Streaming Salvation: How Studios Made Bank Selling Movies to Netflix and Amazon During the Pandemic

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Rune Fisker for Variety

It was supposed to be the year in which female superheroes ruled the box office, with an assist from James Bond, a gritty street-racing Vin Diesel and a jet-flying Tom Cruise.

Instead, “Wonder Woman 1984,” Disney’s “Mulan” remake and more movies that were poised to be among the year’s biggest found themselves streaming online as others continue to be pushed far into the future in the hopes of outrunning the coronavirus pandemic.

It’s a reality that would have been unthinkable when these films were greenlit years ago. After all, traditional Hollywood studios don’t pump hundreds of millions of dollars into a movie for audiences to watch it for the first time at home.

But with theaters closed for a good portion of the year, Hollywood studios have been forced to recalibrate a film release calendar that’s been entirely upended by the ongoing global health crisis. Yet industry insiders predict the current moment marks an inflection point, one that won’t disappear with the pandemic.

Streaming has never been more popular, and cinemas are facing an existential threat unlike anything they’ve experienced before. When the world eventually emerges from the COVID-19 outbreak, it’s not an exaggeration to say the film landscape will never look the same.

Due to the pandemic-induced shutdown of most cinemas across the country, studios have seemingly limited options for their biggest movies.

“You sell to a streamer, or you die in a theater,” says Schuyler Moore, an entertainment industry lawyer with Greenberg Glusker. “Pick one.”

That’s resulted in eye-popping, occasionally head-scratching deals that have colored the movie landscape in 2020. Each of the major Hollywood studios has taken a different route to get through the pandemic.

Paramount doesn’t have a streaming service on which to offload movies. So the studio has been one of the more active sellers, auctioning off “Coming 2 America,” the long-anticipated sequel to the Eddie Murphy classic, to Amazon Studios in a deal worth roughly $125 million and sending Aaron Sorkin’s latest “The Trial of the Chicago 7” to Netflix.

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“Wonder Woman 1984” and the rest of Warner Bros. slate will screen on HBO Max and in theaters. Courtesy of Warner Bros.

Sony sold Seth Rogen’s “An American Pickle” to HBO Max and the Kristen Stewart-led romantic comedy “Happiest Season” to Hulu, but otherwise, the studio behind “Spider-Man” and “Ghostbusters: Afterlife” has resorted to postponing the majority of its buzzy upcoming titles.

The math in selling to streamers is easy — worldwide rights go to the highest bidder. Streaming services usually pay a premium over the film’s production budget, allowing studios to make slightly more than what it would take to break even. For high-profile projects, streamers often have to shell out upfront to compensate megawatt talent, directors and producers for lucrative back-end deals that are built into contracts for would-be commercial smashes.

“My life now is selling films to Netflix, Amazon Prime and the streamers,” Moore says. “The competition between Apple, Disney and Amazon has heated up. [Studios] can’t sit around and wait for everyone to get vaccinated and go back to theaters.”

Disney and Warner Bros. have used the opportunity to bulk up their parent companies’ fledgling streaming services, Disney Plus and HBO Max, respectively, with the ultimate goal of creating a true rival to Netflix. Still, Disney’s decision to send the $200 million-budgeted “Mulan” to Disney Plus turned heads, as did Warner Bros.’ recent announcement that its entire 2021 slate will go on HBO Max and in any theaters still open. The studio had already planned for “Wonder Woman 1984” to stream on the platform, as well as unspool in theaters.

But Warners learned the hard way with Christopher Nolan’s “Tenet,” which fell short of expectations and failed to reignite moviegoing, that audiences by and large aren’t ready to return to theaters. Every studio has been delaying big movies, but 2021 won’t have room for them all.

“Some of this is survival,” says Marc Simon, an entertainment lawyer at Fox Rothschild. “They’re making an economic and business decision.”

Universal, on the other hand, is betting big on an eventual return to moviegoing. Months into the pandemic, the studio forged historic pacts with AMC and Cinemark that allow films to appear in the home within weeks of their theatrical debuts.

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“Mulan” streamed on Disney Plus, eschewing cinemas. Jasin Boland..© 2019 Disney Enterprises

It’s true that the debate around windows, industry jargon for the amount of time that a new movie screens exclusively in theaters, has been contested for decades. Yet there’s no denying that conversations were expedited by coronavirus, which has all but eradicated any bargaining power that theater operators once had. Gone, many anticipate, are the days that movies played solely on the big screen for 75 to 90 days. Though Universal’s rivals haven’t fashioned similar agreements, industry experts suggest that other studios will continue to put new releases on digital platforms earlier than ever before.

“Studios that always wanted to be reducing the theatrical windows are taking advantage of this opportunity,” Simon says.

But a collapse of the movie theater industry wouldn’t benefit anyone, Simon points out. The pandemic settled the argument that content is king, but studios still rely on ticket sales to generate millions upon millions in profits. If theaters file for bankruptcy or go under, studios will miss out on a significant revenue stream.

That’s something Universal was acutely aware of when giving theater operators an olive branch of sorts in the form of multi-year agreements that allow exhibitors to share in the digital profits of an early premium video-on-demand release. Universal isn’t blind to the rapidly shifting tides in consumer behavior. However, the studio that created the “Fast & Furious” and “Jurassic World” franchises knows that sequels to popular pictures won’t be able to justify budgets that reach $400 million without theaters.

“For Universal, this is our new normal,” says Peter Levinsohn, Universal’s vice chairman and chief distribution officer, who led negotiations on deals with AMC, Cinemark and Cineplex. “This is our business model that we believe, going forward, will best optimize [a film’s] value.”

He adds, “We’re putting a model in place that’s not free, but costs $20 to rent a movie for 48 hours. It’s much more competitive than putting it on streaming.”

For moviegoers, that means no longer having to wait months to watch the latest blockbuster from the comfort of their couches.