THB #583: The Future of Filmed Entertainment: Episode Three - Movies

(Episode One - Episode Two)

Ah, Movies.

And by “Movies,” I mean theatrical Movies. Movies that are marketed to bring audiences to theaters, go to theaters with the idea of maximizing that window of revenue, and then capitalize on post-theatrical revenue possibilities for days, week, years, decades, and perhaps centuries to come.

I have written endlessly about the flawed thinking that dragged movies into the Streaming realm and won’t repeat myself here today. But theatrical Movies and non-theatrical movies are two very different models and this is not a whim or a feeling… this is a fact. Can a company that is spending north of $10 billion a year on content for a streamer afford to spend $200 million-plus on a “movie” that has no intention of generating a dollar in cash return? Absolutely. But these are loss leaders for a subscription sales effort, not the release of a theatrical movie. There is nothing wrong with making those “movies,” but they are not theatrical Movies and should not be considered in the same way.

Judging quality is a completely different muscle, even if film critics - most of whom are not really in the mindset of being film critics these days - want to present their opinions about the business choices around movies as part of their reviews. I am honestly thankful to Netflix, to use an obvious example, for many of the “movies” they have funded that no one else would have… not at those budgets and not with the freedom allowed so many of their filmmakers. And in many of those cases, I am thrilled that I was amongst those who got the rate opportunity to see those films on a big movie screen, as the experience was better than it would have been on my big TV.

But I am writing today about the future, not the past. The line will forever been blurred by the last decade during which we have all been pulled in multiple directions and even The Academy of Motion Pictures Arts & Sciences has abandoned the priority of Movies being Movies, seen on a big Movie screen, as the primary delivery system and the one that they would prioritize. I would love to know what the percentage of voting Academy members now see their Movies for voting on the for-profit Academy streaming platform instead of (for free) in a movie theater… but they won’t do that because it would be embarrassing, no doubt.

The experience of going to the Movies is as different from watching a movie on your TV as listening to a musician or the cast album of a Broadway show on your phone as going to a concert or going to a theater to see a live show. And that will never change. It’s not a measurement of quality. It is a way of experiencing something.

Since the rise of cable and then VHS and DVD, the majority of people seeing ANY Movie have seen it on a television set of some kind, from the old 12” black and white sets to today’s 85” flat screens with Dolby quality built in. The most people who have seen any Movie in a theater is under 200 million. People accessing television sets are in the billions. For the smallest Movies, which have less than 100,000 theatrical viewers, there is no question that many more people are likely to see the work on a tv.

This is not an area of dispute. Nor is it new news.

That all said…

Unlike Streaming, the future of Movies is about choices.

Companies will choose what kind of content and how much of that content they will create to service their subscribers and make the most money. They won’t stop making stuff… that is the model and the delivery of the content is cheaper than the making. Congrats.

For Movies, it’s a fairly simple financial equation. It costs a lot to have a brick & mortar space that needs to be staffed with employees who will attend to audience members coming to see a Movie.

Some percentage of movie theaters can/could operate for some time on film libraries of the past and some specialty product. But the vast majotity of exhibitors and their screens in them can/could not.

As such, theater owners are reliant on distributors to not only supply the product - the Movies - but also to market those Movies at a level that will draw large numbers of people out of their homes - and all of those distractions - to pay more money than it costs to just watch all kinds of filmed entertainment at home on a tv.

That money is split and exhibitors supplement it with concession sales (primarily) to make their theaters narrowly profitable.

When asked about going to the Movies, many adults will complain about the experience of the theaters themselves. And indeed, theater owners have a responsibility for making that experience the best it can be. It matters. And people over 35 are less inclined to go to the Movies, not because of alternative entertainment, but because of the inconvenience of going.

But in reality, the content comes first.

A lot of sports stadia are beautiful feats of architecture and visual design… but people go to see the games, not the stadium. (The Colliseum in Rome is an exception… now. Back then, they were going for the Christians and lions.)

I have written in the past about the shrinking of high-marketing-value films being put in the theaters since COVID. And that conversation gets very blurry. But let’s try to create some landmarks that have developed with some time since COVID slowed.

Interestingly, before COVID, there were fewer films on 2000 screens or more. In 2018, there were 57 and in 2019, 53. In 2022 and 2023, that stat leapt to 71 and 96.

So we have more movies going wide. That must be good, right? Wrong.

Two things are happening. First, the window from theatrical release to VOD and then Subscription Streaming has been shrunk… further front-loading the box office numbers and also thinning out the box office potential after the first weekends.

If you have 15 screens to fill, that means you need more movies to fill those screens since the 4th and 5th weekend of a modest performer now is making so little money - with VOD already started and promo for Subscription Streaming started - that you are better taking a chance with a new release with less marketing support and potential than with a studio movie that is well on its way home. So you have more movies getting more screens that have less potential than the pre-COVID window system created.

Second, the number of high-ambition studio titles has shrunk precipitously. In 2022, there were just 23 summer films that landed on more than 2000 screens and only 6 of them had budgets over $100 million. Okay… recovering market. Elvis, Nope, and Bullet Train all grossed over $100 million domestic even with smaller budgets. None were cheap… but not $100m budgeted Movies. Other less expensive underdog hits included Where The Crawdads Sing, The Black Phone, and Everything Everywhere All At Once.

In the summer of 2023, we saw a leap to 39 summer titles landing over 2000 screens and 14 summer releases with budgets over $100 million. Looking pre-COVID, the number of $100 million budget films in the summer 2018 was 9. In 2019, it was 12. Those are the 2 highest grossing summers in history.

Quantity vs quality needs to be kept in check.

Last summer ended up being the #4 all-time summer gross. But again… there were 14 $100 million movies. That’s a lot. And a lot of them failed. Indiana Jones V, The Flash, Blue Beetle, and Haunted Mansion were the sure red ink films, with Mission 7, The Meg 2, Elemental, and Transformers: Rise of the Beasts all close to the bad side of the ledger, and Fast X tanking domestically, but probably making it up overseas.

This summer, there were 4 expensive summer Movies scheduled for this summer of 2024 that moved, blaming the strikes. Personally, I won’t count Mission 8 or Mustafa as Strike-moved Movies. Neither was likely to be ready, regardless. So that leaves Venom 3 and Captain America: New World Order. On the flip side, The Fall Guy and A Quiet Place: Day One both moved into Summer 2024 when they would have - most likely - been released earlier had there been no strikes. Clearly, the 2 Marvel movies that moved would have been bigger than the two that ended up landing in summer. Maybe $700 million more between them.

We still ended up with 11 $100 million movies released this summer.