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One of the biggest complaints with the streaming landscape is that you need to subscribe to so many different streaming services to watch all the latest TV.
Well, in 2021, it won’t just be figuring out where all the content is, but how you’ll have to pay for it too. Especially for big blockbuster films.
The news of the week is that Warner Bros announced a plan to make all their 2021 films available on HBO Max the same day they premiere in theaters (if they do premiere in theaters, that is). This follows their announcement of a similar release plan for Wonder Woman 1984 on Christmas Day, given that most theaters will be shut down for Covid-19 precautions. Meanwhile, earlier in the year, Disney announced a similar move for Soul. Not to be outdone, Comcast is taking some of their films to a $20 rental windows (Premium Video-on-Demand, or PVOD) after three weeks in theaters.
In 2021, folks will have more options than ever to stream blockbuster films. But why all the moves so suddenly? And why now?
Why? Because the Traditional Studios Are Shifting To Streaming
The challenge for traditional movie studios is that streaming is coming and you can only avoid it for so long. Avoid it is actually the wrong word. A better word is “optimize”.
Studio executives know that the old distribution methods (theaters, premium cable, linear TV) are/were extremely valuable. And as valuable as streaming will be for its data, direct connection to customers and ability to control the experience, it won’t be nearly as profitable for the movie studios. Thus, studio executives tried to balance making as much old money as possible while building their new streaming platforms.
Yet, no one quite knows what the best way to transition to the new reality. That’s where the new distribution models come in. Comcast (who owns Universal), AT&T (who owns Warner Bros) and Disney (who owns Disney Animation, Pixar, Marvel and Lucasfilm) all have their own ideas for how they can launch their own streaming services (HBO Max, Peacock and Disney+) while still making some money of theatrical distribution.
One studio thinks that keeping a three-week window makes sense, one is offering a limited run on their streaming service and Disney may (we’ll find out next week) continue a version of buying films early on their streaming service as they did for Mulan. Here’s a lay out of three new approaches:
Notably, the big tech companies (Netflix, Prime Video) are skipping theatrical windows altogether and most traditional windows as well. It’s unclear what Apple TV+ is going to do going forward, as they’d previously committed to a theatrical window. Still, here’s a rough lay out for what each studio is planning:
That’s what’s happening. But the more interesting question is why it’s happening now.
Why 2020?
There is no “one” right reason. But a few played a role.
Wall Street Cares About One Number in Streaming: Subscribers
When in doubt, fall back on basic economics. Or, rather, the most basic economic principle: people do what they are incentivized to do. (If you make more money doing X, you do more of X.) For most businesses, they care about their share price as determined by Wall Street.
Take Disney. Even with a fairly poor year financially, their stock price has held steady because of the growth in Disney+. The lesson? Anything that boosts streaming subscribers will likely help their stock price.
Meanwhile, if you’re AT&T, you’re repeatedly reminded that HBO Max was a “disappointment” because it didn’t generate the same volume of subscribers that Disney+ did out the gate. And hence their stock price isn’t doing as well. AT&T desperately wants new subscribers to HBO Max and offering up the whole Warner Bros 2021 slate at a loss is probably the best way to do that.
In a world where AT&T’s share price is determined by how much money they make, then Warner Bros wouldn’t put their films straight to HBO Max. But in a world where all Wall Street analysts care about is subscribers, well you get this move. Same for Disney: if Wall Street only cares about your Disney+ numbers, then you feed movies straight to the service.
HBO Max is In the Growth Phase
Netflix is entering middle age. For businesses, that means slower growth, but hopefully higher profits. Double digit percentage increases in US subscribers frankly just aren’t on the table anymore. Over the last year, in the US & Canada, Netflix has seen quarters where subscribers only grow by 150,000 folks or even shrink. When you don’t have fiery subscriber growth, good revenue growth is the alternative. Hence, price increases.
HBO Max is still a teenager in comparison. (While HBO is arguably a grandpa…) They desperately want to get to Netflix’s subscriber level. Right now, they’re about 25 million short:
Peacock and Disney+ are still in the growth phases too. And if you’re in that phase and Wall Street rewards losing money, you do what you can to gain subscribers as quickly as possible.
The Covid-19 Caveat
Ah, Coronavirus, who we’ve written about so much this year.
Very likely, if Covid-19 doesn’t happen, then the current disruption in film going doesn’t happen either. If theaters had the option to release their films to packed theaters, they’d have taken that option. With the good news of recent vaccine approvals, there is a ton of uncertainty for when theaters will be back to full capacity. Even May could still see partial capacity for theaters. Thus, moving films to HBO Max makes more sense.
So if box office revenues are at risk anyways, taking a risk with the streaming window makes sense.
The Calendar Will by Jammed Next Year at the Box Office
Not to mention, when Coronavirus first hit, one of the responses for the studios was to delay every film a year. While they delayed some of the films scheduled for 2021, they didn’t delay all of them. Meaning 2021 will be packed at the box office with a Fast and the Furious film, James Bond, multiple Marvel films, all the Warner Bros. films and the usual animated fare. Every week will be a big new release.
Thus, Warner Bros., Comcast and Disney could all expect somewhat lower box office hauls. This could further convince them to move their films to streaming.
The Entertainment Strategy Guy writes under this pseudonym at his eponymous website. A former exec at a streaming company, he prefers writing to sending emails/attending meetings, so he launched his own website. Sign up for his newsletter at Substack for regular thoughts and analysis on the business, strategy and economics of the media and entertainment industry.
