The Greatest Movie Studio - The Worst Streaming Service

At the start of the pandemic when theaters shut their doors, world-famous director, Christopher Nolan penned an open letter which pleaded that movie theaters are a vital part of American social life. In it, he sets the grim scene of the film industry with mention of B&B Theaters, which for nearly a century exhibited films for audiences of the American midwest, being forced to shut the doors of 418 theaters and lay off over 2,000 workers. The Covid-19 crisis, in turning any sociable action into a danger to public health, has ravaged the theater industry with no reprieve in sight. Even titans in the theater business like AMC have been fighting tooth and nail to stay afloat. Last Friday, they revealed in an SEC filing “in the absence of additional liquidity, the Company anticipates that existing cash resources will be depleted during January 2021.” And if theaters were to fail and cease their operations, Nolan states we would lose “the most affordable and democratic of our community gathering places,” a place predicated on “on humanity’s greatest instinct — the desire to be together.” To fight the destruction exhibitors have been facing, Nolan stated that ‘in addition to the help theater employees need from the government, the theatrical exhibition community needs strategic and forward-thinking partnership from the studios.”

Nolan’s 2020 time-bending action film, Tenet, was one of the few films in this foul year that have made it to exhibitors. It was viewed as the ‘most important film of the year,’ the biggest blockbuster to draw in business for recently reopened theaters and rejuvenate the struggling industry. It was a big gamble, especially with the hefty production cost of $200 million, but the Labor Day weekend and suspected cabin fever left Nolan remaining hopeful. In all, it grossed a triumphant $539 million globally, but only $50 million came from the domestic market with most exhibitors in Los Angeles and New York City shut down. While it pales in comparison to his other time-heist flick, Inception with $839 million, Nolan was happy with the numbers but feared his distributor, Warner Brothers was not. He worried that “the studios are drawing the wrong conclusions from our release — that rather than looking at where the film has worked well and how that can provide them with much needed revenue, they’re looking at where it hasn’t lived up to pre-Covid expectations and will start using that as an excuse to make exhibition take all the losses from the pandemic instead of getting in the game and adapting — or rebuilding our business.” And it seems that Nolan’s suspicions have been confirmed with the studio’s recent announcement. 

Warner Brothers has decided to do away with the paradigm of a 90-day exhibition period for its entire 2021 slate — 17 films will be available simultaneously in theaters and on the streaming service HBO Max. This act has shaken the industry, reading to many people as the studio abandoning the struggling exhibitors and joining the streaming machine, and a large stress-fracture in the moviegoing experience. The streaming service, owned by WarnerMedia, had a lackluster and perplexing launch in May and reported a mere 12 million activations, an estimated 4 million paying subscribers. In comparison, NBCU’s streaming service, Peacock, launched at the same time now bolsters 26 million users and Disney+, after a year, has smashed every expectation with 86 million paid users. The latter in response to the throes of the pandemic has pivoted from their physical theme parks and went full steamboat willy into streaming, with films like Mulan and Cruella seeing their debut on the platform. The simultaneous release of 2021 films on HBO Max is sure to give their consumer base a big shot of adrenaline, and gain a competitive edge at the expense of not only WarnerMedia — giving up hundreds of millions in box office revenue — but the thousands of exhibitors left in the dark. 

“Some of our industry’s biggest filmmakers and most important movie stars went to bed the night before thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service,” said Nolan during his press interviews for the DVD release of Tenet. He was not happy with the development and was sure to not mince words going into how egregious the announcement truly was. He said “there's such controversy around it, because they didn't tell anyone. In 2021, they've got some of the top filmmakers in the world, they've got some of the biggest stars in the world who worked for years in some cases on these projects very close to their hearts that are meant to be big-screen experiences. They're meant to be out there for the widest possible audiences... And now they're being used as a loss-leader for the streaming service — for the fledgling streaming service — without any consultation. They deserved to be consulted and spoken to about what was going to happen to their work.” Nolan is among many creatives that share this sentiment, including fellow Warner Bros. directors Patty Jenkins (Wonder Woman 1984) and Denis Villenueve (Dune). The latter attacked the storied production studio’s parent company, AT&T, saying “There is absolutely no love for cinema, nor for the audience here. It is all about the survival of a telecom mammoth, one that is currently bearing an astronomical debt of more than $150 billion."

However, the Chairman of the Warner Bros. Picture Group, Toby Emmerich, frames it differently — being about the consumer who deserves to see the film. He believes that even with the recent development of vaccines, “it’s not clear that full normal will return even well into the fourth quarter of next year.” He would not provide a clear answer whether this massive shift would be temporary or permanent but maintained that this plan was set for the year and would not be flexible. His disingenuous attitude was clearly spelled when he said, “We really believe that in markets where HBO Max exists and theaters are also open that many consumers will choose the theatrical experience … We hope that this will prove to be a win-win.” However we know this wishful thinking does not reflect the reality of moviegoing being a frictional decision, as compared to the one-click decision of streaming. The pandemic has only exacerbated the exponential growth and domination of streaming within the entertainment economy. 

Hollywood is shocked by WarnerMedia’s decision, and rightfully so, as it demands existential questioning of industry practices and rituals. The standard 90-day exhibition model provided not only studios but exhibitors to accrue as much revenue as possible. This straight-to-streaming model seems to be the biggest leap of convergence between cinema and streaming, a move that will cost studios and exhibitors millions for the hopeful long term benefit of the telecommunications giant. With the benefit of hindsight, maybe the writing was on the wall at this year’s Oscars. Netflix came out strong for the 92nd Annual Academy Awards with 24 nominations — more than any other studio. The year before, they had made more films than any other studio. Over the past 10 years, the streaming service has vertically integrated into an all-in-one service that has dominated consumers for ease and accessibility. The moviegoing experience is a staple of American culture but it is predicated on the ability of social gathering — which in a digital world where people are more isolated than ever before, and in a pandemic where social isolation is the law, this experience seems to be something of the past. 

As Nolan wrapped up his plea for the importance of the theatrical experience, he said “When this crisis passes, the need for collective human engagement, the need to live and love and laugh and cry together, will be more powerful than ever. The combination of that pent-up demand and the promise of new movies could boost local economies and contribute billions to our national economy. We don’t just owe it to the 150,000 workers of this great American industry to include them in those we help, we owe it to ourselves. We need what movies can offer us.” Nolan’s words are hopeful and inspired, as a director who preaches IMAX and has spent her career perfecting the ultimate movie experience. But he recognizes that the current public health crisis does not permit this experience. The actions of  WarnerMedia and AT&T are not only disingenuous but dangerous to the declining health of the industry. I do believe that the cinematic experience will not cease to exist once this crisis is over, but it has certainly lost it’s spot as king in the age of streaming. What is so mortifying about the actions of WarnerMedia is the blatant disregard for those working the theaters, who are struggling to make ends meet. With no immediate source of revenue, a shrinking amount of assets, and a stalling government failing to deliver relief, exhibitors have felt the unrelenting turmoil. Here’s hoping for a deus ex machina in the third act of the moviegoing experience. As for now, the future remains in complete and terrifying uncertainty.