‘Long Live Theatrical Cinema’: Despite Existential Threats to Theaters, They Will Survive
“Long live theatrical cinema!”
The valediction of director Denis Villeneuve’s scathing response to Warner Bros. Pictures’s decision to premier their entire 2021 film slate on streaming service HBO Max reads like a resistance slogan; one reminiscent of the “Vive le France” cries in the studio’s 1942 classic, Casablanca.
Villeneuve is one voice in a madrigal of directors, actors, and organizations expressing their shock and dismay over the studio’s momentous announcement that they will adopt a hybrid model in which films will be released to theaters and subsidiary streaming platform HBO Max on the same day.
The move is born from an ominous union of streaming service proliferation and fallout from the COVID-19 pandemic. The combination of those factors, along with the termination of antitrust laws for the film industry, creates a perfect storm converging around cinemas and presenting an existential threat to the beloved cultural institution of movie going. The institution was beginning to stagnate before being struck by a global pandemic. Like so many stories projected in movie theaters’ dark auditoriums, the protagonist overcomes seemingly insurmountable adversity and has changed because of it. Movie theaters won’t become a thing of the past but the landscape in which they reside will continue to change as it always has. The question is: what will movie going look like?
“Contagion”
The COVID-19 pandemic shut down movie theaters across the globe in early 2020. In March, the two largest movie theater chains in the U.S., AMC and Regal, closed all their locations in the country as localities imposed restrictions on the type of businesses that could remain open in order to limit the spread of the virus. Independent theaters did the same resulting in furloughs and layoffs across the industry.
Exhibitors large and small scrambled to offer virtual screenings, which allowed customers to purchase tickets and view films online. The films were a mix of new releases and old favorites. Some independent theaters supplemented their offerings with an interview or Q&A that gave loyal patrons an opportunity to watch a movie and support their local theater all at once.
The virtual screenings provided a trickle of revenue that amounted to a scant percentage of their typical box office haul. Film Forum, a non-profit repertory theater in Manhattan, said revenue from virtual screenings brought in only 1.5%-2% of their typical income. It didn’t help that each theater had its own platform, sometimes multiple, for which patrons had to create new accounts and familiarize themselves with each interface. Compounding the issue was the decision by movie studios to push many of their tent-pole releases to 2021. Even if customers wanted to purchase tickets, their options were both limited and lackluster.
As months went on, some states and cities allowed movie theaters to reopen, many at reduced capacity and mandated to adopt safety precautions. An apprehensive audience and lack of alluring titles left exhibitors with little recourse as government bailouts like the Paycheck Protection Program dried up and a congress at odds proved unable to provide more assistance.
Stock prices of major theater chains like AMC, Cineworld, Marcus Corp. and Cinemark saw declines as the corporations reported heavy losses. AMC lost $561 million in a quarter with their revenue down nearly 100%. The owner of CMX Cinemas filed for bankruptcy protection and closed its New York City location at the start of the state’s lockdown. Smaller theater operators resorted to private rentals and showing local sporting events with little to show in return.
AMC warned it could run out of cash in January of 2021 and complained its situation is made even more dire by Warner Bros. pushing their slate for the year to HBO Max.
“Don’t Cross the Streams”
Since 2015, the U.S. theatrical market has largely been flat while home and mobile entertainment increased by 40 percent, due to massive growth in the digital market, according to the Motion Picture Association of America.
AMC invested in enhancing the movie going experience by adding amenities customers may not have at home like La-Z-Boy style seating and Dolby Cinema, which is advertised as a premium audio/visual experience. The chain also expanded their concessions in an effort to attract younger audiences.
Netflix, Hulu and Amazon Prime laid the groundwork for more niche curators and corporations to spin up their own streaming platforms. We now have Peacock, Disney+, HBO Max, The Criterion Channel, Shudder and Apple TV+ all competing for the county’s monthly subscription dollar as well as their attention.
The streaming platforms are the latest way for media companies to recapture the money lost by cord cutters. For the corporations, their platform’s performance has a direct impact on the bottom line as well as stock prices.
The increase in platforms led to a push for more original content from each provider as studios pulled licensing deals to make the content they owned exclusive to their respective service. Much of this content is in direct competition with traditional studios for awards and accolades which informs audience interest.
The botched roll out of HBO Max is believed to be a factor in Warner Bros. decision to adopt a hybrid release plan for their 2021 film slate, which includes high profile productions like Matrix 4, Godzilla vs. Kong and In The Heights. Only 30% of HBO subscribers eligible to activate HBO Max for free have done so since its launch in May, indicating a failure in messaging. For comparison, Disney+ announced it had reached 86 million subscribers in a little over a year at its Investor Day presentation this month.
The Warner Bros. announcement resulted in stock price gains for its parent company, AT&T while those of exhibitors like AMC, Marcus and IMAX fell.
The announcement also resulted in backlash from those on the creative side of the studios. Denis Villeneuve’s large scale remake of Dune is one of the films that would be subject to a hybrid release. Villeneuve said the strategy muddies performance metrics, typically box office numbers, and all but kills any hope for future Dune films. Jason Momoa and Josh Brolin, two of the film’s stars have publicly sided with the director.
Director Christopher Nolan also came out against the decision. “Some of our industry’s biggest filmmakers and most important movie stars went to bed the night before thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service,” he said. Nolan’s film Tenet was one of the few blockbusters released exclusively in movie theaters amid the pandemic. Nolan has long been a champion of cinemas and traditional filmmaking processes such as practical effects and shooting on film rather than digital. His investment in large format 70mm film and IMAX filmmaking emphasizes his belief in the importance of the movie theater experience that provides the large screen required to best view the enormous spectacles of his work.
Moving in the opposite direction, and an enormous threat all to themselves, is Disney. Their acquisition of formative movie studio 20th Century Fox last year gave the House of Mouse an incredible amount of back catalog and intellectual property to add to their already massive presence. Disney’s previous box office titans included Star Wars, Marvel, Pixar and their animated classics. In 2019, Disney accounted for 33% of the box office market. The addition of Fox’s contributions brings the share to 38%.
One studio controlling that much box office revenue affords them tremendous power and influence over how the public sees movies. In another gut punch to theaters, Disney announced a company restructuring that would allow them to focus their colossal resources on producing content for streaming. The movie theater box office was no longer the most lucrative venue for their work.
In December, during the company’s Investor Day presentation, Disney revealed a seemingly never ending docket of projects, the vast majority of which were exclusive to its streaming platforms. Their stock jumped 13% to an all time high.
The ease, convenience and value of streaming puts the living room at odds with the local theater for America’s Friday night.
For an evening at the theater, a family of four would spend about $40 for tickets. Including concessions, that figure rises to over $50 for one night out. In large cities, the price of a movie ticket is about the same as a month of a streaming service subscription. The emergence of food delivery apps makes for a more enticing prospect than the standard pizza order- not that there’s anything wrong with the standard pizza order.
An Antitrust Mountain Crumbles
In 1948, the Supreme Court made a landmark antitrust decision. The Paramount Consent Decrees, as they were known, put an end to anti-competitive tactics by the major film studios and were used to end vertical integration in other industries.
Prior to the ruling, movie studios could own the entire film experience: stars’ and directors’ contracts, means of production, distribution and the theaters in which films were shown. It also put an end to “block booking,” where an independent theater would be forced to purchase a package of movies in order to show the one or two they really wanted, and “blind booking,” where an exhibitor had to purchase a movie without being able to judge its quality beforehand. The loss of revenue from concessions resulted in the elimination of 90 percent of the money spent by studios, according to “The Whole Equation: A History of Hollywood” by David Thomson. The decision is often referred to as the end of Hollywood’s classic studio system.
In 2020, those antitrust laws were officially terminated during an audit by the Department of Justice as they sought to remove antitrust laws considered no longer relevant.
The Independent Cinema Alliance, a trade organization that advocates for independent cinema owners and operators, attributed the survival of independent theaters to the Decrees. “To dissolve the Decrees at this moment in cinema history would declare open season on the most vulnerable players in the market and imperil access to the Big Screen for tens of thousands of Americans in small towns and rural areas,” said the alliance in a brief to the DOJ. The organization warned that without the protection of the laws, deep-pocketed streaming services like Amazon could snatch up theaters and abuse its power by favoring its own cinemas with its content or punish indie cinemas that did not agree to terms that favor itself.
Netflix has already purchased two theaters: the Paris Theater in New York City and the Egyptian Theater in Hollywood.
The Future of Cinemas
After the adoption of the Paramount Consent Decrees shattered the powerful studio system, another enormous blow would be dealt to the off-balance industry: television.
The proliferation of television sets in the 1950s brought motion picture entertainment into the homes of Americans. In 1957, 135 million people were seeing the equivalent of at least two films a day on television but less than a quarter of that saw one movie per week in theaters, according to Thomson’s book.
To combat the infestation of television, the film industry flexed its muscle in the theater. Studios produced films where arrows would fly towards you in “immersive” stereoscopic 3-D. Fox pioneered widening the frame with CinemaScope. Paramount offered higher resolution with VistaVision. Something audiences truly loved that their small screens couldn’t offer was color, produced with DeLuxe Color and the now famous Technicolor.
The threat of television isn’t all that different from streaming. The advancements in technology used to lure audiences into theaters in the mid-century resemble the Dolby Cinema, IMAX and 4DX (which turns the movie into an unpleasant ride) options available today. Those experiments will continue. Some will be successfully embraced (surround sound), others will be rejected (high frame rates) and still others will continue to be resurrected and shoved at us until we wearily capitulate (3-D).
Theaters are combining the ‘dinner and a movie’ experience as dine-in viewing is offered from large chains like AMC and CMX, as well as smaller operators like Alamo Drafthouse and Nighthawk Cinemas.
Alamo Drafthouse is an innovator in the exhibitor space who offers engaging, party-like screenings for certain movies. Along with its own film festival and film conservation non-profit, Alamo Drafthouse has its own merchandising outfit. In line with the prominence of ephemera like Funko POP dolls, the theater can offer its self-produced wares in the lobby of every theater as well as online. It offers tickets that include limited edition trinkets themed by the movie. A revenue stream that goes beyond popcorn and Pepsi.
If the COVID-19 pandemic adds theaters from large chains to its casualties, we may end up seeing the Regal E-Walk in Times Square become the Disney+ Theater, continuing the so-called ‘Disnification’ of the area once known as The Deuce. It may be the only place in town to see the latest large-scale Marvel or Star Wars feature.
Large cities will continue to have repertory cinemas that cater to the cinefile faithful that tend to populate them but the chains and independent theaters may find rural and suburban locations no longer viable. The movie going experience will continue in those towns but options and accessibility could suffer.
Movie theaters have faced existential threats before and they will continue to as long as they exist. It is the public’s love of going to the movies that will ensure and shape their existence. In over a century, there continues to be a desire to experience films in the shared company of strangers with whom it’s known they share one thing in common: they want to sit in a dark room and watch a movie on a big, bright screen.
