Last year, the big question after Covid-19 shuttered theaters, stopped productions and generally upended the movie industry was, “What comes next?” Specifically, how long would the around-90-days-of-theatrical exclusivity last?
With some recent news stories, I think we have an answer.
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Most Important Story of the Week – Disney and Warner Bros Are Headed to a 45 Day Theatrical Exclusive Window
When the pandemic first started, every pundit breathlessly screamed that, “This changes everything!”, then ran outside and lit their hair on fire. Did we have evidence that pandemics “changed everything”? Not really. As Andrew Sullivan pointed out on KCRW’s Left, Right and Center last week, after the Bubonic plague–which killed a quarter to 1/3rd of Europe–it did indeed change everything.
Crazily enough, after the 1918 Spanish Flu, society didn’t really change. Sure, the roaring twenties became a thing, but that would have happened, flu or no, because of the end of World War I and growing industrialization in America.
Of course, in March of 2020, we didn’t know this. To deal with closed theaters, the short term move was to push some films into 2021 (Fast 9, Black Widow), sell others to streamers (Without Remorse, Borat Subsequent Movie Film), release some early to PVOD (Trolls, Onward) and release others straight ot streaming (Wonder Woman 1984, Soul). It sure seemed like everything had changed.
But will those changes last? The previous window had already been shrinking. Right before the pandemic, theaters had films exclusively for around 90 days. Would the pandemic destroy the window entirely? It doesn’t look like it. Based on recent headlines, 45 (days) is the new 90:
Given that Universal will put their films on Peacock within “four months” of theatrical–and given that they’d already carved out a reduced 18-day exclusivity period before PVOD–then basically, yes, the window has shortened. The first window for premium cable or streaming (the Pay 1 period) will start around 45 days. And no surprise, most studios that aren’t Netflix have aligned on this new time period.
This makes sense! Giant corporations love standardization. It makes everything easier. Instead of having to negotiate constantly, the industry can simply repeat the same model/contracts/deals.
So did this “change everything”? I’d say no. Sure, the window shrunk, but the window had been shrinking for years. Did this accelerate the trend? Probably, though, even without Covid, I have a feeling that Jason Kilar/AT&T would have dabbled with early releases for HBO Max. Disney+ too might have tested different release windows. It’s a “what if?” that would make Marvel proud.
Some big questions remain, though:
– Will Netflix accept 45 days of exclusivity to theaters? I don’t think so, especially with no transactional revenue to rely on. That would turn things back to theaters: is any Netflix film valuable enough to break the windows? I don’t see it. And as such Netlfix will likely continue to leave hundreds of millions of dollars on the table. (Want some math on that? Click here.)
– Does 45 days finally train customers to wait for streaming? When it comes to PVOD, anecdotally, I think customers are smart enough to realize that some PVOD titles will be free soon. Like Raya and the Last Dragon and soon Black Widow. Do customers finally make that connection with streaming and theaters? Or does the past hold and customers don’t see theaters and Pay-1 as mutually exclusive? We’re waiting for more data to draw firmer conclusions.
– What about made-for-TV movies? The other theme of recent news is how many films will be made straight-for-streaming. Warner Bros has committed to ten films for HBO Max. Disney+ will have its own films too. Paramount+ is planning to release a movie a week too. Likely there will be a further bifurcation of distribution: giant blockbusters go to theaters; other films only go to streaming.
– What about talent payments? The new model will provide greater clarity. Knowing a film will have 45 days of theatrical exclusivity, talent can demand backend. (And their agents will negotiate terms that place limits on changing this model.) For straight-to-streaming, stars will need to demand up front payments. However, in both cases, reduced payments will likely be the norm, meaning more fighting is likely.
– Are the premium cable channels the biggest losers? For all the talk of sports being the straw that breaks the cable bundle’s back, it surprises me how few top tier films will be on premium cable soon. Universal, Disney (and 21st Century Fox), and Paramount films won’t have a run on premium cable. (At least yet. There could be deals that aren’t announced or finalized yet.) Warner Bros will still be on HBO, MGM will be on Epix (for now) and Lionsgate will be on Starz, but basically most major films will be streaming.
– How long until the window shortens again? Does the window ever, gasp, go back to 90 days? As long as the streamers are willing to lose money on feature film releases, then the model will continue to be in flux. I think 45 days is the new standard, because everything seems to be aligning on that time frame. But could this change again by the end of 2022? Maybe. (The most counter-intuitive take is that theaters would benefit from expanded exclusivity, but that ship appears to have sailed.)
Listen, I’ll level with you: I’m not spitting the hottest, hot-fire take here. (My last two columns frankly did that…) If the industry converges on a new 45 day standard–and all the evidence points to that–it’s a big deal. And odds are it will likely hold for the next few years. So we have our new standard (for everyone but Netflix and Amazon).
The only remaining wildcard is Covid-19. Which deserves its own section.
Covid-19 Update – Will the “Delta Variant” Ruin Everything?
The last few weeks have reversed the trends of ever growing box office. First, The Jungle Cruise wasn’t huge. Then Suicide Squad flopped. Even Free Guy–which did well for a non-established IP film–only earned $28 million at the box office. A “great in context” number.
And who’s to blame? Coronavirus.
Even worse, the emerging consensus in the trades is that the worst is yet to come. Matt Belloni mentioned it in his latest newsletter. Variety VIP warns Disney’s stock is due to crash because of Delta. (Twice actually!)
I remain sanguine. To start, you’d think the media would have a bit more humility forecasting the course of this virus over time. No matter how many confident experts tell us breathlessly that the worst is to come, when you take a poll of experts the most striking note is the lack of consensus. Here’s the CDC estimates, which show a tremendous range of potential outcomes…
And here’s Nate Silver making the point if you don’t trust me:
The models the CDC tracks are all over the place OTOH with about half predicting continued exponential growth and about half thinking we're at peak. (Weirdly, not many think we're somewhere in between, even though that's probably the most prudent answer.)https://t.co/dEn8whexd8 pic.twitter.com/Yv3hrjwDcA
— Nate Silver (@NateSilver538) August 16, 2021
I’ll admit: I don’t know what’s going to happen to cases over the next three to four months. I didn’t predict that the Delta variant would change everything, because… it may not have. My main prediction is that deaths (in America) would fall, and stay low. And frankly that’s mostly happened. Deaths are going up in numerous regions, but at rates far below what they were at the fall peak.
The reason is obvious: vaccines. While the Delta variant can still spread among the vaccinated, the risks of severe outcomes (hospitalizations and deaths) plummet if you’ve gotten the jab.
Yet, the news stories are what they are. And despite the relative safety for vaccinated folks, the news stories are downright terrifying. The media consistently emphasizes the worst case scenario. As you’d expect, this has led to a rise in folks concerned about the Delta variant and avoiding theaters. Though to be “that guy” using his own personal experience, when I went to a screening of The Green Knight, the theater was packed.
The best way to describe it is this way: the segment of the population most concerned with Covid-19–say 20-30% of the country–is avoiding theaters again. Decreasing box office by about that same rate. Polling of consumers back this up:
Source: The Quorum (a great new resource!)
Thus, studios are shuffling their release schedules again. Venom moved from late September to middle October, and Hotel Transylvania 4 moved from theaters to direct-to-Prime Video for a $100 million payday. Clearly the studios are worried about renewed society-wide shutdowns.
But are those likely? I don’t think so. For the majority of Americans, lock-downs just aren’t a reality they want to return. For a few reasons:
– First, vaccines work. Phenomenally well. Most vaccinated folks feel personally very safe. As they should.
– Second, the moral valence has changed. Before, lockdowns protected everyone. Now, if you aren’t vaccinated, it’s a personal choice. And most folks don’t want to lock down to protect the unvaccinated.
– Third, the virus has been and continues to be about as dangerous as the common flu for kids. This reality is poorly explained in most media outlets, so I recommend Emily Oster’s newsletter.
Source: Emily Oster Newsletter
– Fourth, yes, I won’t make predictions, but it seems as likely we’re at the peak than we are not. Nate Silver pointed out that infection rates are slowing, a potential leading indicator. Conor Sen made the same point. Past Delta waves seem to burn out as brightly as they rise, like in India, Denmark or the UK. So call it at least 50/50 that this is the peak.
– Lastly, politically the will isn’t there. In California, for example, a closing of schools or return to lockdowns could end Gavin Newsom’s governorship. Even President Biden is loath to return to lockdowns and potentially ruin the economic recovery.
Given that I don’t see renewed lockdowns returning, or a closing of theaters–which for the most part are fairly safe locations–box office should continue its reduced capacity for the rest of 2021. How should studios, journalists and others respond? Here are my recommendations:
– Studios, don’t try to time release dates. In hindsight, either Black Widow or Fast 9 probably would have made more money holding to their May release dates than pushing to June/July. For studios looking to tweak release dates just perfectly, don’t. You may end up doing more harm than good. You can’t predict Covid-19 any better than the experts.
– Studios, do take ridiculous pay days from the likes of Amazon and Netflix. I won’t begrudge a studio from taking the guaranteed cash in the short term.
– Government, approve the vaccine for children. End the emergency authorization for adults. Mandate vaccines any and everywhere. (Schools, hospitals, public workers, and so on.) Go faster.
The thing is there's much more we could be doing on just the vaccine front.
—More aggressive use of vaccine mandates
—Require vaccines (except for kids) for attending mass gatherings
—Full FDA vaccine approval
—EUA for kids 5-12
—Booster doses for adults age 65+, J&J recipients
— Nate Silver (@NateSilver538) August 16, 2021
– Media, in any article or story about Covid-19, please provide totals, rates and context. For example, if an article even casually mentions Covid-19 and children, provide the actual risk of death and infection, and compare to other common causes of death. That’s just basic journalism.
– People, be wary of the overconfident expert. The more confident someone’s forecasts of Covid-19, the less you should trust them.
Almost Most Important Story of the Week – Amazon Moves Their Lord of the Rings Prequel Production
Am I making too big of a deal out of this? The news is that Amazon is moving their production of the Lord of the Rings prequel series from New Zealand to the United Kingdom. And I think this is huge news.
The stakes are frankly as big as you can get. This is pretty clearly on track to be the most expensive TV series in history. If it succeeds, it’s Amazon’s Titanic. (Or I guess Lord of the Rings films?) If it fails, it’s Amazon’s Cutthroat Island. Amazon spent hundreds of millions (likely) to build sets in New Zealand to shoot five seasons of this series. At least. And after a couple of years, they’re moving everything to the UK? That move could cost them millions.
Let’s tell the pessimistic version of this story. As everyone parrots mindlessly, Amazon has seemingly unlimited funds. So they dropped the hugest paycheck possible on the Tolkien Estate and promised the most lavish production in the world. And to keep things looking the same, they decided to film in New Zealand like the past movies. (All of which makes sense.)
But maybe even Amazon has a limit to how much money they’ll spend/waste. As Bill Simmons mentions frequently regarding basketball owners, billionaires don’t become billionaires by wasting money. The pessimistic side of me thinks that Amazon planned to spend hundreds of millions per season on this series, and then read in the trades that Disney (via John Favreau and crew) found ways to shoot The Mandalorian for a fraction of that cost. So the cynic/pessimist sees this as Amazon waking up to the idea that this series doesn’t need to cost $200 million per season. Or more. Even worse, if the initial cuts aren’t good, this could be Amazon cutting their losses ahead of time. (That’s about the most negative read possible.)
Now let’s toss out the “not negative” view. (I don’t think there is a positive spin here.) Covid-19 meant a lot of the British actors were stuck in New Zealand for the pandemic. They’re home sick. And presumably the United Kingdom will also have lucrative film subsidies. So long term this move could be financially neutral. And maybe an improved production.
Either way, it will be fascinating to see if seasons 1 and 2 of this series look drastically different than seasons 3 and on. Instead of production values increasing over time, a la Game of Thrones, this series could be moving in reverse.
Other Contenders for Most Important Story
Roku: Making 23 Roku Originals for debut
Of course they are. Because everyone is making originals. It will be interesting to see if any breakthrough the streaming clutter, or if they flop like most other originals do. The upside is the next House of Cards. The downside is the next L.A.’s Finest for Spectrum Originals. The reality will be somewhere in between.
Here are a bunch of talent deals.
If the streaming wars are powered by the “content battlefields”, the soldiers are top tier talent. Here’s a collection of recent stories about major showrunners re-upping or moving in my rough order of value:
Trey Parker and Matt Stone sign Paramount+/South Park deal.
Alex Kurtzman re-ups with CBS Studios for Star Trek for overall deal.
Power Creator Courtney Kemp moves overall deal to Netflix.
Shawn Levy has a first look with Netflix.
Robert Rodriguez signs a first look at HBO/HBO Max.
Zack Snyder signs a first look deal at Netflix.
Disneyland Unveils New Annual Passport
Well, that didn’t take long. The annual pass is back at Disneyland, but requires reservations for all customers now.
M&A Updates – AT&T Completes Its Spin Off of DirecTV
Whenever you read M&A Pr0n on the business press, just always remind yourself of AT&T. No firm exemplified the idea that “M&A is not strategy” more than AT&T. After spending the 2010s buying whatever they could, they’re selling/sold it all. The latest news is that they have officially spun off satellite provider DirecTV.
Lots of News with No News – SalesForce is launching SalesForce+, which means Originals
The saddest part of the news that SalesForce is launching Originals is that they aren’t the first CRM software firm to do it! MailChimp did it last year! On one hand, bravo to the marketing team that convinced leadership to make Original content. On the other, truly we are at peak TV.