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• Movie theaters / The future

The relationship between movie theaters and movie studios has long been a contentious one, and global pandemic lockdowns made things much worse. Now a new Disney Marvel movie might push things over the brink, and into full-scale war.

First, the obligatory back story: Once upon a time, people regarded Amazon as a cute little online bookstore. Today, it is the world's largest online marketplace, and the second largest private employer in the United States. Once upon a time, people regarded Netflix as a funky mail-order DVD sales and rental service. Today, Netflix has over 200 million subscribers and is the largest entertainment/media company by market capitalization.

Seeing how Amazon took over its world, everyone in Hollywood is watching in terror as Netflix takes over their world. So, the race is on. Everyone (Disney+, HBO Max, Amazon Prime, Paramount, Universal, Warner Bros., etc.) wants to establish their streaming service before they are annihilated by Netflix. The corollary to that terror is the sneaking suspicion that online subscriptions are the future of movies.

Which brings us to the brink. Last week Disney announced that its Black Widow movie, part of the enormously popular Marvel Avengers universe, will be released simultaneously in theaters and online on July 9. In particular, it will debut on Disney+ via its Premiere Access plan and it will cost subscribers an additional $30 to see the flick. As such, it will serve up a prime-time, heavyweight match-up between movie theaters and premium streaming.

Exactly what is Disney's thinking here? Clearly, it wants to maximize profit from its $200-million movie. And, it is probably wary that lingering Covid might diminish theater attendance either directly because of capacity limits in some markets, or indirectly because some people will still be gun-shy about going to a public theater. And, of course, it also sees the Netflix leviathan and knows it must ramp up Disney+ asap. So, the decision to hedge its release bet is obvious.

Understandably, theater owners are not pleased. Many saw Black Widow as their savior from a brutal year. Instead, it is an existential threat. Responding to the announcement, Adam Aron, CEO of AMC Entertainment, said, “We haven’t made any threats...” but... “it is widely known that AMC has threatened not to play movies if we could not find business terms that we found acceptable.” Of course, theaters are in a hard place. They need some juice to get people back in the seats, and a Marvel movie would provide that. But this non exclusivity thing is a real problem for them going forward.

What are theaters to do? They might try to wrangle with Disney for better terms. For example, instead of a 50/50 split of ticket sales between theaters and studios, they might push for more. But with a pandemic, and the rise of subscription services, do theaters really have any bargaining power anymore? And with premium movies, the numbers often work in reverse; for example, Disney demanded 65% of ticket sales for The Last Jedi. Besides, Disney wants to grow Disney+, and fully understands the math here. When a movie goes to Disney+, they don't have to split the money 50/50 or any other way – they keep it all.

Disney+ already has more than 100 million subscribers in the U.S. chipping in $8/month, and anticipates getting that number up to 260 million by 2024. And if they get an extra $30 or so whenever a big movie comes along, exactly how much longer will they even need movie theaters?

Will this kind of simultaneous release disappear along with Covid, or is it the future of movie releases? If simultaneous release becomes the norm, will movie theaters even be able to survive? Or will those vast mall-anchor multiplexes just downsize to mall atrium popcorn kiosks? Ask yourself – even before the pandemic, per month, how many movies did you see in theaters, and how many did you see on a subscription platform?

My best guess is that movie theater attendance will bounce back strongly as people gratefully escape from their quarantines. That will restore some leverage to theater owners. But as movie studios grow their own streaming platforms and enjoy that subscription income as well as big chunks of the box office, I see them increasing the pressure on theater owners to accept short exclusivity terms, and less of the box office.

For now, the score is Kraken: 1, Movie theaters: 0.