“I guess the movie theaters will just be Halloween stores now.”
That was the glib response from a veteran studio executive on Thursday, joining a chorus of powerbrokers, agents and other Hollywood insiders floored by the news that Warner Bros. Pictures will be releasing 17 movies — its entire 2021 slate — simultaneously in movie theaters and on the streaming service HBO Max.
In the moments leading up to the announcement, which will make the likes of “Matrix 4,” “Dune,” Lin-Manuel Miranda’s “In the Heights” and “The Suicide Squad” available for free to HBO Max subscribers for 31 days on the same day they release in theaters, film journalists started softening up the ground on Twitter. They promised an extinction-level event, the kind audiences typically find in the blockbusters cooked up by the Burbank-based Warner Bros.
Many in Hollywood had expected traditional studios to follow the lead of Universal Pictures, which brokered a milestone deal in July to shrink the theatrical window — the exclusive period in which movies run in theaters — to just 17 days before Universal would have the option to take their wares to paid video-on-demand. But few expected a change this drastic.
“There’s no question that WarnerMedia is leveraging this pandemic moment, and making a decision for the future of their company by prioritizing streaming. The question is, at what cost to this art form?” asked one C-suite executive at a rival studio.
Another well-known, high-flying executive estimated that WarnerMedia had “parted with easily $2 billion in assets, gift-wrapped for HBO Max, that will see absolutely no return.”
The executive refers to mega-budget genre and franchise titles like “The Matrix 4,” DC’s “The Suicide Squad,” Denis Villeneuve’s “Dune,” and big potential earners like the “Sopranos” feature film prequel “The Many Saints of Newark,” Lin Manuel Miranda’s “In The Heights,” and Hugh Jackman’s “Reminiscence.” The box office returns for those films will certainly be adversely affected by the decision to move forward with a hybrid distribution strategy.
While many in show business have been following the contentious debate around theatrical windows for years, in which global theater owners say big-screen exclusivity is essential to making movies a lasting part of the cultural conversation (and essential to selling popcorn and soda), few were prepared for how swiftly WarnerMedia let this particular axe fall.
Warner Bros. Entertainment CEO Ann Sarnoff and motion picture group chairman Toby Emmerich briefed CAA, WME, UTA and other major talent agencies on Thursday morning just before the news hit, insiders said. The bread-and-butter job of a studio head is to keep talent happy, and many traditional star deals are structured around box office participation. By releasing movies on HBO Max in the midst of a pandemic, where movie theaters in major markets will likely remain shuttered in the months ahead, star compensation will clearly take a hit when watching from home is safer. Restructuring those deals and making sure their top stars for 2021 — including Will Smith, Angelina Jolie, Timothee Chalamet, Margot Robbie, Jackman, and Miranda — is on a laundry list of administrative headaches the surprise announcement will bring for the studio.
The news was particularly upsetting to theater owners, whose business has been decimated by the pandemic. Prior to Thursday’s bombshell, Warner Bros. had announced that “Wonder Woman 1984” would debut on HBO Max on Christmas, the same day it starts screening in theaters. Normally, that would have caused outrage in the exhibition community. But in that instance, theater operators understood it was a unique situation in response to the pandemic, and they were desperate for new product to offer customers. They couldn’t have anticipated what would follow.
Part of the reason why theater owners felt betrayed by the announcement that Warner Bros. is relying on HBO Max to bring its film slate to the masses is because the studio broke the news as numerous vaccines are starting to be approved. Exhibitors said they would have understood if Warners sent movies to HBO Max on a case-by-case basis. But the decision to send the entire 2021 slate meant they still believe the return of moviegoing is many, many months away.
“The year-long part was a little befuddling,” said Mark O’Meara, who owns two movie theaters in Fairfax, Va. “They’re claiming it’s a COVID model. I think there’s some truth to that. But theaters are closing, and it’s getting tougher.
He adds, “I don’t think we’ll ever get back to three months,” referring to the standard 90-day window.
Larger movie theater chains mostly stayed silent; numerous other circuits declined to comment. In a statement, AMC’s CEO Adam Aron didn’t mince words expressing his frustration.
“Clearly, Warner Media intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidize its HBO Max start-up,” Aron said. “As for AMC, we will do all in our power to ensure that Warner does not do so at our expense. We will aggressively pursue economic terms that preserve our business.”
Cinemark, one of the country’s biggest theater chains, said it will assess movies individually before booking them to play in theaters.
“At this time, Warner Bros. has not provided any details for the hybrid distribution model of their 2021 films,” a spokesperson said in a statement.
Privately, theater owners are trying to remain optimistic that they hybrid model won’t outlast the pandemic and praying other studios don’t follow suit.
“If Disney follows this template in any capacity, movie theaters are done,” one film executive said on the condition of anonymity.
Jeff Logan, who runs a small theater chain in South Dakota, said he was “surprised” by the news, calling it one that was made “in haste” and “without much foresight.” He felt consternation, not toward Warner Bros. distribution executives, but rather the higher powers at WarnerMedia and its owners, AT&T.
“It’s like they aren’t listening to the news — or they are listening to three months-old newscasts. It doesn’t make sense when we’re on the verge of vaccines being distributed,” Logan said. “To do it on one picture, I could understand. But the entire slate for the year made absolutely no sense.”
He’s not blind to the fact that even with a vaccine, people might be hesitant to immediately return to the movies. But he’s confident that once a notable part of the population is vaccinated, audiences will be eager to watch the next big blockbuster on the silver screen.
“I think things will get back to near normal faster than the Warner Bros. decision would indicate,” Logan said. “They’re using this as a cover to push HBO Max. I would hope they would come to their senses than sooner than after a year.”
In the meantime, theater owners worry that legions of fans are getting accustomed to watching new movies at home and fear that it could have irreversible effects.
“We’ll see how this plays out. I just hope movie theaters are around to see how it plays out, Logan said. “They’re playing with fire at the expense of our livelihoods.”
As game-changing as 2021 will be for Warner Bros. and the theatrical film business, the C-suite executive Variety spoke with said the Thursday bomb-drop comes down to one thing: Wall Street.
“This is AT&T justifying the billions they paid for Warners Bros,” the executive said. “This is bad for creativity and the long term, but is it good for their stock this week? Absolutely.”