Warner Bros on Thursday shocked the entertainment world by saying it would put all of its 2021 movies — a 17-title list that includes such highly awaited films as ‘Dune’, ‘In the Heights’ and ‘The Matrix 4’ — on HBO Max at the same time they play in theatres, upending a well-established business model in the hope of redeeming its flagging streaming service.
The shift stretches well beyond the next few uncertain shutdown months to include films scheduled for the second half of 2021. ‘Dune’ had previously been slated for release next October, for instance, while ‘Matrix’ wasn’t set to hit theatres until December 2021.
The move suggests that Warner Bros and corporate parent AT&T are hoping to boost HBO Max at the expense of theatres, not simply reacting to the pandemic.
But in undoing, at least for the moment, the time-honoured Hollywood practice of “windowing” — bringing movies to theatres for a set period of time before making them available on digital platforms — the move has the potential for widespread, and potentially long-lasting consumer implications.
By keeping marquee films coming to homes first for another year, the shift could further habituate Americans to getting their entertainment at home instead of in theatres. And that could further limit revenue for theatres at a time when they most need it, even after pandemic measures permit widespread reopening after months of closures.
Still, experts were inclined to see the effects as circumscribed, in part because the move was born of the very particular need for Warner Bros. and Warner Media to boost its own streaming service and not something others would rush to adopt. And WB movies, while lucrative, are far from the most popular; the top five grossing movies in the US last year all came from Disney. The move also would just affect US releases; HBO Max is not available overseas.
Shutdowns have certainly taken a heavy toll on theatrical movies. Some studios have put movies on digital platforms as one-offs during coronavirus shutdowns. Disney is about to debut Pixar’s ‘Soul’ on Disney Plus, while WB has “Wonder Woman 1984” coming to HBO Max at the same time as theatres in three weeks.
But Warner Bros. action goes much further, sweeping up a range of titles that will be available to home viewers: the Space Jam, Godzilla and Conjuring franchises; an adaptation of the ‘Mortal Kombat’ video game; the Richard Williams story “King Richard”; a new take on the DC Comics title ‘The Suicide Squad’; and the ‘Sopranos’ prequel ‘The Many Saints of Newark’.
The announcement also one-ups deals Universal Pictures made with top chains AMC and Cinemark that allow for the biggest films to at least play exclusively in theatres for three weekends before moving to streaming.
Warner Bros. has certainly raked in dollars at theatres. In 2019, hits such as ‘The Joker’ and ‘It: Chapter Two’ were part of a roster that generated more than $1 billion at the US box office. (A studio typically retains about 60% of domestic receipts.)
But AT&T and Wall Street have been eager to see HBO Max grow. The company has struggled to attract subscribers to its $15 per month service since launching it in May, even failing to convert about three-quarters of current HBO subscribers, who do not need to pay extra to receive Max.
Last month, AT&T said that the service was “available” — either those who signed up or those who could get it for free as existing HBO subscribers — to about 29 million subscribers. That ranks well below Disney Plus’ 74 million subscribers (though Disney’s figure includes tens of millions of overseas subscribers).
HBO Max was initially hampered by a lack of carriage deals with Amazon and Roku, two primary streaming gatekeepers; a deal with Amazon has since been worked out but a pact with Roku has not. (Amazon’s chief executive, Jeffrey Bezos, owns The Washington Post.)
Experts think the film moves could help draw significant number of subscribers to HBO Max.
“Our research says that exclusive access to new movies is what makes people a lot more likely to subscribe or stay subscribed to a platform,” said Kevin Westcott, a vice-chairman at Deloitte who leads the firm’s US technology, media and telecommunications practice. The company conducted a survey in October and found that a new desirable movie would cause 27% of respondents to change their minds on a service they were about to unsubscribe from.
It remains to be seen, however, if Warner can attract new customers who are already loyal to another service, or who are uncertain about the differences between HBO and HBO Max.
In its announcement, at least, Warner Bros. sought to emphasise the impact of coronavirus over the needs of Max.
“We’re living in unprecedented times which call for creative solutions, including this new initiative for the Warner Bros. Pictures Group,” said Ann Sarnoff, chair and chief executive of WarnerMedia Studios and Networks. “No one wants films back on the big screen more than we do. We know new content is the lifeblood of theatrical exhibition, but we have to balance this with the reality that most theatres in the US will likely operate at reduced capacity throughout 2021.”
The news — basically eliminating a chance for major WB movies to come to theatres in 2021 after the pandemic has gutted 2020 — created an instant backlash among theatre owners.
“I think it’s ridiculous and shortsighted,” said Chris Johnson, chief executive of Classic Cinemas, which operates more than 100 screens at theatres in Illinois and Wisconsin. “You don’t have to throw out every model that worked in the past to try something that may not.”
Calling it “kicking theatre owners when they’re down,” he said he’d be less likely to play movies if they’re available in his customers’ homes.
Adam Aron, chief executive and president of AMC, Adam Aron, the country’s largest theatre chain, expressed his disappointment. “These coronavirus-impacted times are uncharted waters for all of us, which is why AMC signed on to an HBO Max exception to customary practices for one film only, ‘Wonder Woman 1984,’” Aron said in a statement provided to The Washington Post.
“However, Warner now hopes to do this for all their 2021 theatrical movies, despite the likelihood that with vaccines right around the corner, the theatre business is expected to recover. Clearly, Warner Media intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidise its HBO Max start-up. We will do all in our power to ensure that Warner does not do so at our expense.”
He said AMC would negotiate for a greater share of theatre revenue to offset the loss. Studios typically take about 60 per cent of ticket sales, though Warner Bros. has agreed to take less for ‘Wonder Woman’ this month.
The news was startling in part because Warner Bros. has long been theatre-friendly. As other studios largely sat out the summer, it released Christopher Nolan’s ‘Tenet’ in US theatres on September 3 — in part to “protect the model” and give hurting theatres at least some revenue.
Its theatre-friendliness also has helped cement WB’s relationships with filmmakers, including with the likes of Nolan and Clint Eastwood. It remains to be seen what impact the decision to convert to a streaming service for the foreseeable future will have on those relationships.
The lack of theatre-first release also could hurt the movies’ consumer awareness. A typical theatrical roll-out comes with a major marketing campaign; a streaming release does not.
Most other studios appear eager to preserve the theatrical business. US ticket sales generated $11.4 billion in 2019, and even as they ease into a digital world that Wall Street and many executives believe is the future they are reluctant to upend matters too much. Nearly all would-be blockbusters from rivals that are scheduled for 2021 remain on the release calendar.
While social media Thursday was awash in talk of others potentially following suit — ‘Black Widow’ was trending as fans called for Disney to put the movie on Disney Plus — experts say a shift of this scale was unlikely. Other companies, they note, don’t need digital subscribers the way WarnerMedia and AT&T do.
A long-term shift to in-home debuts also could hurt event movies — the franchise titles that cost at least $200 million to produce. Studios need the billion dollars a theatrical film will earn around the world to continue to afford making those movies; most streaming services survive by producing lower-budget films, banking on volume game to keep subscribers.
Warner Bros. has sent mixed signals on how it views that development. Even as its moves its 2021 titles to HBO Max, it is currently shooting a new take on ‘The Batman’, an expensive movie with star Robert Pattinson, the expense of which can only be recouped with a major theatrical release.
The Max move is one of the biggest since Warner Media got a new chief executive, Jason Kilar, in the spring. Kilar comes from Hulu, which was one of the first to offer digital subscriptions to legacy content.
Kilar on Thursday sought to position the move as featuring no downside. “We believe this approach serves our fans, supports exhibitors and filmmakers, and enhances the HBO Max experience, creating value for all,” he said.