In a world without theaters to release to, how will movie studios stay afloat?

The movie industry has taken a heavy hit thanks to our current pandemic. Covid-19 didn’t just upend filming schedules and shutter theaters – it’s upset the industry down to its core. Company execs are scrambling to “offset the $160 billion loss ” Ampere Analysis has estimated the entertainment industry will face in the coming five years – using tactics that were unthinkable pre-pandemic. 

While many studios are simply postponing their premieres until vaccination re-opens theaters, others are making strategic (albeit controversial) moves to try to get ahead of the game. Here are some of the industry trends we might be looking at in a Covid and even a post-Covid world.

Focus on Franchises

One of the most common trends in Hollywood is to focus on what they already know works – ie., producing sequels, remakes and reboots. As studios reslate their production lines in the face of the pandemic, priority is being placed on proven intellectual property.

Why? These types of films are relatively low risk, and they’re profitable. According to the Institute for Management Development (IMD), sequals are some of the most profitable movies in history.

“The numbers behind [sequels, remakes and reboots] films are mind-boggling,” explains Knut Haanaes is an IMD professor of strategy. “Iron Man 3 grossed $1.2 billion, Star Wars 7 grossed $2 billion and the Avengers grossed $1.4 billion. To date, 41 of the 50 highest grossing movies of all time is either a sequel, reboot or remake. Of the 29 films that have grossed over $1 billion, 23 of them are sequels, remakes or reboots. “

Traditional media companies have been pulling IPs out of the archives and rebooting left, right and center. NBCUniversal launched remakes of Saved by the Bell and Battlestar Galactica directly onto their newly named streaming service, Peacock; while the Marvel Cinematic Universe (MCU) expands undeterred, first during a nine-part TV series that will air on Disney+, then with at least four more movies and five more Marvel shows slated for 2021. 

“The goal is for Marvel to always have something new for MCU fans, enticing audiences to join Disney+’s 86 million global subscribers and keep them paying monthly,” explains Marvel Studios boss Kevin Feige to the Hollywood Reporter. 

Because fans already have a relationship with the characters, remakes are less risky to produce than a unique piece of media. Proven intellectual property comes with a built in audience, which, in today’s cutthroat media landscape, may offer an essential competitive edge. 

Ditch the Blockbuster

Not all movies are $100+ million endeavours. Many small-to-medium budget films have gone on to make impressive profits – as was the case with Paramount’s 2018 A Quiet Place, a PG-13 thriller that grossed over $340 million worldwide. 

Better yet,“A Quiet Place” cost only $17 million to produce. That made for incredible profit margins, especially when you compare it with Paramount’s Top Gun: Maverick feature, which cost over $150 million to make – and will need impressive ticket sales at the theaters to strike a profit. 

“The studios have delayed the vast majority of their major releases until movie theaters are back in business for a very simple reason. A theatrical release is their biggest source of revenue on these titles, and they cannot be profitable without such a release,” says John Fithian, president-CEO of the National Association of Theatre Owners in a Hollywood Reporter interview. 

Due to Covid-19 theater closures (and an uncertainty as to when they will open), lower-budget features are proving even more essential to a studio’s well being, and are poised to become central to the future of movie-making – especially as streaming services continue to grow. 

While A Quiet Place II‘s premiere was pushed back until April 2021 in an effort to maximize profit this enviable franchise, many smaller or mid-range titles were sold to cash-happy streamers.

Paramount’s Coming 2 America was sold to streaming for top dollar, along with Sony’s Happiest Season. Even Disney released two of its bigger-budget films – Mulan and Soul – straight on their Disney+ streaming service – trading box-office glory for increased subscriptions.

Relying on streaming services to release films is unprecedented, and it’s a drastically different business model for the entertainment industry. With subscription economics, “more movies get made, but the financial successes are smaller, make[ing] it harder for studios to justify spending $200 million-plus on a film,” explains the Hollywood Reporter. 

However, in the entertainment landscape of today, it might be an essential strategic switch. 

“There is a lot of denial going on among studio executives,” said Megan Colligan, president of Imax Entertainment in a Washington Post article. “People are rushing to make these big-budget movies but not giving much thought to the fact there won’t be any place to put them.”

Which might mean the end of the Blockbuster … and the beginning of a new era of filmmaking, led in part by an industry legend.

Release on Demand

“A $200 million movie capable of earning $1 billion at the global box office cannot achieve its full financial potential without a robust theatrical release, which triggers lucrative ancillary streams, merchandising and sequels,” explains the Hollywood Reporter. 

So what is a studio to do when they have a big-budget film sitting on ice thanks to a global pandemic? Use it to usher in a new era of entertainment business. 

After the laureled successes of Netflix and Amazon Prime, just about every media company in the country is pursuing its own streaming-service glory. However, not all streamers are created equal. 

While Disney+ made headlines by captivating 26 million users in its first three months, WarnerMedia’s fledgling streaming service, HBO Max, struggled to get off the ground. The company’s then new CEO, Jason Kilar was charged with solving the problem.

Kilar, who is well known as an industry interrupter, negotiated a myriad of deals that led to Warner Bro.’s studio releasing their biggest blockbuster of the year, Wonder Woman 1984, directly onto HBO Max. 

While the film itself “is likely to lose north of $100 million at the box office,” AT&T CEO John Stankey considered the release a grand success. 

“The release of Wonder Woman 1984 helped drive our domestic HBO Max and HBO subscribers to more than 41 million, a full two years faster than our initial forecast,” said Stankey.  

And perhaps, it also created a new measurable. In an industry that’s looking to reinvent itself sooner than imagined, how does 41 million activated users on a streamer compare financially to a $300 million global box office take? 

Warner Bros. (along with its parents Warner Media and AT&T) is looking to find out. On December 3rd, The studio announced it would release all of its 2021 films on HBO Max at the same time they premiered in theaters.

This sort of release could be a huge financial loss. “A MoffettNathanson report estimates $1.2 billion, though rival studio executives and financiers put that number far higher.” 

However, WarnerMedia is expecting the long-term earnings from streaming subscriptions to balance it out. They could even be hoping to see a huge jump in their stock prices, like the 14 percent surge in Disney stock price when the company released its 2021 streaming content plan back in December. 

Still, it was an extraordinary decision – and one which brought on rampant criticism.

Grooming a new generation

One of the more obvious downsides of social media and smartphone prevalence is our ever-shortening attention spans. This change is even more prevalent in the younger generations, who’ve grown up with technology at their fingertips. It’s become a new challenge for media outlets to figure out how to get kids to stay interested during a three hour sports game, in the hopes of turning them into future fans. 

“Millennials don’t watch TV, they don’t have TVs or subscribe to cable. So we have to bring that audience in,” explained Robert Kraft, principal owner of the New England Patriots in an interview with The Street. 

Yet according to a McKinsey Report, “Overall reach for sports on TV hasn’t declined; ratings have dropped because fans are watching fewer and shorter sessions.”

Tech platforms are at an advantage over traditional media on this one. According to the same report, “millennial sports fans report using streaming websites and apps (for example, NBCSports.com, Twitter, and WatchESPN) almost twice as much as [the previous generation].” 

Tech platforms also have more options to enhance the viewing experience – by layering interactive media over the broadcast, focusing the action on a single star player, or even streaming in virtual reality

Yet as the recent Saints v. Bears game showed, traditional media isn’t out of the running by any means. 

The wildcard round playoff game, which was played on January 10th, was aired simultaneously on CBS and on its for-kids sister channel, Nickelodeon, in an attempt to convert kids into football fans. To keep the game interesting, special effects were added, from hamburger hats and googly-eyes on the players, to digital slime cannons to celebrate touchdowns.

The game was a success. According to the New York Times, it was also a move made to impress league execs ahead of the new contract negotiations. “Viewership for the N.F.L. would increase, along with the opportunity to capture a new generation of football fans.” A potential key move for the future of the sport – and those who broadcast it. 

While grooming new fans is a long-term move, it could give more traditional media outlets a leg up against streaming services in the short term. Especially now that sports gambling has finally hit the scene.

The Backlash

According to the Hollywood Reporter, after the announcement “Mega theater circuits including AMC Theatres and Cinemark Theatres, issued terse statements saying it will force them to consider carrying Warners movies on a title-by-title basis.” 

Unnotified Agents, talent and guilds were also understandably peeved.

“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,” said filmmaker Christopher Nolan in a well circulated statement. 

Working for a streaming service rather than a studio may truly be the future of moviemaking – as long as studios, talent and streamers can strike a deal that’s favorable to everyone. 

 “The long-term future of theatrical movies depends exclusively on people’s desire to share stories together,” continued Nolan in a statement to The Hollywood Reporter. “The medium-term future depends on productive cooperation between exhibition and studios.”

Change is Yet to Come

Will there be big changes? Maybe not this time around. Sports Business Journal’s John Ourand thinks everything is going to stay just about the same.

“Everybody I’m talking to says … there aren’t really any big surprises. All the main players are going to stick around and keep what they have. The only new wrinkle is what happens with Thursday night. Fox doesn’t want it. NBC doesn’t want it. CBS doesn’t want it.”

So streaming may get a touchdown in after all. With Amazon already simulcasting Thursday Night football, it’s possible that Thursday nights might end up exclusively on the NFL Network and Amazon Prime. 

Yet when asked whether Ourand “would put money on CBS keeping the Sunday afternoon AFC package, Fox keeping the Sunday afternoon NFC package, NBC keeping the Sunday night package and ESPN keeping Monday Night Football.”

“Yeah, I would bet a lot of money on that,” said Ourand, “and I don’t bet.”