THB HEADLINES: CEO of #4 Theater Domestic Chain Speaks Out
THB HEADLINES: CEO of #4 Theater Domestic Chain Speaks Out
(Editor’s Note: This started as an exchange between Greg Marcus (@greglovesmovies), Julia Alexander (@loudmouthjulia), Entertainment Strategy Guy (@EntStrategyGuy), and myself. I decided it was worth putting together as an editorial from the guy who is CEO of Marcus Corp, which owns the Marcus Theaters chain, the domestic market’s #4 chain, with more than 1000 screens operating in America.)
by Greg Marcus
I think @DavidPoland used the right word, “ecosystem.” There is the broad ecosystem of all the sales channels (theatrical, PVOD, VOD, streaming, etc). Viewed as an ecosystem, not a zero-sum game, there are many ways to benefit a piece of IP that goes beyond the box office itself, but it starts with simply adding revenue/box office to the overall income stream a movie generates across the sales channels.
However, there are more value creation opportunities. For example, the ability for theatrical to create awareness and distinguish filmed product can add value to that product as it moves through the ecosystem in a way a tile on a streaming page simply can’t.
Theatrical can also add value to the streaming service in other ways. The last thing a theatre goer will see before a movie starts is the producer’s title card, essentially a huge ad for the streaming service itself. This ad is being presented to an audience of known media consumers (studies show huge overlap between movie goers and streamers). It is an ad placed in front of a captive audience in their seats at the perfect time.
As proof of this value, one of the more significant advertising groups in the preshow are streamers. If the streaming service title card had no value, why would these companies be buying theatre ads? Thanks to loyalty clubs, theatre owners know many of the people who saw a show. Exhibitors can reach out to those who have seen the movie the day it moves to PVOD, VOD, streaming, etc.
Even if you don’t believe in these benefits and you only count actual dollars the @EntStrategyGuy data that says there is no detriment to the streaming run from theatrical then to simply maximize the revenue of the IP it often makes sense to go theatrical.
Something I don’t see being discussed is the significantly lower cost of a theatrical run since the “p” in p&a is virtually gone thanks to digital. So now all a content owner needs to recoup to simply be in no worse position is the marketing spend, and again that is absolute worst case given there are likely some benefits to the overall ecosystem.
I am always frustrated when I read about a movie not making its money back (I assume negative cost) in the theatrical run only. That makes no sense. With a windowed product you need to look at the total revenue (and cost) pie over the life of the IP not just one slice. Judging success on theatrical alone is not informed at best or disingenuous at worst.
Windows have often been described as “selling the same thing to the same person over and over.” It is a humorous description that even sounds a little subversive, but do you know why they can sell the same thing to the same person over and over? Because they want to buy it! I gladly watched Terminator the other night again and subjected myself to the advertising. Certainly not the first time I bought it. Why? Because it is great!
It is also essential to remember the theatre business itself is an ecosystem inside the overall ecosystem (see Donald Sutherland in Animal House ;-)).
As @DavidPoland points out, theatrical cannot exist on tentpole films alone. It needs a broad spectrum of film to operate profitably. If the IP owners want the benefits of theatrical described herein they need to make sure that it drives enough of a return on the investment in the theatre and enough to maintain those theatres over time so that they continue to provide a quality experience.
In other words, theatres need three meals a day not just dinner. The good news is where this started, humans want to go out and be together. Something not replicated on the couch. Of course, the tentpoles look great on the screen, but comedies are funnier with a crowd, and a good cry is better with friends.
END
Here’s the thing. They don’t have a 30 day window. They have aspired to a real theatrical for years now and haven’t been able to get Ted on board to spend on marketing… the only reason it hasn’t happened. Not insane. Marketing is very expensive and isn’t their core mission. It has nothing to do with paying out more on theatrical.
They have been at 600 before, so they aren’t adding theaters… they got AMC to 4-wall some screens for them.
And no, there are no magical secret numbers that make this make any more sense. This is Netflix’s thing. Irrelevant to everyone else’s choice. And changing dramatically in the next year.
There is a reason why Netflix is trying new things now. Subs are flat. Stick pride is down 70%. Ads will be an interesting new journey. And they really only have one film that could have been a sure-fire theatrical hit. Glass Onion. They didn’t hit the gas. And that is their prerogative.
I don’t listen to internet buzz. It’s hysterical and usually misguided. Happy you reported on this is August, but it wasn’t news to Netflix. They are proud of their long theatrical window for Bardo and White Noise and have been trying to do more for others.
Glass Onion is not a successful attempt at theatrical. It’s the best they were allowed.
You may think it’s a win. Your right. But there is no nuts and bolts argument that makes it so. They have had a remarkable year of content popularity. And subs are flat. Subs, until ads settle in, are all that matters.
Best….
I've had this discussion a number of times (with some of the people above) and I have two thoughts. A theatrical release makes a lot of sense if you have a movie a bunch of people are going to want to see in the movie theater. Even pre-pandemic, that list is increasingly shorter. Big IP, genres like horror. Sure, I can see the argument for a theatrical release.
But the thing that gets lost in this discussion is that there is a customer acquisition cost for new subscribers, and it's increasing substantially in mature markets like the U.S. If a streamer could make $20 million on a modest theatrical release after marketing costs and profit points, but keeping it a streaming exclusive provides that much (or more) marketing/sub acquisition/reduced churn, then not releasing it to theaters makes sense. And the economics of doing a theatrical release is much different a streaming-only release. A theatrical box office has to be shared with various participants, and to be honest, I don't think there is a way for us to judge any of this from the outside.
The core argument for a theatrical release - especially from the people who believe most movies should be released first in a theater - is that streaming executives are too dense or too set in their ways to pursue a big revenue stream. My experience has been that streaming executives are willing to do all sorts of unpopular things if it brings in more revenue. So maybe they know something we don't?