Shaken and Stirred: Welcome to the Fall Movie Death March

Cinepolis Bay Theatre, closed due to COVID with a #SaveYourCinema sign
Photo by AaronP/Bauer-Griffin/GC Images
Matthew Belloni
August 19, 2021

One of the many brilliant conceits of The Office was that Ricky Gervais and Stephen Merchant set the whole thing at a paper company. All the corporate absurdities, the egos, the insults and power plays were rendered even more ridiculous because the entire business was becoming obsolete. Paper wasn’t going away entirely, but in the early 2000s, it was just funnier that a deluded fool like David Brent—or Michael Scott in the U.S. version—would be scraping for self-worth in an industry that, while it was never discussed, was being decimated by digital.

Just like the movie business today, right? It definitely feels that way. Call a film executive, ask what the latest distribution strategy is, and you’ll get a nervous laugh, then some variation on “We’re flying blind here” or “It’s informed chaos” (or, if their publicist is on the line, “We’re remaining flexible”). Eighteen months into a relentless pandemic, I’d say the sentiment is no longer panic, it’s more exasperation, and anger, and a sense that there’s no way to strategize eight to twelve weeks out because everything changes day to day. Worse, there’s no reason to think movies are going back to “normal” anytime soon, if ever.

That’s true everywhere in town, but it’s especially true in film distribution, usually the most data-centric and heavily-researched units at the studios. It’s a business that has worked pretty well for 100 years, despite at-home innovations like television, HBO, VHS, DVDs, and pay-per-view, growing to a record $43 billion in global box office revenue in 2019—a stat you never see in reports declaring the death of movie theaters. Then came the pandemic, which likely rendered that number the high-water mark for theatrical, scaring off customers and supercharging the theory that subscription streaming is somehow a different form of at-home entertainment than subscription television. Or, rather, there’s a company, Netflix, that has become a stock market darling in that business, so now everyone must abandon 100 years of theatrical success as a condition of chasing those subscribers.

After essentially 15 months in purgatory, this moment was supposed to be the big ascension. The low-hanging fruit was sold off to streamers, the big titles with “theatricality” were pushed to early 2021, and then to late summer and fall. Everything was built around that Hot Vax Summer that never came. Instead, July and August have looked more like a dark winter night during one of those massive blizzard pile-ups on I-95. One after another, films are crashing and burning, opening to about half what they’d normally generate. Then, like Toonces the Driving Cat, they ride off a cliff in their second weekend. How long can this continue?

A year and a half of movies have been crammed into this six month corridor, and just this morning, a new poll revealed only 67 percent of Americans are comfortable even setting foot in a theater, down from 80-something percent just a month ago. Not great, though it ticked up a little this week. Older women and young children (and their parents) are especially reluctant. For film executives and producers, the Sunday grosses are like hearing that another longtime Dunder Mifflin paper client has halved its usual weekly order.

Some of that, of course, is self-inflicted, thanks to the day-and-date streaming strategies that are boosting subs to Disney+ and HBO Max while draining blood from the box office of movies like Black WidowSuicide Squad and the rest. With the Delta variant blowing up the fall and holiday season models, at least the companies with streaming services have options. They may be lighting money on fire, but it’s for a purpose. And they don’t have to agonize as much over their strategies. The rest? “Studios have some big decisions to make in the next couple weeks,” Jeff Bock, the box office analyst, told me yesterday. “You can’t sustain with these drops week to week.”

Without its own streamer, or on a film deemed too expensive to jettison to streaming, a studio is left with a few bad options: Shift again, forcing another hefty marketing spend and potentially diminishing the value of the film through fatigue; sell off to streaming, like Sony just did by sending Hotel Transylvania 4 to Amazon for a reported $100 million; or trudge ahead with the current death march, going through the usual motions while knowing there’s no real path to profitability for most of these movies.

Depressed yet? At least you’re not attending CovidCon—er, CinemaCon—the annual theater owners convention, which, amazingly, is still happening next week at Caesars Palace in Las Vegas—albeit without the stars and media stunts that usually generate headlines. I’ve always found CinemaCon amusing, and not just because I enjoy perusing the large “concessions” ballroom displaying the latest bizarre flavors of Icee and nacho cheese. What’s funny is that while Hollywood is so often painted as the exclusive province of out-of-touch, bicoastal liberals, the people who actually sell movie tickets are Red State exhibition executives based in places like Kansas (AMC Theaters), Tennessee (Regal Cinemas), and Texas (Cinemark). In short, CinemaCon is a steakhouse owner’s dream. I once played blackjack next to a mid-level exec based in Knoxville who tried to get me to explain why the #OscarsSoWhite movement was, you know, “a thing.” The loudest ovation I heard was in 2015, when Tom Cruise showed up to unveil that Mission Impossible stunt where he hangs off the side of a plane. You get the point.

One thing I never heard at CinemaCon was any discussion of the decline in movie attendance, which was a big problem even before the pandemic. This year’s event speakers will likely keep their heads firmly buried in the sand, chanting “The big screen is back!” and praying that the fall titles aren’t pushed to 2022 or, worse, sent to streaming. No film is under a bigger microscope on this issue than No Time to Die. Numerous sources have told me there just isn’t a way to make much money in the current environment on a $250 million-plus production, but distributors MGM and Universal—with pressure from the Broccoli family, of course—are said to be committed to that Oct. 8 release date. Bond movies typically do nearly 80 percent of their business outside the U.S., particularly in the U.K. (where it’s set to open a week early) and Europe, and Universal is hoping the Delta peak will have passed there. China also hasn’t yet allowed the film, but previous Bonds got in (2015’s Spectre grossed $85 million there), and the fall release date was picked in part to avoid the country’s summer ban on Hollywood fare. It needs every penny from every market.

If the new normal best-case scenario for a tentpole movie is F9 ($682 million and counting, including $204 million from China; about half the previous installment), maybe Bond gets to that number? It skews older, which could hurt it, and Venom: Let There Be Carnage’s recent shift to open Oct. 15 in the U.S. is a second-weekend challenge, but MGM hopes Venom will move again. Vaccine mandates in some U.S. states and countries like France also could limit crowds—or might embolden certain people to return to theaters. Who knows? The consensus among distribution people I talked to is that the mandates will be bad in the short-term because some people will be turned off, but if they convince more people to get vaccinated, that’s better long-term.

Regardless, if the Bond situation is looking bad, especially in the U.S., watch how fast it goes to PVOD (pay-per-view). The Broccolis would have to sign off on that windowing shift, but making the film available early for a fee would be a way to honor a theatrical window and capture some additional cash if people just aren’t showing up.

Beyond Bond, decisions will likely be made on a film-by-film basis, with each studio in a different situation.

  • Warner Bros. long ago decided its 2021 movies are a massive loss leader to boost HBO Max, and there is strong evidence that the movies are helping subs. (That’s not a surprise; the secret at HBO over the years was that the original series got all the attention but the “Pay 1” movies actually drove viewership.) So DuneMatrix 4 and the rest have that “cushion,” even if they flop theatrically.
  • So does Disney, if it chooses to use it. Free Guy couldn’t go day-and-date because of the limits of Fox’s HBO output deal, and its release hasn’t been a total disaster (though a $28 million opening for a $150 million tentpole would have been considered terrible in the Before Times). Shang-Chi and the Legend of the Ten Rings seems to be testing the theatrical waters in early September (it’s tracking for a mid-$40s debut, on the low end for Marvel originals, but tracking means less than usual these days). I wouldn’t be surprised if C.E.O. Bob Chapek goes back to the day-and-date “premiere access” strategy for November’s Eternals if Shang-Chi doesn’t deliver. He can then say he tried.
  • Universal has Peacock but the studio still wants to actually make money in theatrical, and it believes lower-budget films with targeted audiences, like Dear Evan Hansen (young women, musical superfans), and horror franchises like Candyman and Halloween (young people) can still do OK. If it’s not looking good, NBCU’s Jeff Shell can pull an audible like he did on Boss Baby: Family Business and drop titles on streaming.
  • It’s the big-budget, all-audience stuff without an obvious streaming home that seems most vulnerable. This fall, that means potential trouble for Sony, with two Spider-Man plays (VenomSpider-Man: No Way Home) and the Ghostbusters reboot, plus Paramount with Top Gun: Maverick. I’m betting Tom Cruisewould rather push again than debut his opus on Paramount+, but could ViacomCBS’ Shari Redstone stand up to Cruise like her father once did after the Oprah couch-jumping incident? It’s decision time.

“There’s no crystal ball on when things will be better again,” one distribution exec griped to me this week. What about never? That’s a distinct possibility. I’m not one of those doomsayers who believes people won’t return to theaters. More than $40 billion worth of box office isn’t just going to disappear. But I do think that even after the “recovery,” the theater business will likely shrink about 25 or 30 percent over the next five to ten years, becoming a boutique industry rather than a mass market, making it less attractive to outside capital. Consumers are getting too used to first-run movies at home, and the studios seem intent on furthering that acceptance, despite the potential long-term impact on the business. It’s either a race to the future or a race to the bottom.

After all, a significant drop in box office revenue would bring massive changes across the entire leisure economy. N.A.T.O., the theater lobbying group, put out an Ernst & Young study yesterday saying the theatrical industry sparks $5 billion per year in consumer spending outside of theaters. In Hollywood, it’s not just that mid-to-small budget films will go directly to streaming, which was already happening pre-pandemic and has accelerated dramatically. I think budgets on the upper-end films will come down, too. The A+ franchise play would still make sense: Marvel, Bond, Star Wars, etc. But without a critical mass of theaters, why risk $150 million on Free Guy, an A- movie that will now open to $28 million and get pushed quickly out of theaters, then hastily arrive on streaming a month later. The death of the mid-budget theatrical movie might just expand to include the $100 million to $200 million play as well. And even if its subscriber numbers stay where they are, how many nine-figure movies can Netflix afford to make in a year? And for how long?