What’s Happening with the Film Industry?#1: Exhibitors
With empty cinemas, is streaming our future?
Entertainment is probably the thing that has saved many of us from boredom during lockdown: movies, tv shows, online content, but yet the entertainment sector has been one of the mostly hit by the coronavirus crisis. All cinemas are closed, productions are shut down and all those movies ready for distribution are now either on hold (titles like Mulan or Tenet) or they have been moved to VOD platforms. This first chapter concerning the film industry will focus on the side that has been closer to audiences for more than a century: movie theatres.
Many say that the lockdown could determine the final decline of movie theatres and the long-desired domination of streaming.
And let’s be honest, exhibitors are the weakest link in the film chain: they have no control over what content is produced, they have limited space in terms of screens and seats and most of their revenues comes from ticket sales and food & beverage, therefore when things get bad, as it is happening now all over the world, they have their hands tied. Today theatres are left on their own to figure out how to make their business sustainable if social distancing and restrictive measures are set to become the new norm, at least in the coming months if not years.
Some historical facts
Let’s quickly take a look back at the early age of cinema, the time when there was no television, no home entertainment and no streaming.
Back in 1910s a monster-like company called the MPPC (Motion Picture Parents Company) controlled the whole film chain through patent rights and takeovers and soon after, between 1930 and 1949 the notoriously known as the Big Five (Universal, Columbia, Walt Disney, Warner Bros. and Paramount) managed to vertically integrate and accounted for 75% of exhibition revenues. This profitable oligopoly came to an end when the Majors were forced to let go of their cinemas.
Similar examples took place in Europe too, in the 1920s, but undoubtably the nearly 20 years of control over the money-making end of the chain, have contributed to the growth and affirmation of American cinema throughout the world.
The film exhibition world today
Jumping to the world we know today, both during but also before the coronavirus, we see things have changed…but maybe, in the end, not so much. Although there are, of course, a few exception of vertical integration even today, like Curzon in the UK an independent film production, distribution and exhibition company, they cannot be compared to the scale of the 1930s Big Five.
As a matter of fact, the majority of movie theatres today are independent from the major studios, making them free to play, keep or dismiss any title according to their own evaluation, be it of box office or quality or affinity to a specific cluster or target audience. This freedom is paid at a cost that today more than ever appears clear: movie theatres are solely dependent on external players.
They have, in other words, no control over the core of their business. On the other side, distributors are able to compensate for this loss by relying on video-on-demand, home entertainment and subscription services and many of these are, in fact, vertically integrated. Disney is producing, distributing and now releasing movies on Disney Plus, the same applies to the long-talked-about enemy of theatres, Netflix as well as Amazon and Apple TV, etc. So while other players are able to keep moving and experimenting with their business models, movie theatres are somehow left behind.
Somehow, we could acknowledge that the vertical integration that frightened the film market and that lead to the anti-trust ruling of 1949 has come back today in another form and it is damaging the most that part of the film value chain that was once the most profitable.
Some can argue that the flexibility in the business model is a luxury that only big studios have and that many independent distributors are enormously struggling during these though times.
The independent sector, though, has been very innovative in responding to the crisis, first of all, by understanding the importance of joining forces with the theatres.
So even though independent distributors have started to build their own VOD platforms, they have done it in such a way to support independent and local cinemas that would otherwise perish. A great example in this sense have been Kino Lober in the US, but we see more and more initiatives following their examples in many countries around the world.
What’s next?
As a cinemagoer it is really hard for me to imagine a world without movie theatres, but it goes without saying that the priority is to make them a safe place for their guests. This is, in fact, the real challenge cinemas are facing with more and more cinemas in Europe eyeing for a reopening in the upcoming weeks while audiences all over the world are getting excited about drive-ins and open-air cinemas. These are great ways to keep the interest for the big screen alive, though they are only temporary and therefore should not be seen as a sustainable new way of doing film exhibition.
Moreover, even though many films have had early releases on home entertainment, big and expensive blockbusters cannot survive without theatres because the costs couldn’t otherwise be covered with only VOD, SVOD and ancillary window rights.
This is proven by the fact that titles like Mulan and Bond 25 have been moved to later release dates in the hope that audiences will be able to experience them on the big screen. For now, we just have to wait and see which strategies will be put forward but undoubtedly all players in the film industry are interconnected and therefore when challenging times like these arise it should be logical to come together and support each other by acknowledging that the fall of movie theatres would undermine the wealth of the whole industry.
