In today's Finshots, we talk about streaming services, theatrical windows and the changing face of the movie business.


The Story

Last month Warner Bros. dropped a bombshell announcement. They confirmed that all their movies for the year 2021 would debut on HBO Max (their streaming service) the same day it hits theatres. And while the studio had already dabbled with this strategy when releasing “Wonder Woman 1984,” nobody expected them to pursue it as aggressively as they have. And this means a grand total of 17 films will make it to the streaming service the moment it hits the big screen. This includes movies like The Matrix 4 and Suicide Squad.

Hollywood, meanwhile, wasn’t happy with the news one bit. Stars, directors, and theatre chains were visibly upset with Warner Bros. for blindsiding them. Filmmaker Christopher Nolan slammed the idea and called HBO Max, “the worst streaming service”, while the “Dune” director Denis Villeneuve said, “AT&T [Warner Bros. owner] has hijacked one of the most respectable and important studios in film history”.

And look, they’ve got a point. Their love for cinema aside, filmmakers are getting a raw deal here. The economics don’t work out in their favour. After all, filmmaking is a collaborative effort. Many talented individuals work together in a bid to make the best movie they possibly can. And in most cases, their income is directly tied to how well the film does at the box office. Meaning — Apart from getting paid directly, they are also entitled to substantial bonuses and a share of profits from the theatrical release.

The HBO Max arrangement directly threatens this status quo. And while the situation was already dire, this recent move simply pushes them to the brink.

The Disappearing Theatrical Window

For a while now, streaming services like Netflix have been trying to force movie studios to cut the theatrical window — the period during which a movie runs exclusively in theatres. The industry standard was once 90 days. But after the pandemic, movie studios and cinema chains have been actively negotiating in a bid to cut down this window. And in July, America’s largest cinema chain struck a deal with Universal Pictures to limit the window to 17 days. So after 17 days, Universal can stream their movies anyplace they like.

Meaning people will have fewer incentives to visit the theatres and it’s quite likely that this will reflect in box office revenue. Granted, once the pandemic subsides, it’s possible that studios will allow movies to run exclusively in theatres for more than 17 days. After all, they’ll probably make more money this way. But right now, the likes of Warner Bros. have gone farther than anyone to limit the theatrical window.

Unfortunately, there is one problem. Unless studios can actively negotiate with filmmakers and actors alike, the scheme won’t take off. And in the wake of growing criticism, Warner Bros. was forced to intervene. For instance, bonuses entitled to the cast and crew are usually paid when the movie makes a certain amount of money at the box office. Warner Bros., however, has promised to make the payout even if the movie makes half the amount originally intended. So if anyone was in line to collect a cheque when a movie’s box office collection exceeds $100 million, the bonus will now simply trigger at $50 million. Also, they’ve promised to adjust this number in the event more theatres start closing in the near future.

To sweeten the pot some more, they’ve also agreed to share profits from on-demand and online sales. Meanwhile, the streaming service HBO Max has vowed to pay a special fee to Warner Bros. studios to compensate them equally as well. In fact, this model is so generous, that it could actually set a new precedent for streaming services everywhere. And while you might be inclined to think Warner Bros., HBO Max and their parent AT&T are throwing money here, their argument is simple.

If this move brings 10 million paying subscribers to HBO Max, then it’s a massive win for them. At $15 a month, they could rake in $1.8 billion in annual revenues. At 20 million subscribers that figure doubles to $3.6 billion. In comparison, WB made $3.6 billion at the box office and reported revenues totalling $4.12 billion. And to see why the streaming business is so important to the studio, you simply have to look at numbers from other streaming services. Netflix has over 195 million subscribers, Disney’s Disney+ has 86 million, HBO Max currently dwarfs in comparison with 12.6 million free and paid subscribers. But if they can hit their target and reach 90 million subscribers globally by 2025, it will work out very nicely for them.

The only question now is — Will we see something similar in India as well?

Let us know your thoughts on Twitter.

Until then...

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