What Warner Bros.’ Streaming Strategy Means for Netflix and Movie Theaters: A Dialogue

Photo courtesy of Warner Bros.

Movie theaters have been brought low by coronavirus and even the promise of a vaccine may not be enough to rescue them from financial ruin. With film studios putting upcoming blockbusters like “Wonder Woman: 1984,” “Dune” and “Soul” on streaming services and major exhibitors teetering on the edge of insolvency, will the big screen experience be able to outlast the pandemic? Brent Lang, Variety’s executive editor of film and media, and its two chief film critics, Peter Debruge and Owen Gleiberman, discuss what the HBO Max news means for the theatrical landscape and whether movie theaters are an endangered species.

Owen Gleiberman: The arrival of a COVID vaccine offers the first concrete hope that we may, relatively soon, be glimpsing the light at the end of the tunnel of this pandemic. So what does that mean for movies, and for the battered landscape of movie theaters? Pretend it’s three years from now. The pandemic is behind us. Will going out to a movie look and feel the way it did in 2019, before all of this started? Will movie theaters occupy the same place in the industry? If not, how will it be different?

Brent Lang: I hope and pray there will still be movie theaters in three years. I know that I personally cannot wait to put COVID behind me and reemerge from my tiny apartment to visit my neighborhood theater (shout out to Cobble Hill Cinemas!). But I do worry that when that comes to pass studios will have moved with so much momentum towards their streaming future that they won’t be devoting the same kind of resources to making movies for the big screen. Warner Bros seemed to be mapping out that kind of “evolution” last week when it opted to release its entire 2021 slate on HBO Max at the same time the movies will open in whatever theaters are still open. What’s interesting is that many of the films, such as “The Suicide Squad” and “Dune,” are slated to be released in the summer or fall, past the point where medical experts have suggested a vaccine will be readily available. That’s not exactly a sign that the studio thinks theaters will come back strong.

Then there’s the financial part of the equation. That slate represents more than $1 billion in production spending spread across 17 movies – a massively expensive gamble and a move that will leave other studios, particularly those that have in-house streaming services, scrambling to counter by thrusting blockbusters out of the theatrical marketplace and into the digital arena in the hopes of feeding the binge-watching beast. What does that mean for Hollywood? The old totems of success, Oscars and box office grosses, may fade in favor of new signposts of financial favor. Don’t be surprised if agents, directors and producers start getting a lot better versed in subscriber churns rates and get a lot less animated about awards season or next year’s Sundance. If you look at the way that WarnerMedia, Disney and Universal/Comcast have reorganized their executive teams in recent months, it’s with a clear eye towards augmenting their streaming offerings and with a knowledge that the movie business is going to be a less important component of their bottom lines. That may be inevitable, but as someone who lives for cinema (I have almost a Pavlovian response to the smell of popcorn), I’d be lying if I said that doesn’t make me sad and worried about an art form I love.

Peter Debruge: I’d be lying if I said I loved the direction Hollywood was heading prior to the pandemic. Just look at all the “big titles” that have been postponed or pushed to streaming this year: a handful of superhero tentpoles from DC and Marvel, a couple live-action remakes of classic Disney cartoons, and more sequels than you can count, from “A Quiet Place” to “No Time to Die.” I enjoy seeing spectacular films on the big screen, surrounded by audiences and the smell of popcorn (even if I never partake of the stuff), but I miss the more modestly budgeted story- and character-driven movies — an area where the streamers had already stepped in to fill the void. The business had already reoriented around a “too big to fail” budget model, when the pandemic came along and eliminated the option of packing 3,000-plus screens to capacity, forcing everyone to consider collapsing release windows.

The big unknown through all of this has been the length of the pandemic, and the longer it drags on, the deeper the transformation to our moviegoing habits will be. Frankly, I’m astonished — but also encouraged — that the vaccine has come this fast. (Warp speed, indeed!) To your question, Owen, I believe that audiences are ready and willing to come back as soon as it’s safe. Just look at how they’re still crowding into restaurants and stores amid spiking test results. Old habits die hard, and this industry has withstood other challenges, like war and seven “Police Academy” movies. However, there was a huge segment of the market that had been priced out by ticket costs or who simply preferred the convenience of watching at home. Before the pandemic, they had no leverage to influence the industry’s release plans, but now, the industry is scrambling to give them what they’ve been asking for all along. “Dune,” “The Matrix 4” and the “Avatar” sequels will always look better on a big screen, and audiences will still be able to see them that way — but now, it’s not their only option, even if it’s the one I prefer.

OG: Let me float a radical theory. I think the model that Warner Bros. has just come up with — smashing the window to smithereens, opening the biggest blockbusters day-and-date — doesn’t have a prayer of working in the long run. It does make a kind of sense during the pandemic, when the number of movie theaters in operation is quite limited. Essentially, Warners is saying that in 2021, they’re going to open their big films on HBO Max, period. The sprinkling of theaters those movies will also play at amounts to a theoretical value added. Basically, these films are heading straight for the home screen, just as “Trolls World Tour” and “The King of Staten Island” did.

Yet once the pandemic is over, opening movies on streaming services and in theaters simultaneously makes no sense. Even winnowing down the window to, say, two weeks makes no sense. It’s what the exhibitors have argued all along: If you do that, you’re going to kill your theatrical revenues. Right now, it’s almost hip to say that theatrical is on the way out, and that streaming is the new king. But theatrical is kind of like print media: It’s supposed to be a dinosaur, but it’s still where the major money gets made. Once the pandemic is over, I think theatrical is going to get a burst of life — a shot in the arm, if you will, from the millions of folks who are tired of staying at home. And if I’m right about that, does the industry want to encourage those people to go out to the movies? Or does it want to discourage them? The latter option strikes me as bizarrely self-destructive. It strikes me as killing the golden goose (even if that goose is, admittedly, getting on a bit in years). And that’s what the Warners day-and-date model does. It kills theatrical — makes it irrelevant. I’m not sure that’s really been thought through.

BL: Owen, you raise a good point. It’s not just that Warner Bros. Is forgoing potentially hundreds of millions of dollars in ticket sales, they are also jeopardizing what is known in industry parlance as “downstream revenues.” That’s the money you earn from licensing movies to broadcast television and cable channels, as well as renting and selling the movies to fans (the latter a declining source of profits post-DVD boom). That means that “Dune” or “The Suicide Squad” has to make up that lost revenue by adding subscribers, which is harder to measure and, thus, monetize. Plus, a lot of these streaming services — Apple, HBO Max, and Disney Plus — have artificially bolstered their subscriber numbers by offering free trials. When people are asked to pay for their HBO Max subscription, it may take a whole lot more than the prospect of watching “The Many Saints of Newark” to get them to share their credit card info, especially if the economy continues to teeter, impacting discretionary spending all over the place.

So, in the long run, I think you’re right, Owen. This era of streaming blockbusters isn’t sustainable. In the short term, I worry about something that Peter alluded to when he talked about the gap Netflix has filled in the movie business by making films from directors like Spike Lee (“Da 5 Bloods”) or Alfonso Cuarón  (“Roma”) that studios deem as too risky or “too small to succeed.” Can Netflix continue to be the home of auteurs when HBO Max and Disney Plus are offering up populist fare? Owen, we both loved “Mank,” but I noticed that David Fincher’s masterful look at Hollywood history didn’t even crack the top 10 most streamed films on Netflix last weekend. That’s a lot of money to shell out for a movie that’s more admired than watched. My guess is that Ted Sarandos exerts more energy getting another sequel to “The Kissing Booth” or a follow-up to “Extraction” into production than he does listening to pitches from Noah Baumbach.

PD: The irony of the Netflix situation is that the company is still doing theatrical-first releases of prestige titles like “Hillbilly Elegy” and “Ma Rainey’s Black Bottom,” whereas Disney and Warner Bros. have pulled the plug on those plans and gone streaming-only with “Soul” and “Wonder Woman 1984,” respectively. This has less to do with Netflix’s professed love of movies (it shows how little Netflix understands its subscriber base that it would banish 1930s-era classics from the service, but back an expensive black-and-white drama about the writing of “Citizen Kane”) than its desire to compete at the Oscars. This year, the Academy bent its rules to allow streaming releases, but only those that already had a theatrical plan in place. I’m pretty sure that Netflix and Amazon, which stand to clean up at the Oscars this year, are only playing theaters because they don’t want to be disqualified, whereas studios are throwing their exhibitor relationships under the bus to keep the ship afloat.

I admire the distributors with the fortitude to wait this out, such as Searchlight Pictures and A24, which have pushed most of their slates — from “Antlers” to “Zola” — indefinitely into the future because they believe in the big-screen experience. But there are a hundred outdated aspects of seeing movies in theaters that continue to frustrate, like the fact that if you don’t live in New York or Los Angeles, you typically have to wait weeks or months until films from those distributors reach your local art house. Subscription-based streamers and VOD options make the films available to audiences no matter where they live, turning specialty titles into wide releases. I continue to believe that the theatrical experience can and must change. For example, admission prices will probably go way, way up or way, way down. Pre-pandemic, the MoviePass phenomenon showed that many people would be going to theaters far more if they could afford it. But the answer may actually be to swing in the opposite direction, turning cinemas into a luxury experience for those willing to pay a premium.

OG: I think you’re right, Peter, that the theater experience needs to evolve. But if it turns into a luxury item, and going to the movies comes to be thought of as a boutique event, then that, to me, will just be a fancy way of movies dying on the vine. For 100 years, the cinema has been a popular medium, and that has been its lifeblood. Going forward, I think the industry needs to heed the criticisms and think in terms of making the theater experience friendlier, more accessible, and maybe less expensive, in the way that the MoviePass moment indicated. I don’t want to come off as a nostalgic dweeb, but years ago movie theaters were thought of as palaces. People relished the chance to go to them. I don’t think that hunger has vanished. So here’s a question: Could that feeling come back? In the next 10 years, is it possible that we could see the movie-theater experience not destroyed but rejuvenated and redeemed? Stranger things have happened.