Movie Content Scoreboard: Episode 3b – After The Fall, What Next?

Let’s look at the movie industry’s situation from another perspective.

*The car renters of the film business are moviegoers.
*The rental car companies of the film business are the production and distribution companies.
*The renters and owners of the parking lots where the automobile waits for pick-ups-and returns is the exhibition business.

You can’t force someone to rent a car if their travel plans have been curtailed, and worse, they fear every hundredth car might explode. They can afford to stay home, do meetings on the internet, and not rent a car for years.

The rental car companies are not used to selling the idea of people renting cars, but have been in a massive daily struggle to differentiate the quality of their company over the others. Meanwhile, they have a massive investment in cars, which are sitting there going nowhere. They could try to get people interested in renting cars with all kinds of gimmicks or they could just sell off all their cars and go into complete hibernation for a while or they could just sit on the cars they have, which are not being used and therefore not losing usefulness, and wait until people come back.

The people who own or are renting the land where the rental cars live are not making any money and will not make any money until the car renters start renting cars again. They don’t care which cars are rented or for how long or how old the cars are… They need to make some money to pay rent or their mortgage.

And here is what is screwing everyone up in this situation.

People could start traveling at any time. There’s a holiday coming. There is a study showing that the rate of exploding cars is going down in certain states. Vegas has reopened for conventions and once they have a good month, everyone will relax and the business will steadily return. Another holiday. Price cuts. Exhaustion with social distancing. Etcetera, etcetera, etcetera.

But none of that good stuff might change anything. The ground is moving under the feet of the industry. And every week is another adventure in grasping at straws.

Back to the film business.

Studios have completed films which are commodities that have no time frame required for success or failure. They also have alternative options for these commodities that are not as healthy, but are not necessarily money losers.

Exhibitors have no serious alternative revenue streams. They are just waiting around to see what the studios do. They need movies that will not only draw people who don’t worry about masks, but which are enough of a draw to bring out the not-inappropriately nervous. Meanwhile, they have serious fixed costs, no matter what they do, fairly high overhead and low margins while in operation at any scale. Unlike previous history, exhibition can’t leverage bankruptcies to improve their positions with landlords until they know to what position they want to move.

For all the talk of partnership, distributors have no motivation to devalue their expensive commodities for the sake of exhibition.

Exhibition is bending over backwards to keep things up, ready and safer than ever, hoping that distribution will find its way to taking the risk. But that effort doesn’t change reality.

The only thing that has kept exhibition’s relationship with distribution from being completely one-sided — all distributor — is that exhibition has invested in a low-margin business that gives distributors their best returns across all potential revenue streams. But if there are no moviegoers, there is no balance.

Today, there is no balance.

But that illuminates the next problem… There is this constant threat that if exhibition doesn’t lie there, bleeding out, as distribution decides whether it feels like risking a Bond movie or a Marvel movie or a Lord/Miller animated film, distribution will abandon theatrical altogether — at least for the duration of a shutdown — and start moving smaller studio/higher-range independent films into the digital world with no regard to theatrical.

Despite the fantasies floated by movie business writers, the big movies are not — unless used as specific experiments — going to the internet. With 0% interest rates, there is no financial upside to releasing an expensive movie on your streaming service or to PVOD or SPVOD. You could break even. But what distributor is in business to break even with a movie they think could be a hit? Or even a runaway hit?

The hope of Tenet swinging in like Tarzan or Lassie or Shaft and saving the day turned exhibitors into little kids trying to stay up late enough to catch Santa arriving down the chimney. But you can be sure that neither WB nor Disney is happy with the bottom line they have achieved on the releases of Tenet and Mulan

I read a quote about how exhibition needed Mulan as the second part of a one-two punch. That’s so sweet. With due respect to someone who is deeply invested in exhibition, which I love, it’s silly. All you needed to relight the flame was a second $10 million domestic opener? That is sad. Having Mulan — a family movie, making audiences even more resistant, unlike young men rushing to Tenet — do mediocre business following Tenet would only double the ugliness.

On the other hand, it might have hit exhibition in the head hard enough for them to shut down for a month or two or three or until March of 2021. That is an answer that may be better for Exhibition and Distribution, but no one wants to face yet.

Distribution and Exhibition are in a dance of injury (not death). Even if Exhibition said, “Go ahead… try anything you can think of,” Distribution doesn’t have a good answer waiting to go.

There is no source of consumer revenue that works 66% as well as the traditional windowing system. I know this hurts the feelings of some, but it’s not about your feelings. It’s math.

Even if Distribution said, “We’re going to open a new big-budget movie in your theaters every single week until the end of the year,” this would not solve Exhibition’s problem in a real way.

Twenty percent of normal revenues is better than nothing… but maybe not… The costs of being open are likely greater than that 45% of 20% of the norm.

Both Distribution and Exhibition are reliant on the third group, Consumers, to move forward. And as reluctant as industry bigwigs are to accept the painful reality, they have no more than five percent control over the hearts & minds of consumers.

I read the trade stories about this situation and all I see is bullshit and whining. (To be fair, that is all that the writers of these stories are getting… because the truth is much uglier.) Anger about how box office is being reported on Tenet? Killed by Mulan? Not enough audience education about theater safety?

Are these people fucking kidding? Are they just kidding themselves? They sound like the “send your kids back to school” maniacs. Hey… You send YOUR kids. All you like. I’m not playing roulette with my kid and my family that he would be coming home tofive nights a week. Yes, staying home is bad for him. Me or my wife getting COVID could well be worse. Much worse.

And God bless the editor who assigned a story on how Toronto found a new kind of festival in the midst of the pandemic. Bless them… but it’s an absolute lie. The festival that was TIFF this year is there every single year… but the media couldn’t be bothered to pay attention to it. In fact, there is more international… more diversity… more interesting little films that are lucky to get three or four “professional” reviews over the ten-day event. If you liked this year’s TIFF, good on you. Next year, when the stars are back, maybe you will run a review on a relatively obscure title or two.

Then there is the high-and-mighty group that just wants distribution to go ahead and give away their big investments and for exhibition to just shut up about it already.

Same answer as school: You first!

Yes, there are revenue opportunities in leveraging your $100 million or $200 million or even $40 million movie in some way other than traditional release windows. But they are all LESS than the traditional release windows, unless, of course, you have a flop.

Tenet and Mulan have been sacrificed to the Gods of Hopefulness. They may break even. More likely, one will make a very modest return and the other will lose tens of millions. (No skin off my ass, sitting on Twitter, opining.)

So…. What to do?

This is the big question. And there is no answer. Sorry. But let’s offer a few hard swings at the problem.

OPTION ONE: Shut all theatrical down until next March. Rip the Band-Aid off.

Honestly, I am leaning in this direction. Sitting around treading water for two months before mid-November releases happen or don’t won’t do Exhibition any good. Distribution sitting on dates, waiting for a COVID miracle, while not being able to do anything to make miracles happen, and planning for marketing that everyone is scared to start the money faucet flowing on, isn’t going to do Distribution any good.

Agree to this and that there will be a concerted effort come November 2021. Lay out the schedule. A new big movie every week. Don’t sweat collusion issues. If neither side is complaining, no one is complaining.

Set national standards. Promote them. Have all studios on the same page, using five seconds of every TV spot, a space on every print ad, billboards… “Welcome Back To The Movies.”

None of this toe-in-the-water crap with a long-broken New Mutants thrown out to set the stage for Tenet. Start with Soul, The Eternals, The Last Duel. Real movies. Agree to give them an eight-week theatrical window as bigger titles start playing in April.

Keep this in mind: By next March, America will have lived with COVID for another six months. We will get better at it. It is unlikely that there will be a vaccine widely available before the end of summer 2021, but another six months of this and we will all have established patterns in the world, whether mask-wearing or testing or whatever.

The great failures turned into legitimate theatrical hits in MovieLand have been failed campaigns. A reset and a relaunch hitting all the right notes… I would suggest that is an attractive option.

Would Exhibitors go bankrupt? Some might. But there is nothing big business likes better than solid, clear answers. Public-space landlords are being pressed hard all over the country. Do you think they would rather hear, “We’re hoping that Bond will change everything, though they could move it, but it depends on whether the big cities stay safe and the mid-sized cities don’t regress and…” OR “We’re shutting down for six months and then the entire industry, both sides, are going to relaunch movie theaters and we hope to do 20% in the first week and increase it by 15% to 20% every week until we are back to 100%, by which time the vaccine will be widely available, allowing us to return to business as usual.”

What would Distributors do with their considerable staffs in a six-month shutdown? I don’t know. I don’t wish for anyone to be furloughed or let go. So it’s not a one-way street for Exhibition. It’s a major challenge for everyone, including The Academy, which would have to shut down the Oscars for a year.

OPTION TWO: Exhibition accepts the idea of a hybrid business model while big markets are closed and people remain fearful.

Obviously, this undercuts the push for people going to movie theaters by offering a choice during the pandemic. Keeping a screen open — whether it’s a single screen or one of twenty in a megaplex — costs the same whether ten people are in attendance or there are 200.

So why would Exhibition keep spending that money when Distribution is pushing consumers to stay at home, since net return is better with VOD?

Some will say, “if movie theaters can’t compete, that is just people expressing what they want.” Okay. But even putting aside COVID, there is a very good reason why Distributors still want the theatrical revenue… because people pay more to go to the movies than they do to watch things at home. A lot more with a success. Enough that the 45% going to Exhibition is still more valuable than VOD with a roughly 80% return.

The delusion of giving the buyer what they want at the price they want it is madness. Maximizing revenues is the norm in every business, including the movie business. When you go to a restaurant, they make money on your drink, your appetizer, your dessert, you sides… and not so much on the entree. People buy new cars that lose value the second they leave the lot. Americans buy a ton of branded merchandise that doubles or triples the cost of the item. “What the customer wants” is a false notion. It is “what the market will bear.” $42.5 billion in theatrical last year. The number-one revenue stream for movies.

So the truth, in my eyes, is that Distribution, frustrated as it is, do not want this option. They would like more breathing room. They want to keep experimenting on Exhibition’s dime. But they don’t want to kill the goose that lays golden eggs.

OPTION THREE: We carry on as we have for the last few months.

I don’t see how this works for anyone. Magic could happen. Somehow, one, or a combination of all the revenue streams, could explode into sufficient success to make this work for either Distribution or Exhibition or both.

But right now, we are setting ourselves up for another Tenet situation in November. I don’t know who thinks this will be a win… except if magic happens.

There is a rock. There is a hard place.

Everyone started scrambling back in March, when COVID reared up and spat in the industry’s collective face before we could put on a mask. (Even beyond business, I lost four friends in that first two months but haven’t had someone I know die since June.)

I think Distributors did their best. They experimented. They analyzed. They did math. And they kept their ambitions going. Likewise, Exhibition did what it had to do.

I wouldn’t say that all of these were big experiments. But they have all arrived into the culture in a way that was unexpected at the start of the year 2020. And they should be recognized as participants in this history (in order of release).

Trolls World Tour
The King of Staten Island
The Lovebirds
The High Note
Artemis Fowl
My Spy
Hamilton
Greyhound
Palm Springs
The One and Only Ivan
Bill & Ted Face the Music
The New Mutants
Tenet
Mulan

Whatever answers the powers that be arrive at, it will be painful. There is no ready answer, in great part because Exhibition and Distribution have separate interests as well as profoundly intertwined interests. It is an easier road for Distribution… but overplaying that position wouldn’t be fully honest. All sides have a lot on the line.

I wish you all — all of us — wisdom and patience and perspective and luck.