| June 24, 2020
It’s not a complicated answer.
COVID-19 isn’t a fart in the wind, which is about what it takes to get media to start screeching about the end of this or the end of that part of the industry. But this isn’t Armageddon either. Not even close. That is, unless it is literally Armageddon and most of us are about to die and some guy in a space vehicle is going to land and find that apes actually rule the planet. (Three years of Trump has been close enough, thanks.)
Every “stupid” journalist who has been drooling for a decade for everything to move to streaming while not remotely understanding the economics is dancing in their foyers (afraid to go out in the air for anything less than the quest for toilet paper), finally ready to be proven right. Ding, Dong, Theatrical is dead!
But this isn’t 1969, kids. It’s 2020. With the exception of the car wreck that is Viacom/CBS/Paramount, the major studios are all major corporations with multiple revenue streams, many of which are not reliant on people leaving their houses to go to the movies, visit a theme park or to buy branded merchandise.
As obnoxious as corporate overlords can be, they are really good at one thing… planning out an extended view of the future. The movie and TV business is too reliant on the mercurial tastes of the public to make this a comfortable skill for the industry in most situations. But right now, with what looks like a four-month and then maybe another two-month window of serious business disruption, the ability of the bean counters to understand how beans will be valued in 2021 and 2022 and not just this quarter (though, of course, they want consistent growth quarter after quarter) is a savior.
Again, I don’t want to underplay the reality. March and April have become a launchpad for a lot of box-office revenue and obviously, summer months May, June, and July are three of the strongest five months of the year. There is money to be lost.
BUT… the argument that this is a moment that suggests we dump the theatrical window because people aren’t going to congregate for a few months makes as much sense as doing “Medicare For All” right now because it will help with COVID-19. It’s just bullshit. That doesn’t make either argument bullshit (though I believe the “everything on streaming” argument is financial armageddon for the industry and only makes sense if you want the entire future of filmed entertainment to be low budget), but both claims are bullshit in the immediate reality.
Here is a bit of 2019 math.
Netflix Gross: $20 billion – $2.6b operating income
Disney Movies Gross Only – $11.1 billion – $2.7 billion operating income
Disney spend about $2.2 billion on production and another $1.5 billion or so on marketing their 12 big releases. And of course, this doesn’t include post-theatrical revenue or ancillaries or park value for Disney. Netflix spent well over $10 billion on production and over $2 billion on marketing to be Netflix.
But here is the thing… theatrical is not the biggest part of the revenue or profit streams at Disney. It is the smallest segment of the $69 billion a year in revenue created by the company. And yet, by itself, it is still a more profitable business than Netflix right now.
This is not a slam of Netflix. The company will eventually start scaling its spending to its revenues. But wild spending is how they have built this era of their remarkable, industry-changing machine and they are playing out that idea. God bless.
But theatrical is one of the areas that is easiest for Disney to deal with at this moment, even with COVID-19 messing up their schedule over the next 18 months (by messing up the next 4-6 months). Their big financial problem is the parks and that isn’t going to be fixed quickly. $26 billion a year and it is not hard to imagine $10 billion of that evaporating off this year’s P&L.
On the other hand, we don’t know what the consequences of this will be in other areas. Will cord cutting slow significantly as people stop caring about the cost of what is coming into their homes and just crave consistency? OR will cord cutting speed up because people have so much time on their hands, they can focus on making the move? But will they be slowed by not being able to get faster internet installation into their homes during this turmoil? We don’t know the answer.
With Peacock pushed to April and HBO Max pushed to May, have Comcast and AT&T missed their big opportunities to sell new products to America at a time when we can all use the free trial period to dig into the content? OR will people be so sick of Netflix and Hulu and Amazon Prime that new content will be more valued and must-get than it is right now? We don’t know the answer.
Will delays to the major sports leagues and movies and live events and human interaction in general lead to a fear that will take many extra months to overcome or will people rush back into life with an never-before-seen aggression when they feel safe sometime this summer? It could be the greatest July-October ever… or a sluggish one. We don’t know the answer.
Here is what I do know. If Mulan cost $200 million, the opportunity to get to $1 billion worldwide means that if Disney pushes its luck and it only does, say, $400 million, they left $250 million or so in returns on the table. This $70 billion annual revenue company can afford to eat the $100 million loss it may take this quarter if it means $250 million more in a few months… or 7 months… or a year.
Universal had led in this regard, first pushing the new Bond movie to its “natural” November slotting and then, under pressure with an even bigger franchise, pushing F9 and entire year to 2021. Here is the news, dumb ass… they aren’t doing that as a show of weakness in theatrical. It is a show of strength and how important the billion dollars in grosses mean in the ecosystem of a big movie.
Would I delay an indie film? Not by a day. (Well, if it’s next week, maybe… but not after.) I would push hard to promote the idea that it is being made available to audiences regardless of COVID-19. I would cut the VOD cost to try to push a bigger buy rate at this moment of attention to being stuck at home. But the indie theatrical world is a different beast than wide release.
And as I posted on Twitter the other day, the fantasy of Frozen 2 going on Disney+ early being a huge moment in distribution… check the facts. Disney is waiting, specifically, for their 17-week contractual window to end before pushing to Disney+. So the only window they are collapsing is their own DVD/VOD window/A d why? Because this is an opportunity to sell more Disney+ subscriptions and Frozen 2 is the best bait they have available to them right now. If they had the launch of Season 2 of “Mandalorian,” this wouldn’t be happening.
So journalists, do us all a favor and stop talking to agents who are screaming, as they are always screaming, about the end of the world. Screenings are cancelled, so embrace it. Studios, get good at streaming delivery to journalists so your content can be reviewed easily. Academy, start streaming movies to your membership… like you have for months… and teach those who aren’t on board how to work an AppleTV.
I could get further into the math of the future of streaming and theatrical, but that will wait for another day.
Be careful out there. Take care of yourself and you will be taking care of everyone. Use social media to listen, not just scream (except about Trump). And let’s enjoy this pause in our lives and get ready to seize the day when it’s safe to kiss your grandma again.
| June 24, 2020
| June 15, 2020
| June 8, 2020
“Recorded stage productions are not eligible for consideration.”
Hamilton Can't Go Oscar But Disney Could Pursue Emmy For "Outstanding Variety Special (Pre-Recorded)"
| July 7, 2020
| July 7, 2020
| July 7, 2020
| December 13, 2019
| December 4, 2019
| December 4, 2019