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The Race to Save Hollywood

What happens when the impossible hype of MoviePass meets the complete dominance of Disney?

M.G. Siegler
Mar 2, 2018 · 7 min read
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A few years ago, I outlined what I thought would come to pass in the future of cinema, specifically, around the movie-going experience. I predicted a continued increase of ticket prices as attendance falls. A continued reliance on sequels. A continued degradation of movie theaters. And the entry of Netflix, Amazon, etc, into the world to truly shake things up. All of this was fairly obvious. But looking back, it’s crazy just how fast this future became our reality.

If you were to hit pause right now on the movie business in 2018, things would look pretty great. To say Black Panther is crushing it at the box office is an understatement. It’s the rare film that has become a cultural moment. Disney, and Hollywood in general, is riding and will continue to ride that momentum into both the Oscars this weekend and the summer movie season.

But. As big and important as Black Panther may be, it’s also the continuation of a macro industry trend that could ultimately hurt Hollywood, which is: increasingly, Disney is Hollywood.

When You Wish Upon A Star…

For the past several years, basically one company has provided the fare to prevent a full-on collapse of the box office machine. Each and every year, thanks to Pixar, Marvel, Star Wars, and their own animated films (including the live-action off-shoots, like Beauty and the Beast), Disney dominates.

In 2016, Disney released four of the top five grossing movies at the U.S. box office, including the top three (and all of the movies that grossed over $400M). In 2017, Disney had three of the top five (and number six was Spider-Man: Homecoming, which for all intents and purposes was a Marvel movie as well), including the top two (and all of the movies that grossed over $500M — only Wonder Woman also eclipsed $400M for Warner Bros).¹

Assuming Disney is successful in its acquisition of Fox, Disney will control seven of the top ten films of all time in terms of U.S. box office receipts (not adjusted for inflation). And, even more insanely, ten of the top thirteen.

Again, increasingly, Disney is Hollywood. And this is actually a good thing, at least in the short term. Because it’s the only thing keeping the box office afloat. In the long term though…

A True Marvel

Nothing lasts forever. And neither will this incredible run of hits. But Disney/Marvel was ingenious in the planning and creation of cinematic universes with a scope that, if successful, would ensure decades of hits.

It’s the cinematic equivalent of compounding returns. You see the latest Marvel movie because you’ve seen all the other ones. And you have to have seen all the other ones to see this one. Even if and when one ends up being mediocre, you’re not not going to see it. You basically have to, unless you plan to step off the ride. Which you’re not going to do. Until the ride breaks down. Which, again, it eventually will.

But just to drive it home: that’s after decades of hits. And while the Avengers story lines may or may not burst at the seams sooner rather than later, Star Wars is just gearing up to reload the cannon. Creating a new… canon which will undoubtedly be tied together with all the rest at some point in the future.

That all sounds promising, right? Decades of fodder to feed the theaters and the Hollywood machine. While movie attendance will continue to decline overall, it will be a very slow decline thanks to Disney ensuring some level of butts in seats.

In walks MoviePass.

Cue the Vader Theme…

The pitch is compelling: young people don’t buy movie tickets (aside from maybe for a few of the Disney movies mentioned above), so let’s give them something they know: a Netflix-like all-you-can-eat option. And the early returns seem to be promising: millions of people have signed up, and MoviePass is paying the theaters for tickets.

Yes, but. They’re paying a price that is too good to be true. Before MoviePass cut the price to $9.99/month,² basically no one was signing up. Now that it costs less than the price of a single ticket in many markets, people are signing up. Rocket science, this is not. Unfortunately, it’s not any kind of science. It’s also not any kind of math. At least not any kind that makes sense.

MoviePass says they’re going to make up the difference with data. Basically, they’re trying to get to such a scale that they’ll be able to see trends in moviegoing that they can then market against (and sell some of that data back to Hollywood). They also think they’ll be in a position of power to command a cut at the concession stands. In the end, they’ll get the girl...

[Narrator]: They would not get the girl.

Instead, MoviePass is going to end up hoping that their Netflix-style model turns into a gym-style model. Because MoviePass requires you to actually get off the couch to go to a physical location to do something, they’ll have to hope that people keep paying, but far more often than not, don’t actually get off the couch. In other words, they hope it becomes more of an aspirational thing. You’ll keep your MoviePass because one day you may want to go see a movie. But hopefully won’t.

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That may be more likely than the first scenario! But it’s a funny business mixed with a little bit of funny business.

And the faster that becomes MoviePass’ business, the better for Hollywood. Because if MoviePass keeps growing as it is, they’re basically signing up customers who will never pay full price for a movie ticket again. Why would they? Paying $10 — $15 per movie will sound insane when they used to pay $10 a month for unlimited movies.³

Also, have you seen most movie theaters these days?

And so when — yes, when — the rug gets pulled and either MoviePass jacks up prices or doesn’t jack up prices and goes out of business as a result, movie theaters — and by association, Hollywood — is screwed.

Whereas before Disney may have been the studio making more money at the box office than everyone else, they may end up as the only studio making any money at the box office. And that, in turn, will cause trickle-down effects throughout the industry. All the way down to movie theaters, many of which will have to close as a result.

Looking forward from this point, I think the big movie theater chains are in trouble. They’ve known this for a while, which is why there has been so much consolidation. But whereas before, it seemed like it would be a long, drawn out death, I now believe we’re nearing this finale sooner than many thought.

If and when the studios start cutting the theatrical window in order to launch $30-$50 movies in the home, it will only hasten all of the above.⁴

The Plot Twist

And so we have it, the showdown. The unstoppable force, MoviePass, versus the immovable object, Disney. Except that’s really not the battle at all. It’s more that both are unstoppable forces right now and they’re in a race. And they think they’re both racing to save Hollywood, but they’re not. In fact, the longer they keep running, the more long-term harm both will ultimately do.

What’s increasingly obvious is that the Hollywood apparatus as we know it is in trouble. I know, I know. People have been saying this for decades. Television would kill the movies. VHS would kill the movies. VCRs would kill the movies. But it’s not that movies are going to die, it’s that the way they’re presented is going to change. A theatrical showing will become more and more rare, and instead we’ll be seeing movies debut in different ways. Be it on Netflix, or Amazon, or via Apple, or Google, or in Disney’s own apps.

Perhaps things are even inverted in such a way that new IP debuts on a streaming service and if it proves popular enough, it then “graduates” to theaters. Or maybe, in a twist, sequels start going direct-to-theaters.

On some level, this should all be exciting. And it will be for consumers. But for much of Hollywood it will not be, because they’ll fear change. But to anyone who has worked in Hollywood in some capacity over the past 50 years (I did for a few years there), it’s beyond obvious that things have to change.

I worry about the movie theaters. But I truly believe the best of them can thrive in this new environment. It will no longer be enough to simply blindly show the slate of new releases each week and hope that the weekend box office makes ends meet. That era is ending. Creativity will be required. Then again, that was always the heart of Hollywood.

¹ In case it’s not clear, the focus on this post is the U.S. market and Hollywood. The worldwide market is quite different, and still coming into focus!

² It’s currently actually $7.95/month!

³ Well, technically limited to one per day.

⁴ The one studio that seems opposed to shortening the theatrical window? Disney. Can’t imagine why…

Written by

General Partner @ GV (née Google Ventures). In past lives I wrote at TechCrunch, VentureBeat, and ParisLemon. A man of few words. Except when writing. 🍻

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