Does Hollywood Want the Theater Industry to Fail?

Share on facebook
Share on twitter
Share on print
Share on email

You know how the symbiotic relationship between movie studios and U.S. theater chains work, right? To boil it down to its simplest terms, the studios spend big tubs of cash to cast and create a great (or many times, blah) film. Then they pay for junkets, screenings, actor promo tours, ads, distribution copies of the film and every other little facet of the vast worldwide promotion and distribution process that leads up to a film’s release. After that, the theaters receive and show the pic and give about 60% of the ticket price back to the studio.

That may sound like everybody’s getting rich when you hear about a film raking in hundreds of millions of dollars. But experts say that in fact, after the many, many expenses on both sides, each industry operates on something like a 3-to-4-percent profit. And that’s when things are rolling merrily along like the well-oiled machine it’s all supposed to be.

Thanks to our current COVID situation, however, that machine is kind of broken and leaking precious popcorn oil all over the place.

Theater chains have tried to get things going again by assuring social distancing, cutting their theater capacity down to 40 or 50% and whittling their profit margins down to the quick. But even that hasn’t really been working. And a big part of their floundering woe is due to the fact that Hollywood is being skittish with its film releases. The much buzzed-about (but, in my opinion, rather bleh) film Tenet was sort of a test balloon to see if crowds of moviegoers would stream back in to see a big-ticket pic at the theater. But after clearing barely $20 million on Labor Day weekend, the Tenet test was declared a flop. (It’s done better overseas, where it’s earned $289 million—a tidy haul even before COVID. But here in North America, Tenet has only earned $52.5 million in eight weeks.)

After that, every other big-ticket film originally slotted for 2020 (Black Widow and the latest installments of the Wonder Woman, Batman and James Bond franchises, for example) has been either pushed back deep into the holidays or out to somewhere in 2021.

As a result, Regal Cinemas—the second-largest theater chain in the US with 536 theaters and 7,076 screens—officially shuttered its doors indefinitely earlier this month. That leaves AMC and Cinemark, numbers 1 and 3, to pick over very small slices of income from a pretty tiny pie. In fact, on Sept. 30, the National Association of Theatre Owners warned Congress that “69 percent of small and mid-sized theater companies will be forced to file for bankruptcy” if things continue as they are. A lot of those being small chains and mom and pop businesses.

But that raises the question: What if the big studios sorta like the idea of this old system dying away? What if they’re in favor of a major paradigm shift in their industry? I mean, the coronavirus isn’t the only culprit. Theater attendance has been on a steady decrease since 2002. And hey, major entertainment industry shifts have happened before. Remember the days when you used to hear all your favorite tunes played on the local radio station and then run over to the music store to buy an artist’s new album? That business arrangement has certainly been redefined.

While most studios have said that they still support the time-honored theatrical release model, they could be gearing up for a shift to something close to a fully streamed model. They’ve had some success with their efforts so far. Universal Pictures’ Trolls World Tour, for example, went directly to video on demand and made some $100 million in its first three weeks, eclipsing the take for the original Trolls pic’s entire domestic haul. And the studio didn’t have to share a big chunk of their income with theater owners, to boot. Films such as Scoob!, Capone, and Mulan have followed suit. The overall income of these films is harder to pin down because of VOD reporting inconsistences, but Scoob! was said to have jumped to the top of the VOD charts faster than Trolls World Tour.

But is that kind of shift to our movie-watching habits really possible? Well, just recently the Walt Disney Company announced that “in light of the tremendous success achieved to date in the Company’s direct-to-consumer business” it was undertaking a major reorganization of its film and television teams with the goal of bolstering production for its streaming services. And then Disney quickly announced that the much-anticipated Pixar family pic Soul would be skipping theaters and heading direct to streaming, too. Which was a major blow to hopeful theater chain operators.

Then there are the big streaming services such as Netflix (with its estimated 190 million subscribers) and Amazon Prime (with some 150 million) to consider. They’re more than happy to toss their hats in this ring and challenge the status quo as well. In fact, they’d love it if movie-watchers thought of them first when seeking some theatrical entertainment. The Financial Times reported that the major streaming services are shaking up things to an even greater degree in these COVID-cursed times.

Mid-budget movies, such as romantic comedies, could not be shown theatrically at all and instead be picked up by streamers to pad their libraries. Some studios have received offers from streamers of more than three times the prices that had been dangled before the pandemic for their films.

Now, all that doesn’t necessarily foretell the death of the movie theater, but it certainly seems to harken to big changes. And that, of course, will mean some potentially big changes for family audiences who love movies, too—and love going to movies. We’ll just have to wait and see how this plot plays out.

Bob Hoose

After spending more than two decades touring, directing, writing and producing for Christian theater and radio (most recently for Adventures in Odyssey, which he still contributes to), Bob joined the Plugged In staff to help us focus more heavily on video games. He is also one of our primary movie reviewers.

12 Responses

  1. – I would argue that yes, Hollywood does want theaters to fail. Not in a personal way, but in a business way. Studios save money when they don’t have to distribute their films to theaters, and families who rent the movie digitally can get their movie experience for $20 instead of $50 ($10 per ticket, which is being generous), so really, everyone wins when studios release their films digitally instead of in theaters!

    Aside from theaters though, the one group that will NOT win if this is the future of movie releases will be families with bad internet. For a lot of people (especially those who live in the countryside or away from the city), good internet is difficult to get, if not impossible. Those people still don’t have streaming services like Netflix or Disney+, so if theaters do take an all-digital future, then they’re going to miss out on the new releases.

    So if theaters do die out and studios release their films completely via streaming, they could potentially lose a large chunk of their audiences. At the same time though, maybe that audience isn’t a big enough amount for studios to worry about.

    Either way, it’s going to be interesting to see what happens in the next few years.

    1. – If you are wondering, those families can find their movies using a video player and DVDs. My family used them a lot when I was little and it brought a great experience for all of us!

      1. – My family did the same! Growing up in the countryside with no highspeed internet was a little tough, but we made due with what we had.

        I just wonder how those people will be able to watch the new films that get released to streaming when those films aren’t out on dvd for a few months, if not ever.

        1. – Hmm. I am optimistic that the studios would not neglect the audience that does not have internet for this particular problem. If they do not release those movies, we can always protest for them in some way.

  2. – I can see how they can save money for a movie by only doing VOD. I went to the Bill and Ted movie that came out last month at my local theater for $4, but it is on VOD for $30. I don’t enjoy movies the same at home. I could afford to go to very few movies as a teenager and when I was in my early 20s, so it still feels very special and exciting to go to a theater.
    I also don’t have internet at home related to cost and broken phone lines, so streaming is very inconvenient. Netflix lets you download temporarily to a laptop, so I’ve used it in the past, but I don’t feel right about buying it now while they’re pushing their Cuties movie.
    At least, eventually, all major family movies come to the public library. If the theaters close, I’d rather wait for the library to get it than pay $30 and have to watch it on public wifi while sitting in my car.

  3. – I’m still upset that certain movies have become streaming only with no chance of even renting them on DVD. Take last year’s remake of Lady and the tramp or dolphin reef or even Tom Hanks’s new war movie. Luckily I was still able to see some new movies this year like I still believe, call of the wild and scoob, but some movies I’ll never see because they’re streaming only, and sorry but except for playing music on youtube occasionally I don’t do streaming at all.

  4. – I’m not sure what Hollywood wants, but I know that I miss seeing flicks on the big screen. Is it a major pain in the butt for me to drive an hour (the closest theater; I’m rural) to see a movie? Yes. But there’s nothing quite like seeing a flick on an ENORMOUS screen with a bucket of popcorn and five friends beside you. I suspect, however, that the pandemic is going to mean more people will want new releases on streaming networks, and so it will shift that direction.

    One thing I hope it doesn’t mean is that films cease being available to purchase on BluRay or DVD. Stuff moves around to different streaming networks so much, I am unwilling to subscribe to all of them just on the off chance one afternoon I want to watch [insert new movie here].

    There’s absolutely no way Disney+ can recoup their money by going straight to streaming — both on Mulan (in which they sunk what, 300 million?) and Soul, which cost a lot to animate. But they also have no other choice, because there’s nothing new and binge-worthy on their network except The Mandalorian. I own most of the original Disney films that I love, so I got a couple of months of Disney+ and then canceled, because… there’s nothing on there I haven’t seen or don’t own. I’ll get a month of it in December to catch up on The Mandalorian Season 2, watch Mulan and Soul, and then cancel it again.

    So really, IMO, it’s still more cost-effective to roll the dice with a movie theater. But… maybe this will mean fewer bad movies get made, since there’s no longer a cash cow of profit that can bankroll / balance out the flops.

  5. – I was wondering the same thing…perhaps the studios want to put the theaters out of business…but, I hope there will be a way for the movie theater model to continue. I have worked from home for years, and I have enjoyed getting out 3 to 4 times a month to see a new release. It’s a mental break to get out, see other people, and enjoy a movie and some popcorn. For those whose jobs require them to be on the go, it may be a welcome opportunity to see new releases during their brief respites at home, but with my job and the COVID restrictions this year I’m not looking for more things to do at home.

  6. – I for one do NOT look forward the day when movies can no longer be seen on the proverbial “Big Screen.” Being able to watch a powerful movie that way, in the presence of a like-minded audience, is a wonderful communal experience.

  7. – I can’t believe Biden’s probably gonna end up being our president. I figured Americans were smarter than that. Don’t they realize Trump’s been our best president in a long time, at least since FDR and maybe even since Lincoln? Apparently Americans aren’t as smart as I thought they were.

    1. – Even if we do not like him, we still have to respect him because God has placed him in authority over our country. Also, please keep post on topic with the discussion.

Comments are closed.