Even as some states across the US are allowing businesses to reopen, many movie theaters are still closed in response to the COVID-19 pandemic, but the market they occupy has been dramatically changing over the last few years. Due to current events and with much of the world practicing social distancing, this year could serve as a catalyst for the downfall of movie theaters in more ways than one.
Look no further than the comments from NBCUniversal CEO Jeff Shell and the dramatic response from AMC Theaters and the owners of Regal Cinemas. After releasing the latest Universal Pictures movie, Trolls World Tour, direct to video on demand (VOD), Shell addressed the film’s success on VOD versus how successful it would have been in a theater by saying “As soon as theaters reopen, we expect to release movies on both formats.”
As a result, AMC Theaters and Regal Cinemas, two of the largest theater chains in the country, have declared that they will no longer show any Universal Pictures movies in their theaters. While they have both laid out their positions on how private talks and an amicable solution with NBCUniversal could resolve the matter, there’s no question that this decision would be bad for everyone, from theater chains to studios to consumers.
As many pointed out, AMC and Regal may be cutting off their nose to spite their face. As Allie Gemmill points out on Collider,
“Cineworld [Regal] crossing the line in the sand to stand with AMC in refusing to show Universal Pictures only serves to hurt their own financial interests. Universal is home to numerous major, million- and billion-dollar franchises…There is so much at stake right now for these theater chains who are already feeling the financial impacts from the global coronavirus pandemic. To shun major upcoming franchise features which could help kickstart theaters once we can all return to said theaters is, uh, pretty bold.”
But how did we get here? Does this even matter? Who’s to blame? Before we start answering those questions, we have to dive into the nitty-gritty of the movie industry as it stands today.
How a movie gets from a studio, into theaters, and then onto home release formats
For those who may not fully understand what this all means, let’s dive into some standard industry background.
Studios and theaters have a symbiotic relationship that has dictated the movie distribution model for decades. Studios need movie theaters to show their films, and theater chains need those films to bring consumers into their theaters so the consumer can be sold popcorn, drinks, and those massive, overpriced popcorn tins that you swear you’ll reuse when you bring it home with you.
Let’s use a real-world example: Universal Pictures has developed a new Fast and Furious movie called F9 and they want to release that movie into theaters next year. Movie theater chains like AMC and Regal have specific arrangements in place with major movie studios that outline how long Universal should be keeping their movie in theaters. Usually, it means that Universal can show F9 in AMC and Regal theaters as long as they keep it there for 90 days before making it available on VOD or on home video. And as we’re learning now, God help the studio that dares to challenge that.
How did we get here?
This isn’t the first time that tensions between studios and theaters have flared up. Ever wonder why it was almost impossible to see Netflix’s Martin Scorsese film, The Irishman, in theaters? That’s because Netflix wanted to show The Irishman in major theater chains. They tried to make the movie as accessible as possible…but they only wanted the movie in theaters for 45 days instead of the traditional 90-day release window. It was a Netflix-produced movie, and Netflix wanted to have the film on Netflix as soon as they could. But major theater chains declined and thus refused to show the movie at all because they didn’t want anyone to get the idea that a streaming giant like Netflix could challenge the traditional release window and win. That sort of sums up the entire struggle the industry has been facing over the past few years.
Streaming services like Netflix, Amazon Prime, and Hulu haven’t just risen in popularity, they’ve been churning out new original films, and much of the movie industry takes that as a direct challenge. Before the coronavirus pandemic, would you have been more likely to pay up to $15 to go see a film in a theater, or would you rather have thrown on a Netflix movie or show? No matter what your answer is, there’s no doubt you at least had to think about it for a second. Consumers have more choices than ever, and they’re choosing not to go to the theater as much. Everyone in the movie industry has taken notice.
It’s why we find ourselves in our current situation, and why so many studios have made their recently released or upcoming movies available on VOD and streaming platforms. Studios need to show their films somehow, and with cinemas mostly shut down due to the COVID-19 pandemic, theaters couldn’t threaten to not show their films.
Does this even matter?
Yes! Theaters and studios both stand to lose a lot if this debacle isn’t resolved. At the end of the day, however, it’s consumers who will be hurt the most by this, whether they’re a casual fan who will only make it out to the movies to catch the latest blockbuster or a die-hard movie fan like myself who will always cling to the moviegoing experience.
Let me set a scene here: Imagine this doesn’t get fixed. Imagine that AMC and Regal actually follow through on their promises to not play Universal films. Now imagine a family of five that wants to see F9 when it comes out next year. They’ve seen the TV ads and they know their three adolescent kids want to see it, so they pick a Saturday afternoon, pack everyone up in their car, and drive 10-20 minutes down the road to their closest movie theater, which is probably an AMC. They walk in the door and up to the counter and the dad asks for five tickets to the next showing of “that Fast and Furious movie” – plus three kids packs and two small popcorns and drinks, because the family doesn’t go to the movies often and the kids absolutely love popcorn.
Then the poor high school sophomore behind the counter has to regretfully tell the dad that F9 is not playing at the theater. No one’s happy. The kids are disappointed, the dad is frustrated, and the sophomore behind the counter wants to be anywhere but there. Maybe the family could catch a showing at a different theater, but the second closest theater to them (a Regal) also isn’t playing it, and the closest independent theater is a half-hour drive into the city – and they just missed the next showtime. Maybe in this particular scenario, the family learns that F9 can be streamed in their own home, but they came out to the theater partly because of the experience.
Obviously, this is a hypothetical, but the concept remains the same no matter who the demographic is: If this scenario is allowed to play out, everyone, including the consumer, loses. In a future where only some studio films show at certain theaters, you can either drive to the closest theater that has the movie you’re looking for (which is already the case for many smaller-budget movies) or you can wait for it to come out on streaming. Either way, it means fewer people are going to the theater, which hurts theaters. It means studios won’t make as much profit on their films as they’d like, which hurts the studio. And it will end up changing the way they select projects to develop, which inevitably hurts consumers with a lack of choice. This matters a whole lot because the movie distribution model is currently extremely fragile, and tipping the scale in either direction could reshape the industry forever.
Who’s to blame?
With this particular situation, there’s plenty of blame to go around. As mentioned before, it’s hard not to see this as an audacious (and frankly a bit boneheaded) move by AMC and Regal. But the moviegoing experience was in decline before this whole debacle, and with studios and theater chains relying on the other’s continued success, movie theaters have done a poor job at drawing people into the cinemas. I never walk out of movies, but last year, my wife and I walked out of a theater because it was impossible to focus on the movie with people around us talking and playing on their phones – and I have no doubt that other people have similar stories. Not only have movie theaters done very little to make paying lots of money to sit down and watch a movie amongst a bunch of strangers more appealing, but they’ve also actively fought to keep studios from trying out different streams of revenue while doing so.
Of course, the studios are not faultless in the decline of the moviegoing experience either. The solution to this specific problem is for all parties to sit together and figure out a way forward while being very realistic regarding the current condition of the industry. That means AMC and Regal might have to be flexible about the traditional 90-day release window, which would be huge for them, and studios have to actively support the theaters’ efforts to bring people back into theaters and encourage them to do more.
You may notice that some of these solutions are pretty vague, but that’s because while the current conflict between the theater chains and the studio can be resolved, drawing people back to the theater in a market full of streaming content will be much harder to identify without the help of the consumer. That’s right. If theaters and studios are suffering because the consumer has more choice, then we as consumers will have to act if we want to save theaters. That means going to the movies not just to see the big-ticket films, but also to see smaller films as well.
This flash-in-the pan conflict could change the way we watch movies forever, but even if this gets resolved, nothing says that the moviegoing experience isn’t slowly going away anyway. Once the COVID-19 pandemic is over, studios, theater chains, and consumers must all do their part in order to keep the moviegoing experience alive, even if it’s just for a little while longer. But maybe my pessimism is misplaced. Maybe after this is all over, people will want to be around other people in a communal experience. I know I sure will.
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