What Now? Entertainment in a Post-Pandemic World Pt. 2

In my last post, I wrote about the current circumstances the entertainment world finds itself in – from orchestras to pop acts, sports to movies – none have escaped the effects of COVID-19. Until there is an effective and readily available vaccine, any “opening up” has risks. We’ve already seen this in places that have tried to return to normal. Coming back too soon and/or without protocols being followed has led to a resurgence of the virus. Normal ain’t walking through that door until not only a vaccine has taken hold, but people’s confidence has returned. So now what? How will these industries adapt?

One industry that is truly reeling is the movie industry (see what I did there). With movie theaters around the world mostly shuttered – there are small pockets of hope in Asia and Europe – movie production companies have largely held off releasing their movies. We’ve seen tectonic shifts from Disney, Sony, Paramount, and Universal to name a few. Tent pole movies like Tenet, Black Widow, Wonder Woman 84, and Mulan have seen their release dates moved to the right more than once. In fact, Marvel Entertainment has shifted their entire Phase 4 lineup to the right as well as delaying the release of their shows on Disney+.

The symbiotic relationship between production companies and theaters has come under tremendous pressure as a result of COVID-19. Without the ability to safely allow audiences in theaters, production companies are generally balking on releasing their money-makers; and without these movies, theaters (who generally split profits 50-50 with production companies), are quickly losing their ability to remain in business. Unlike restaurants, which could at lease phase back into business with carry-out and outdoor seating, movie theaters really don’t have many options.

What we’ve seen is delaying tactics on the big movies and a combination of moves on smaller budget movies. Tom Hanks’ WWII film Greyhound, which had a production cost of approximately $50M and was originally set for a theatrical release by Sony Pictures, was purchased by Apple for about $70M to be released exclusively on their new streaming platform.

Trolls: World Tour was originally set to be released April 10. With theaters beginning to close all over the country and around the world, Universal decided to make the movie available for digital rental on the same day it opened in limited theater locations. It later made it available for digital purchase, and three months later for purchase on physical discs. While reports are sketchy on how much money they actually made, it’s success (albeit during an unprecedented time when people and their children were stuck inside) showed some potential. AMC Theaters, unable to reap the rewards of the movie’s success, vowed to stop showing Universal’s movies. If AMC is still around in a year, we’ll see if they still feel the same way…

So what’s the answer? For movie theaters, I honestly don’t know what they can do in the short-term. Theater chains have spent a serious amount of money over the last several years upgrading the viewers’ experience – from recliners to sound systems – all in the hopes of providing an experience that would warrant a higher price tag. Without the cash to reinvent themselves, a serious contraction is on the horizon, and perhaps a reinvestment in drive-ins…and HVAC systems.

Theater chains will need to spend capital on cleaning (much like the hospitality industry) and marketing their cleaning protocols. This will necessarily include fewer showings to accommodate the time it will take to properly sanitize each theater. I would think these companies would invest in designing a new kind of theater experience that would help isolate people from each other and more immerse them in the movie. We’re already halfway there with the recliner model. My wife and I generally only go to the theater to see big movies. I honestly don’t see us going unless there’s a readily available and effective vaccine. That’s the brutal truth.

What about the production of the movies themselves? It costs money to make a blockbuster, and it will only keep happening if companies can make a profit. Avengers: Endgame cost approximately $500M to produce and market. That’s a lot of money. It paid off, of course, as Marvel and Disney took in $2.8 billion at the box office. How many digital rentals and purchases would it take to make even $1B? Those big profits not only fund the next blockbuster, but they allow studios to take risks on smaller films. Are they in danger now too? I could certainly see in the mid-term only money-makers go to theaters and the rest go digital in an effort to maximize profits.

From a distribution perspective, I think production houses are going to have to re-think the world theatrical release model (when a movie is released around the world on a singular day) and go back to the way it used to be when movies were released in phases. I could see something like:

1. Theatrical release in countries that are “open” for business.

2. Depending on the situation, the movie is made available for digital rental one month later. If other countries have curbed the virus to the point that theaters are open, then the movie is released there. For tent pole movies particularly, there will be a market to see them in theaters so long as the viewer feels safe.

3. Two-three months after initial release, the movie is made available for digital purchase.

4. After four months (as opposed to the usual three), the movie is released on physical media.

5. After six months, it’s made available on streaming services such as Netflix and Amazon; for Disney properties, on their streaming service.

These companies will not be able to continue kicking the can down the road forever. They borrow money to make movies, take in profits, then fund the next project. Disney, without Mulan or Black Widow, and without much help from their parks because of the pandemic, will have to slow things down at some point until money starts flowing in. This phased approach in the short to mid-term could be a way to keep things afloat. Honestly, if they released Mulan for digital on-demand next week and six months from now re-release it in theaters, I think a lot of families would go (if they deem it safe).

Originally set for May, the release date is now November 6…

Now, I’ll be honest. If Marvel announced Black Widow was available for digital rental tomorrow, I’d spend $15-20 for my wife and I to watch it on our home theater. Would you? The problem is, I don’t think those rentals, digital purchases (for say $30), and Blu-Ray sales down the road would be enough to make the profit Disney looks for when it invests in movies like this. (The film cost about $200M to make and market.) For these major films, the revenue of each person buying a ticket (as opposed to one “ticket” per household in the digital scenario) and the very real phenomenon of repeat attendees for movies like this makes it difficult for me to imagine a world without movies theaters. There’s no doubt that Disney was (is?) expecting Black Widow to give them a $1B payday (an $800M profit margin).

I think theaters will be back. They just might look different. Eventually. I just wonder if the contraction will cause tent pole movies to hit theaters and the lower tier movies to go straight to video-on-demand. That is a very real possibility.

1 Comment

Filed under The Arts

One response to “What Now? Entertainment in a Post-Pandemic World Pt. 2

  1. Pingback: Are Movie Theaters “Dead Men Walking?” | To the Color

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