Movie Theater Business Isn’t Going Back to Normal: Disney CEO

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by Wolf Richter, Wolf Street:

Are multiplex theaters even viable in the era of streaming and affordable big screen TVs, if studios crush the “theatrical window?”

Disney will release “Raya and the Last Dragon” this Friday in 2,000 theaters and simultaneously on its streaming service Disney+ for an additional $29.99 fee, on top of the monthly subscription fee. In September last year, Disney released “Mulan” directly on Disney+ for $29.99.  In December, it released its Pixar animated movie, “Soul,” on Disney+ instead of in theaters. The entire family or a group of friends can watch those flicks when they premier, for $30, on a big screen in their living rooms. Any efforts by a studio to pull this off before the Pandemic would have caused all movie theater chains to boycott the release.

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But the power relationship between movie studios and the movie theater chains has changed forever as a result of the Pandemic. Are theater chains really going to boycott a studio’s release because it’s released to theaters and in other channels, such as streaming, on the same day, rather than three months later, as specified by the traditional “theatrical window?”

Yes, they can try. Cinemark, the third largest theater chain in the US after AMC and Cineworld, is boycotting “Raya and the Last Dragon” this coming weekend, according to the Deadline today. So good luck negotiating with Disney.

The “theatrical window” – the time span between a movie’s release in theaters and its release on other channels – used to be six months. In 2010, Disney unilaterally reduced it to three months, and got away with it, and the other big studios soon followed. For consumers who wanted to watch new movies at home, the theatrical window always tested their patience.

But during the Pandemic, the theatrical window essentially went away, as movie theaters were closed, and consumers are clamoring to watch movies at home on their new big screens, now, and not in three months, and studios figured out how to leverage the exploding popularity of their own streaming services.

Meanwhile, movie theaters are barely hanging on and may be going the way of department stores, obviated by technology – broadband and affordable big TV screens – and no longer have any leverage to steer these developments.

Disney CEO Bob Chapek, speaking at the Morgan Stanley Technology, Media and Telecommunications Conference, reported by Variety on Monday, laid it out:

“I think the consumer is probably more impatient than they’ve ever been before,” he said. “Particularly since now they’ve had the luxury of an entire year of getting titles at home pretty much when they want them. So I’m not sure there’s going back, but we certainly don’t want to do anything like cut the legs off a theatrical exhibition run.”

The revenues from the theatrical runs still matter, once all theaters reopen and consumers feel comfortable going to theaters again. But consumers want a choice when the movie is released – watching the movie at home, or watching it in theaters. And the theatrical window, even if shortened, is just a pain for consumers. It was never designed to benefit consumers. It was designed to benefit movie theaters.

“Obviously, theaters aren’t going to be 100% back,” Chapek said. “But it’s nice to know that we’ve got the ability for people who do want to enjoy it in their home — because they don’t quite feel confident in going to a movie theater — that they’ve got that choice.”

“What this looks like in the future? Well, we’re going to gain a lot of experience and a lot of data points,” he said.

Disney+, which was launched in November 2019, already had nearly 95 million paying subscribers at the end of 2020. If each pays a fee of $70 a year, it amounts to about $6.6 billion in revenues for Disney, plus the extra fees for the special releases. And the service continues to draw large numbers of new subscribers. And it’s not just families:

“What we didn’t realize was the non-family appeal that a service like Disney+ would have. In fact, over 50% of our global marketplace don’t have kids, and that is the big difference,” he said.

If 50% of the subscribers don’t have kids, he said, “you really have the opportunity now to think much more broadly about the nature of your content.”

Consumers have been watching movies at home for years, by buying Blue-ray or DVD discs, or by downloading or streaming, and they have been watching more than ever, from more sources than ever, and they have cut back on going to theaters, and movie ticket sales peaked in 2002.

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