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The Last Picture Show: Theaters, Streaming, and the Future of Moviegoing

Aired on December 13, 2020 (Episode #830)

Moviegoing as we have known it is dead. Probably.

The past months of quarantines and lockdowns have had a remarkable and detrimental impact on all sorts of industries, cinema among them. The pandemic came at a time when the business of theatrical distribution and exhibition were already shifting and the economic impact of the health crisis has accelerated those changes, forcing filmmakers, studios, and theaters to make difficult decisions in an effort to make the best of an uncertain situation. And in recent weeks several stories emerged that indicate we are in the midst of major paradigm shifts in the American movie business that will transform the way consumers access films.

By far the most significant event has been Warner Bros. announcement that all of their 2021 releases will debut simultaneously in theaters and on the HBO Max streaming service. Warner Bros.’ decision was apparently controversial behind the scenes—an article in The Hollywood Reporter indicates that filmmakers, stars, and production houses were left out of this decision and are in revolt—but regardless of the fallout at Warner Bros., it is clear that streaming is the future of movies.

Warner Bros.’ HBO Max decision didn’t happen in isolation. For years Hollywood studios have inched toward what’s known in the industry as day-and-date releasing—meaning that a film  debuts simultaneously in theaters and on streaming or video-on-demand outlets. The only thing that’s kept studios from running into the day-and-date paradigm has been the theater owners. Many of the biggest chains refuse to play movies that are available on streaming platforms or are released on disc simultaneous with their theatrical debut. Cinema owners have used that leverage to negotiate an exclusive theatrical window. Before the pandemic this window was about ninety days, which made sense since most theatrical releases earn the majority of their money in the first four weeks and are typically out of theaters after about eight weeks. In the early months of the pandemic, Universal renegotiated this window to seventeen days. Throughout the summer and fall of 2020, studios either delayed their movies or opened them theatrically and fast-tracked streaming and disc releases. Then, as the pandemic continued and theatrical attendance was either anemic or impossible due to lockdown orders, Disney bypassed theaters entirely, putting their remake of Mulan on the Disney+ streaming service where users could access it for an additional charge on top of the regular subscription fee. Warner Bros.’ 2021 plan does not include a surcharge for its films but it does limit the HBO Max debut to thirty days before the title appears on pay streaming outlets like Amazon and iTunes. 

The Warner Bros./HBO Max announcement hasn’t gone over well with theaters and AMC—the largest theater chain in the world—has threatened to use its clout to protect their business. But therein lies the problem. The theaters just don’t have any leverage. While the pandemic continues, there is no reason for studios to worry about alienating theaters. Exhibitors could threaten to boycott these movies or even forsake the output of an entire studio but with theaters closed and consumers rightfully scared of going to the cinema such a boycott would mean nothing. That’s the stick portion of this business. The carrot in the distributor-exhibitor relationship is the money to be made. At the moment, streaming will not generate the revenue equivalent to ticket sales of Hollywood’s biggest box office draws. But theaters are vulnerable here as well.

The reality is that theatrical attendance was already facing worrying trends before the pandemic. The big movies—event spectacles like The Avengers and The Fast and the Furious series—are major ticket sellers and earn literally billions of dollars worldwide. And low budget horror films like those produced by Blumhouse have also done well because their production costs are low and they draw a steady audience. What has suffered are the mid-level budget films, movies that cost between $30 and $80 million to produce and typically another $50 million to market. This is the realm of comedies and relationship dramas. Audiences have stopped going to see these films in theaters. There’s a variety of explanations for that—increasing ticket prices, consumer tastes, and competition from television are all reasonable hypotheses—but the result is that spectacle and franchise titles are essentially carrying the theatrical business.

This is not sustainable. Show houses, as they exist now, cannot survive on tentpoles alone. Multiplex theaters need to get a lot of people through the door in order to make ends meet and spectacle films alone will not reach those levels of ticket sales. If studios conclude that it isn’t in their interest to release films to theaters because they can generate equivalent revenue through streaming subscriptions and premium video-on-demand fees then that is the end of movie theaters as we’ve known them.

That doesn’t necessarily mean movie theaters will go the way of the VHS tape. They’ll probably continue to exist in some form. What might disappear is the fifteen-screen multiplex. Theaters of the near future may narrow down their operations to three-to-five auditoriums showing Hollywood’s newest event title and maybe the year’s Academy Awards contenders. Films outside of those categories probably won’t be economically viable in the future theatrical market. 

The space within movie theaters might also change. As it is, theaters are not really in the movie business but in the candy business. Cinemas make the bulk of their money on concession sales. If the future of theatrical moviegoing is to be tied to franchises and spectacle films then it’s fairly predictable that their offerings will lean into that. Anyone who has been to a Disney theme park knows that every attraction ends in the gift shop. That may be exactly what happens to theaters. Imagine exiting the newest Pixar feature or superhero adventure directly into racks of tie-in merchandise. This scenario may seem vulgar to those are indifferent or antagonistic to superhero movies but this outcome ought to taken seriously nonetheless. 

The disruption within the theatrical industry was prefigured by the decimation of the video store. From the 1980s through the early 2000s every community had a video store whether it was a movie section at a gas station, a mom-and-pop operation, or a national chain like Blockbuster Video. Today the video store is all but extinct. The last remaining national chain is Family Video but their business is now in crisis. Like theaters, Family Video was struggling before 2020 but the pandemic has accelerated the challenges to their business, prompting a wave of store closures and Family Video has initiated a #savethevideostore social media campaign.

The traditional video store does not have a future. It doesn’t have the qualities to compete in the marketplace. Unlike streaming, their supply is finite and disc releases lack the convenience and portability of a cloud based service. Video stores also suffer from overhead costs much greater than Redbox, the kiosk business that is the video store’s nearest competitor. And video stores lack the excitement and the communal experience of theaters.

But there is a possible future for the video store. It just won’t resemble the past. Some video stores continue to thrive in specific regions and by catering to a certain kind of customer. There are a lot of places in the United States where broadband access is bad or even nonexistent. A video store could do well in those places. It might also do well identifying a different kind of customer. At their height, Blockbuster and Family Video catered to a mainstream audience and their shelves reflected this; new release walls were packed with dozens of copies of the latest Hollywood hits and categories were stocked with familiar favorites. A video store of the future would be geared toward more discerning and adventurous moviegoers, offering a deeper selection. As much content as there may be on Netflix and Hulu there are a whole lot more movies that aren’t, especially titles made before 2000. This vision of the video store would most likely succeed in places that have a cinematic culture where film festivals and art house theaters are well attended.  

Just like the future of the theater, the future of the video store may also hinge upon merchandising. At this moment, not only is the future of the video store imperiled but the viability of physical media itself is in question. But video stores could reinvent themselves and intervene in the market by not only renting and selling discs but by becoming home theater headquarters. As accessible as streaming is, physical media is almost always superior in terms of picture and sound quality but a lot of consumers don’t know what they’re missing. A reimagined video store that not only sold and rented movies but also offered the hardware to enjoy them could educate the public and make them savvier consumers.

There is another possibility for the revised video store and that’s as a social space. Perhaps the video store could resemble a comic book or coffee shop where customers go not only to peruse the selection but also to hang out with people of similar interests. That would require a different kind of store layout, one that doesn’t fill the floor space with shelves illuminated by ugly florescent lighting. Admittedly, this is a more ambitious concept but it’s the kind of innovation that video stores will need to entertain if they are to survive.

Someday, hopefully soon, the pandemic will end. But we should not fool ourselves into thinking that life and work will go back to normal. For the movie industry, whether it be theaters or home entertainment, the paradigm was shifting well before COVID-19 and the marketplace will continue to be pliable after the last patient is cured. This kind of transformative event is anxiety provoking for those in the business but also for those of us accustomed to the way things were. But it is also exciting and provides opportunities to rethink the movie business in new and imaginative ways. Theaters and video stores can survive but only if the people who run them are willing and able to adapt. All of us who love the movies are counting on it.