What he says about Hollywood

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Temporarily closed signs hang the doors of an AMC Entertainment Holdings Inc. movie theater in the Georgetown neighborhood of Washington, D.C.

Bloomberg

Tensions are high in the film industry.

Studios and exhibitors have faced difficult decisions in the aftermath of the coronavirus pandemic as the two seek to keep their businesses afloat long enough to resist movie theater closings and restrictions related to social distancing.

Theater owners understood when movies that had already hit theaters early on the home video market, or when theatrical releases that had already done most of their marketing, skipped theaters for a video launch. Requirement. However, the relationship between exhibitors and studios reached a boiling point on Tuesday, which prompted the world’s largest theater chain to announce that it would no longer play films from one of the world’s largest studios. ‘Hollywood.

This quarrel brought to the surface decades of concern over the vitality and longevity of the traditional theatrical experience and questioned whether movie theaters will really be able to return to normal after the ebb of this epidemic. He also created a schedule of crowded movie releases for studios looking to maximize profits. The result could be to rethink this long-standing relationship.

World War Trolls

After winning a press victory over the digital success of “Trolls World Tour”, NBCUniversal CEO Jeff Shell suggested on Tuesday that the studio could start making more simultaneous releases of its films in theaters and at the asks, even when the rooms reopen. .

Exhibitors already felt upset with Universal after the studio announced the simultaneous release of “Trolls World Tour”, even before the cinemas officially closed. Shell’s new comments have only exacerbated the fears and frustrations of theater owners.

The National Association of Theater Owners responded quickly, saying that the performance of the “Trolls World Tour” was indicative of hundreds of millions of isolated people looking for entertainment, not a change in preferences. consumers.

AMC went further by stating that it would no longer show Universal movie slate in more than 1,000 locations.

Still from “Trolls World Tour”.

Universal

“The position of AMC in this matter, which is never to show Universal Pictures again, is absolutely not only the correct answer for a theater chain, but it is really their only answer”, Tom Nunan, professor at the UCLA School of Theater, Film and Television, said. “This kind of comment from Jeff Shell could be a death knell for the theater chains. “

Since 2010, when Netflix moved from renting DVDs to launching a streaming service, the theatrical model has come under increasing threat. Consumers generally only venture into cinemas three to five times a year, and with more content available on more streaming platforms, there is concern that cinemas will continue to take a hit.

Of course, there are studies that suggest that people who go to movies in theaters more frequently are also the people who consume the most content via streaming.

What’s at stake

Theater owners are in a particularly vulnerable position during the coronavirus epidemic as their cinemas are closed and their income has become almost zero. The main players in the space were forced to lay off and lay off employees, suspend dividends, cut wages and use debt revolvers to keep bankruptcy at bay.

“We are dealing with a destroyed business,” said Jonathan Kuntz, who teaches film history at the UCLA School of Theater, Film and Television. “And AMC knows it, and their investors know it, and that’s why you see an imminent risk of death for this company. “

Theaters thrive by having the first exclusive window for a movie. This is what drives consumers out of their homes. If the studios were to start releasing films in theaters and on demand at the same time, it would not only withdraw the revenues from tickets from exhibitors, it would also mean that revenues from concessions would suffer.

Last year, the film industry earned $ 15 billion nationally, a combination of about $ 11 billion in ticket sales and $ 4 billion in concessions. Globally, ticket sales hit a new high of $ 42.5 billion.

“Theater Closed” signs are displayed in front of AMC Montebello, while the American chain of cinemas AMC closes for 6 to 12 weeks, March 17, 2020 in Montebello, California, while the epidemic of coronavirus (Covid -19) leads to restaurant and school closings and homeworkers to encourage social distancing.

Frédéric J. Brown | AFP | Getty Images

Some theaters have endorsed AMC’s statement, such as Cineworld CEO Mooky Greidinger, who agreed that if a studio did not respect traditional theatrical windows and decided to release a film on demand and in theaters the same day, Cineworld would not show this film.

Likewise, Sonny Gourley, senior vice president of cinema at Marcus Theaters, said his channel is not currently doing “day and date” simultaneous releases, but would still show exclusive theatrical releases.

Although the coronavirus still has locked movie theaters, more studios are expected to choose to place movies on demand or on their own streaming services.

… The majority of films, whether we like it or not, are consumed at home, and it is not realistic to assume that we are not going to change.

Jeff Shell

CEO, NBCUniversal

So far, only a handful of films have decided to give up the theatrical experience and go directly to the domestic market. Warner Bros. “Scoob” will arrive on demand in May, “Artemis Fowl” from Disney will go to Disney + and “The Lovebirds” from Paramount Picture has been recovered by Netflix. Certainly, none of these films is trying to open in theaters and streaming or on demand at the same time.

“We are going to come to a point where the public is going to demand a release on VOD,” said Eric Schiffer, CEO Patriarch Organization and Reputation Management Consulting. “There is such a craving for something that will hold you back and take you on a journey and help you escape the reality in which we are today. “

When theaters reopen

It’s no surprise that studios are looking for alternative exit strategies during this time. The lack of movie theaters has meant that the majority of movie titles are pushed back to later dates in the theater calendar.

Not to mention, there is growing concern that, even if consumers want to leave their homes, they are not ready to return to the movies. A Coresight survey found that 44% of those polled would seek to avoid cinemas even after the lifting of foreclosure orders and that cinemas are allowed to reopen.

“Universal has good reason to go ahead with many more VOD offerings,” said Schiffer. “For me, this is the future anyway. Right now, people prefer to chew glass than go to the theater. “

Theater owners are already planning what will happen when they can reopen to the public. Currently, most are considering offering seats with reduced capacity, allowing people to distance themselves or selling only all the other seats in each theater. Masks will likely be optional, unless otherwise indicated by local government, but will be encouraged. Employees will wear protective equipment and perform more frequent hygiene operations.

Gourley has said that ticket prices for Marcus will be lowered in the weeks when there are no new releases and that the cinema will show library films. Concessions will also be available for moviegoers.

He said Marcus was looking to have “epic-style movies” like “Indiana Jones” and “Harry Potter” movies to get people back to the movies before the first movie of Christopher Nolan’s “Tenet” premiered in July.

What does the future hold

While theater owners are confident that customers will return en masse, others are skeptical. Some predict that cinemas will only become a place for big budget blockbusters and franchise films, while low budget comedies, dramas and genre films will go on demand.

In this scenario, it is expected that there will be filmmakers looking to be Oscar candidates who will always be looking for theatrical releases as well as those who see the big screen as the place they want present their work. Think, Nolan, Wes Anderson and James Cameron, among others.

“I have spent much of the past decade in the film industry, and there is no doubt that the theater will one day again be the centerpiece of our film business,” said Universal’s Shell at a results conference call Thursday. “This is how people make their films and how they expect their films to be seen. “

“But the flip side is that the majority of films, whether we like it or not, are consumed at home, and it is not realistic to assume that we are not going to change,” he said. declared. “That this part of the business is not going to change like all parts of the business are going to change. “

An employee fills a bag of popcorn in the dealership area inside a Cineplex Cinemas.

Bloomberg

The increased tension between studios and cinemas could also lead to further negotiations on the distribution of ticket sales.

Universal has revealed that it is capable of retaining 80% of the Trolls World Tour rentals instead of the 50% agreement that the studios have with cinemas. So while “Trolls World Tour” brought in less money than its predecessor “Trolls”, Universal was actually able to pocket more money.

Of course, this is partly due to the fact that parents are stuck at home and looking for new content to keep their kids occupied. So, we don’t know if the film would have had the same success if the coronavirus hadn’t forced people to stay inside.

Yet the disparity between what studios should do as a percentage of video on demand is tempting. Of course, a movie like “Avengers: Endgame” wouldn’t be able to make the $ 2.8 billion in sales it earned in cinemas from an on-demand market, but films with small budget could certainly have lucrative tours using this strategy.

“Theaters must have a more attractive model,” said Nunan, noting that studios pay all of the costs of marketing and producing a film, but only carry 50% of ticket sales for a film.

Since 1948, studios have not been allowed to own chains of exhibition venues, so they have been forced to work with theaters in order to have national showcases for their films. However, this relationship between church and state is considered to be outdated by many in the industry.

For the most part, industry experts predict that the relationship between theaters and studios will continue; that the cooler heads will prevail and Universal and AMC can come to some sort of agreement.

“There must be common ground here,” said Nunan. “He can’t go on like this. “

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

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