Tuesday, October 4, 2022

What Warner Media’s Latest Move Means For Hollywood & Consumers

By Agambir Bajwa 

As the initial shock of Warner Media’s announcement from last week wears off, I think we can all agree that we are all surprised and that this situation is a mixed bag. I’m here to breakdown everything that is happening surrounding the decision made by Warner Media to move their 2021 movie slate to HBO Max. For your convenience, I’ve broken everything down into six sections, so you can read the piece as a whole or read what you’re most curious about.​

​What Is Happening?

Last week Thursday, Jason Kilar, the head of Warner Media (which owns all of Warner Bros, HBO, CNN, etc.) announced that they would be moving all 17 of their 2021 planned releases to debut in theaters and on HBO Max simultaneously at no additional charge for 31 days. Since HBO Max is only available in the United States, a stay-at-home streaming option will only be available to U.S. consumers, and the rest of the world will have to see these movies wherever theaters are open. After 31 days in the U.S., the films will follow a traditional release strategy by being theatrically exclusive, then being available for physical or digital purchase before going on HBO Max again. Internationally, the films will follow a traditional release strategy from the get-go. This move was worded as something extraordinary for “the fans” and something that will be an experimental one-off for 2021. Now that is only partially true. This move is excellent for U.S. fans because it gives them an option to choose where they feel most safe watching these movies, but it’s not as fortunate for international fans. As for this move being a one-time thing, you can bet that if it is successful and brings in a lot of revenue for Warner Media, this will not be a one-off. Remember how just a few weeks ago, “Wonder Woman: 1984” opening in theaters and HBO Max simultaneously was supposed to be a one-off? This means we cannot predict the direction that the film business is heading in because of this pandemic.

Why Did Warner Media Make This Decision?

This decision was made for several reasons. The most obvious is that they want people to subscribe and stay subscribed to HBO Max, which is doing very poorly compared to Disney+ and Netflix. The whole reason AT&T acquired Time Warner was so they can have their own version of Netflix because it brings in a lot of revenue. By only putting “Wonder Woman: 1984” on HBO Max, they knew people could unsubscribe after watching it, so they needed to find a way to keep people subscribed. Now there will be a movie that was meant to be debuting in theaters coming to the service almost every three weeks, along with other content, giving people a reason to stay subscribed. Also, having each movie only available on the service for 31 days will keep people subscribed. It creates a similar feeling to having a limited edition product that you can get while supplies last. But in this case, you can watch the movie as many times under 31 days, and then you will have to wait a couple more months until the movie comes back to HBO Max.

Second, these movies cannot just be shelved and wait until most people feel that it is safe to go back to movie theaters. Some of these movies have already started their ad campaigns, and some are completed or are in post-production. If these movies are just sitting there gathering dust, they’re costing the studio money because they are accruing expenses. Each day that goes by is a day where these movies will cost the studio more money, and the harder it’ll be for them to break-even or turn a profit. This is a move that would allow these movies to be seen by audiences, boost subscribers for HBO Max, and bring in additional revenue because they are still being released in theaters globally.

When you take a look at these movies, even during a typical year, only seven of them would have a chance of doing well at the box office. The rest are the type of movies the average consumer will not go out of their way to see in theaters because they’re something they would see on Netflix. I’ve placed these films into three categories, streaming, mixed (could go to streaming or theatrical), and theatrical to classify what type of movie it would be in today’s market.

Streaming: “The Little Things,” “The Many Saints of Newark,” “King Richard,” “The Conjuring: The Devil Made Me Do It,” “Judas and the Black Messiah,” “Those Who Wish Me Dead,” “Reminiscence,” “Malignant,” “Tom & Jerry” & “Dune.”

Mixed: “Godzilla vs. Kong” & “Space Jam: A New Legacy”

Theatrical: “Wonder Woman: 1984,” “The Suicide Squad,” “The Matrix 4,” “Mortal Kombat” & “In the Heights.”

If Warner Media had only put the titles I’ve classified as “streaming” movies, they wouldn’t have a lot of interest in their service because brands are what sell services. None of these “streaming” movies belong to a global brand except for “Tom & Jerry.” “Dune” is an interesting case; the film, even though it looks like it’s meant to be seen on the big screen, is not something that is attractive to mainstream audiences. This film is in a very similar position to “Blade Runner: 2049,” which was a great film that cinephiles loved, but general audiences didn’t show up to see it, and it lost a lot of money.

Brands are what are keeping these services attractive to consumers. When you think about Disney+, no one talks about any of the originals except for the one branded original content they have, and that is “The Mandalorian.” These “theatrical” and “mixed” films belong to big global brands and will keep people subscribed to HBO Max. The “streaming” films wouldn’t have a good chance of doing well in theaters, and this is a way for them to be seen by more audiences so they can have a more significant impact than they usually would.

What Does This Mean For Domestic vs. International Audiences?

Dune 2021

This is excellent news for anyone living in the United States because they get the option to choose where they would feel most comfortable and safe seeing these movies. For the rest of the world, this decision is upsetting and disappointing. COVID is booming worldwide, not just in the U.S. and for the films that have more prominent brands. It would be great for international audiences (like myself) to see them from the safety of our homes until theaters are open and conditions are safer. However, this situation is a double-edged sword. If they keep an at-home and theatrical option exclusive to the United States, theaters will still have exclusivity to these movies worldwide. Like “Tenet,” most blockbusters make most of their money internationally, not domestically, because movies are a global business.

Is This The End Of Movie Theaters?

I don’t think this is the end for movie theaters. This might be a temporary shift in how we consume content. But how long will that last? I have no idea. But I do think people will want that communal experience of watching these films. I mean, imagine watching something like “Avengers: Endgame” on your T.V., without an audience. The experience would be degraded. Also, there is no way studios can make as much money on their branded content on a streaming service. Take “Joker” as an example. “Joker” cost around $63 million to make but made over a billion dollars worldwide. There are many positives for audiences and studios by keeping their big movies theatrically exclusive.

However, gone are the days of movie theaters being lazy and waiting for everyone to show up. When you think about it, for movie theaters to survive, they require a product from another business. They need to stop complaining and make the theatrical experience more attractive to consumers. Studios also need to supply the theaters with films that audiences will pay for and go out of their way to see. For example, take Warner Bros approach for the latter half of 2019 with their slate of movies. Only “Joker” was a hit. The other films like “Doctor Sleep,” “Motherless Brooklyn,” “The Good Liar,” “Richard Jewell” are adult dramas that just wouldn’t play well in today’s theatrical market, and they bombed. The government also needs to support theaters in their time of need as well as other businesses.

The worst-case scenario that would happen, in my option, is that after the pandemic, movie theaters become more of a luxury, and only some stay open as consumers get used to seeing movies at home. However, I don’t think that’ll last for long. With so many streaming services, people are being bombarded with content to watch and will eventually become overwhelmed with the overflow of content to watch and will need a break. Think about it. These services are just turning into channels that you have to pay for individually. That is where theaters will step in, and in 5 or 10 years, I think the theatrical model will be brought back to life in a significant way. But that is the worst-case scenario, in my opinion. Comparing theaters to music or book stores is like comparing apples to oranges. Theaters are a communal experience, whereas music and bookstores are an individualistic experience. That is why theaters will survive, but they desperately need to evolve.


​What Does This Mean For Talent & The Future Of Warner Bros?

While talent might initially be upset with Warner Bros for not telling them before the decision was made (which was not cool of W.B.), I think they will eventually come around. I mean, this is just the future of movie-going, and for the time being the safest and most accessible way for people to watch their movies. However, I do think some talent might be upset that their theatrical films are going to a service named after a popular television channel and not a film studio like Disney+. As for back-end deals, I’m sure the people over at Warner Bros will work something out. The talent that usually has back-end deals are the ones making millions of dollars upfront for their salaries and then making millions in bonuses. Given that we are in a pandemic, they are the one’s doing much better than most people who are struggling. Talent will need to settle on back-end deals and realize that they’re not going to be making as much money as they usually do, as is the case with everyone else in the world.

As for attracting talent in the future, if this is just a one-off, I think everything will be fine. Warner Bros, through its history, is a filmmaker first studio like no other. I’m sure that mindset will not change. For filmmakers who want their films to be exclusive to theaters, make a big movie with global appeal. If you’re going to make adult dramas or small niche movies, it is not financially responsible to put them out in theaters in the world we’re living in, even without the pandemic. This is just a harsh reality. If this strategy continues for Warner Bros. for years to come, talent will jump to other studios unless other studios follow suit.

As for production and film financing companies attached to these projects, Warner Bros is still giving them a global theatrical release, which would avoid any conflict that could arise.

As for Warner Media, if HBO Max is not a successful service, the worst-case scenario is that AT&T will strip it for parts and sell it off. The whole reason AT&T acquired Time Warner was to have a streaming service that could make billions like Netflix. If that doesn’t happen, why would AT&T, a telecommunications company, keep Warner Media around? However, I think everything will be fine as HBO Max has already reached 12.6 million activations and engagement is up 36% from the past month, as John Stankey, the CEO of AT&T, said on December 8 at the UBS Global TMT Virtual Conference.

What Will Other Studios Do? 

As for other studios, Disney’s the only one who can make a big move like Warner Media did. However, they will either be seen as copying Warner Media or not being as bold if they do. Either way, they don’t come across as game-changing as Warner Media does because they were not the first to make a move. Disney does have a big investor day presentation regarding the future of Disney+ and the company’s theatrical releases planned for December 10. I would expect them to announce an adult section (this rumor has been going around for a while) where they can put all the Fox movies like “Deadpool,” “The Shape of Water,” etc. They will probably move other films that have been completed for a while, like “Cruella” and “Jungle Cruise” to Disney+ at no additional charge à la “Soul.’ If they want to be as bold as Warner Media, I think they would put a big movie like “Black Widow” on Premier Access like “Mulan.” They likely will charge for the film because Disney+ costs almost half of what HBO Max costs.

I expect that other studios might sell their films like “No Time to Die” to streamers because even if they get released next year, they won’t be making a lot of money. Yes, a vaccine is coming, but it will take months in some countries and over a year in others for everyone to get vaccinated. COVID-19 is not going to go away anytime soon. 

This situation is definitely a mixed bag, but I hope by reading this, everyone sees where Warner Media is coming from and how this is the best decision for right now for them and some consumers. Let us know your thoughts in the comments section below or on our Twitter account.

You can follow Agambir and hear more of his thoughts on the Oscars and Film on Twitter at @AgambirBajwa

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