple that figure. And how about this comp? Angry Birds surprised a lot of people with a $108 million domestic gross. Three years later, the sequel did $42 million.
Of course, not all the VOD money comes back to the studio either. I’m just being petty.
And magic could happen. Teb million people could pay $20 million for Trolls World Tour and Universal would gross $200 million without spending nearly as much on marketing as with a theatrical release. Nothing close to that has happened in the history of films and streaming. The biggest boxing match in PPV history had five million sign-ups. Only three have ever had more than two million sign-ups. But maybe I am holding up the future with my Luddite ways.
But here, my friends and foes, is something closer to reality. Universal did the math. The cost of holding the DWA movie and doing a theatrical at a later date was probably a loser, with whatever hopes of profit being pretty iffy in either situation. So, they have a brand name—however low-end—and a moment in history, so why not take the chance? Eat shit now or eat shit later. Maybe they make magic. The two bets seem, even from the outside, pretty similar. If they lose $20 million or $50 million… well, who cares? Filmed Entertainment was a $6.5 billion segment of a $34 billion revenue company. $50 million a 1/10 of one percent of Comcast’s revenues last year.
And like Disney, Comcast has a bigger fish frying… their cable division that produces $11.5 billion a year, which is under assault from streaming. They will probably be safer for this period thanks to COVID-19. People are not anxious to change things up when they are under pressure. It is possible that this notion is flipped on its head, especially if we are still stuck in our homes in July. But for now, no one is out installing or uninstalling anything in your house real soon.
The truth is, I am looking forward to hearing the numbers on this VOD effort. The $20 price point is significant. The fantasy of “fight pricing” is completely over. The hope is that “just a little bit more than the cost of a movie ticket in a big city or two tickets in smaller cities/towns” will make people forget the are spending $20 for an iffy sequel while they are also paying $10 or $8 a month for tens of thousands of hours of family entertainment. And people with money to burn will do it. And I may buy The Invisible Man for my wife to watch without reminding her how absurd paying $20 to watch TV is. But I suspect that buyers will be on the margins. And there is no better way to find out than to test it. This is a test. And whatever the results, there will be an answer. Not playing theatrical is highly unlikely to be that answer…. like 10,000:1 against.
I don’t want to beat this to death. I suspect that I will be beating it some more very soon. But, the premise that this is some kind of opportunity for studios to hop off the theatrical window train is nonsensical. It makes sense if you believe in your heart that they all want to get rid of theatrical and were just waiting for the opportunity.
But for all the talk-talk-talk-talk-talk of studio execs and agents for, literally, decades, about saving the cost of marketing (anyone who talks about P&A like prints are a major part of that budget line for a wide release film anymore cannot be trusted) and going direct to consumer, it has never made economic sense.
The problem is not, as people will tell you, that getting people to spend a large amount of money—compared to home entertainment—to go out to movies that are no longer quite the way we remember them from the 1970s and 1980s is too hard and too expensive. But it is hard. And it is expensive. And it is unpredictable. But it is unpredictable in the positive and the negative direction.
The film industry with a theatrical window, a Home Entertainment window, and a permanent streaming window is one business. Creating content for streaming into your home is another. The financials are very different. And the consumer target is completely different. If you can’t see the difference, you shouldn’t be writing articles about it, confusing an easily confused nation of content lovers.
Individual sales of content died as a primary revenue stream about three years ago. Dead. There are still hundreds of millions of dollars in that business. Last year, there was over a billion. Sixteen years ago, $30 – $50 billion.
The Theatrical Window world and the Streaming world are not interchangeable because the math is not interchangeable. Just isn’t. No more than broadcast TV and theatrical… or streaming, for that matter. But media has a very bad habit of not thinking it out. It’s all just another two hours of entertainment to most.
I had a similar conversation about Sundance and other big fests and the streamers. If Amazon or Netflix is spending $6 million an hour for a TV series, why does anyone thing they would flinch with a $12 million bill for a two-hour indie movie? (The question of how long their model of TV episodes at $6 million a pop will last is another discussion.)
Bottom line is that hundreds of millions in produced movies being delayed is not going to close any of the major studios. Not even close. And it certainly isn’t going to make them change their theatrical model. Universal. the studio experimenting with Trolls World Tour, is also the studio that moved one movie eight months and another 13 months to find clear worldwide theatrical windows. But it’s f-ing Trolls that defines the future of theatrical? Are you nuts?
These studios are part of giant companies. None of them want to lose money. Disney is the most vulnerable because of the parks, which will lose a lot of money that will never be recovered. Mulan and Black Widow, with due respect to those who are going to make life-changing amounts of money from those films, are not only a financial blip on the Disney radar, they are troubles with a very good excuse. But Disney doesn’t want an excuse. They want MONEY. And so, they will wait.
But deadlines don’t wait. So media feels compelled to stir up hysteria. Some even believe this horseshit. But only because they refuse to open their eyes. It isn’t a huge challenge to figure out this math.
Is there a day in the future when there will be no movie theaters as we know them now? Maybe. Possibly. But most likely, only at the end of the cycle of original content that costs what is seen as—at whatever moment—a lot of money. When every movie is shot on an iPhone or some tool that is similarly inexpensive, the lines will blur. When the studio business is primarily spending, say, $50 million to release a $10 million movie, the lines might blur. But until then, Universal (and Warners) are making a freaking fortune doing theatricals of Jason Blum movies with budgets under $20 million… a fortune that doesn’t exist in VOD or streaming.
And here is the kick… after studios make money on a release, they have a post-theatrical piece of content that has much more value than a piece of new content almost ever will. To wit, would you rather have Get Out exclusively to sell your streaming service or 20 hours of Jordan Peele’s The Twilight Zone?
It is possible that COVID-19 is the end of the movie world. Or the theatrical world. Or whatever fantasy your local ink-stained wretch is selling.
But we are nowhere close to that being even a real discussion. Not even close.
"We had a very good plan to put on the SHOW safely. But with an unending number of cases and the national chaos, even the best strategy is threatened by this out-of-control environment. No matter how much many of us wear our masks and observe social distancing, [circumstances have] worsened and the health and safety of you—our passholders, filmmakers, the people of Telluride and its surrounding areas—cannot be compromised. We have been working cooperatively with our fellow fall film festival partners to champion global cinema and its artists. We hope that many of you will seek out and discover the titles we’ve selected for this year’s program at the New York Film Festival, Toronto International Film Festival or Venice Film Festival. We will announce soon what we have programmed in the hopes that you will experience as we did, the best in film this year. We understand that film festivals and their long-term health are not top of mind today. A safe vaccine, vital medical interventions for those sick and properly enforced health regulations are. However, we do ask that you take this moment to consider a world where gathering around a shared love of culture is no longer possible and what that means for the psychological condition of the world. If the prospect prompts a sense of despair, please advocate and champion the return of our gatherings that provide vital nourishment and oxygen to humanity's soul."
July 14, 2020
"After months of intense due diligence around physically holding an event, we’ve come to the heartbreaking but unanimous conclusion to cancel this year’s Labor Day celebration of film in Telluride."
July 14, 2020
Focus Features Takes U.S. Rights To Schrader's The Card Counter; Universal Pictures International In UK, France, Switzerland, Italy, Spain, Australian, New Zealand China, Japan, South Korea, Latin America and Airlines. Schrader: "The folks at Focus are the best at what they do. Over the years I've been jealous of directors in the Focus fold. Now happily I am one."
| July 14, 2020
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