Hollywood’s Role in Saving the Movie Theatre Industry

By  //  October 1, 2020

Share on Facebook Share on Twitter Share on LinkedIn Share on Delicious Digg This Stumble This

Roger Wolfson, American TV writer, and screenwriter, known for series such as Fairly LegalSaving GraceThe CloserLaw & Order: Special Victims Unit, points out the love-hate relationship between the film industry’s kissing cousins.

Throughout the movie industry, studios have always had a tenuous relationship with theaters. Dating back to a 1928 antitrust lawsuit by the Federal Trade Commission against the Famous Players-Lasky Corporation (later to become Paramount Pictures) and nine other major film studios for violations over control of movie distribution and exhibition.

This battle would continue for decades until a United States Supreme Court decision changed the relationship forever by critically hindering, but not completely stopping, the practice of “block-booking” – the practice of bundling multiple films into one theater license.

Though the two seemed to have found a mutually beneficial relationship, the 2020 COVID-19 pandemic appears to have re-ignited the flames of discontent between them. Studios resent the timetable of movie theaters, the demands that movie theaters make, and the distribution delays.

In short, they dislike the power movie theaters have over films they had no part in creating.  With that said, Wolfson says the money that comes from theaters, and the showcase and glamour they offer, have been of great value to studios. Theaters in the US make 15 billion a year (4 billion from concessions), and studios probably wish they could have a much larger slice of that.

It can be argued that Hollywood has faced a perpetual identity crisis from the mainstream emergence of broadcast television in the 1950s to the streaming services of today that continually push the envelope and challenge how business is conducted in Hollywood.  The deal the studios have with streamers that they do not own is not as beneficial to studios as theaters, but it’s also more dependable. The money comes faster, and the schedules are less stringent.

Streaming Gains Ground Amidst COVID-19

Streaming services may have a say in the demise of the movie theater industry if it dies. There are many benefits of streaming services, including the convenience of watching movies and television shows from the comforts of home, or anywhere other than a crowded theatre.

Netflix, Hulu, and Disney+ are currently among the most popular platforms available today. The convenience of streaming in the era COVID-19 social distancing requirements stacked on the unpredictable re-opening of movie theaters across the country has all but placed the final nail in the coffin for movie theatres.

However, experiencing a film on the silver screen has always been an American pastime. Movie fans love camping out for days to be the first to attend a midnight premier. Seeing a movie at the theater is also a traditional first-date ritual and a staple event for couples, friends, or family to do something together.

It is safe to say that almost everyone knows a family who sees a movie on Thanksgiving or Christmas day. COVID-19 changed that overnight and movie theaters globally were deemed non-essential and forced to close down. The effects of the pandemic-led closures certainly benefited streaming services. Over the quarantine period, Netflix reported a record high of 16 million new customers.

On the flip side, the popular theatre chain, AMC Theaters, estimates a loss between $2.1 billion to $2.4 billion, coupled with a 22% drop in revenue compared to last year leading the company to express doubts about recovering.

To keep consumer optimism intact, AMC announced 100 movie theatres opening to coincide with its 100th anniversary. The August re-opening schedule will follow with opening other locations. In an attempt to recapture it pre-COVID-19 glory, AMC opened by selling 15-cent tickets on opening day, $5 a ticket after opening day for the screening of classic and re-released films.

The theatre chain also announced new re-opening guidelines, including reduced capacity, new cleaning procedures, enforced social distancing, and limited food services. Employees will get their temperatures taken before each shift, must wear a mask, and will be required to wash their hands regularly. The best-case scenario is that these locations can help recover revenue without sacrificing customers’ and employees’ health.

On-Demand Causing More Headaches for Theaters

Another threat risking the future of the theater business is film studios sending films straight to On Demand well before their original release date. To test the waters of this model, a filmed version of the popular Broadway show Hamilton was set to be released in theaters in October 2021.

Instead, the studio bypassed for a direct release on Disney+ on July 3, 2020, a year and a half earlier than the scheduled premiere. If this model proves successful for the studio, this new trend will most likely cause further damage to theater revenue. Wolfson suggests that these models are being tested to avoid further financial calamity in the event of another global pandemic.

In an evolving society where people find ways to avoid crowds and still feed their entertainment fix, it is only a matter of time before Netflix and other streaming services put movie theaters out of business for good.

Accessing shows and movies in the comfort and safety of your own home will ultimately be the downfall of the movie theatre industry. If new service models prove financially viable to studio executives, they will continue to release media to streaming platforms to reach as many viewers as possible.

As for Hollywood’s role in saving theaters from the business crushing effects of COVID-19, AMC Entertainment Holdings, Inc. is an interesting case study.  AMC has been focusing both on the government (pushing for stimulus bills) and on “shaming” the studios into helping them out by posting graphic details of AMC’s financial state.

AMC is trying to scare the film industry into supporting them. Wolfson admits that the outcome of this tactic is it is unknown. Predictability is a huge part of any corporation’s bottom line, and streamers are more predictable, even if they are stingier.

Wolfson concludes that theaters will survive the pandemic – but not all of them. The market is going to shrink. Smart money would invest in Sony TVs instead of on AMC theaters, in the short and long term.