Tom Cruise Might Barely Recognize This Movie Business

Tom Cruise
Photo: Axelle/Bauer-Griffin/FilmMagic
Matthew Belloni
May 5, 2022

Jake Bloom, the fearsome talent lawyer who retired a few years back, used to refer to this time of year as “premiere season.” It was a great line, casually defining May and June as the months for splashy debuts of the movies that, financially speaking, actually matter—and, implicitly, placing his own clients at the center of those movies. There might be film events all year long, he was saying, but the blockbusters that his stars made—the Schwarzeneggers, the Stallones, the Bruckheimers, the Deppsthose movies premiered in early summer, before he and everyone else who mattered took off for their places in Sun Valley.

Premiere season is back, I guess, or at least 2022 Hollywood is doing its best to will the return of big summer spectacles back into existence. Something about a nearly 60-year-old Tom Cruise landing a helicopter onto an aircraft carrier yesterday to plug Top Gun: Maverick feels both totally comforting and totally desperate. Is this STILL the best we’ve got? But other than Marvel, it seems so. We’re 25 months into the Great Box Office Reset, as Exhibitor Relations calls it, and domestic numbers in the first quarter came in at just 56 percent of 2019. Even with hits like The Batman, Uncharted and a big chunk of Spider-Man: No Way Home, there just weren’t enough releases—or people interested in seeing them.

Yet now everyone is talking about whether the summer box office is officially “back.” OK… The trades seem downright giddy, and B. Riley, the analyst firm, put out a report last week suggesting that consumer sentiment is building. By the end of the year, they predict, overall grosses will hit 80 percent of the $11 billion earned in 2019, and will return essentially to normal in 2023. That’s a big lift from 56 percent.   

It might happen, it might not, and we’ll probably know a lot more by Labor Day. The sense is that Doctor Strange in the Multiverse of Madness will likely open to $200 million this weekend, and Top Gun 2 and Toy Story 5 and Jurassic Park 6 and Thor 4 and whatever Minions movie this is will all generate hundreds of millions of dollars and the gushing headlines that come with it. But even if those movies deliver like “normal,” let’s not kid ourselves: the summer movie business that is emerging from the pandemic is decidedly not the same as the one that Hollywood relied upon for decades.

Part of that is Covid, obviously. Despite all the Putin-esque propaganda reels at the Cinemacon conference last month, the truth is that only five movies are getting wide releases this month, compared to a whopping 16 in 2019, and summer will see a third fewer movies than that benchmark year. Studios are still gun-shy, to say nothing of the audience. Nobody knows how many regular moviegoers are gone, their habits broken and reconsidered amid all the great stuff on streaming services. Kris Longfield, one of the analysts behind the October study that revealed 8 percent of moviegoers may be “lost forever,” told me last week that the “lost forever” number has actually ticked up a few percentage points in a new survey, despite improving overall sentiment toward moviegoing. Eric Handler, an analyst at MKM Partners, noted this week that “visibility into a full domestic recovery with revenue once again returning to $11 billion+ remains extremely limited.” That’s a diplomatic way of saying I can’t say when, or if, it’s ever gonna happen again. It may now take even more marketing dollars to deliver butts in seats, and the post-pandemic hits have so far come amid little competition, so what happens when more than one big movie is vying for audiences? Even my buddy Adam Aron, the boosterish C.E.O. of AMC Theaters, recently said that box office won’t fully rebound until 2025. That’s scary. 

A potentially more significant factor, and a topic that is under-discussed, is the impact of the shifting “windowing” strategies among the major studios. Windowing is just distribution shorthand for “when this movie is available, where, and for what price.” Movies create value, and smart windowing is how those movies are doled out to create the most value—even box office flops become profitable if strategically windowed through theatrical, home video, so-called “Pay 1” and “Pay 2” windows, free TV, and eventually via packaged libraries that are licensed around the world.

For years, the major studios all kinda operated the same, tethered to months-long theatrical exclusivity, after which the various home windows kicked in. That’s all gone now, replaced first by the ritual nuking of various windows to chase Netflix at all costs while cinemas were hobbled, and now by dramatically shortened theatrical windows that vary by studio and film, but usually hover around 45 days. The good news for the summer box office is that, post-Netflix stock crash, the studios seem to have realized that, with exceptions, dropping movies on streaming the day they appear in theaters is bad business. From the B. Riley report: 

“One of the biggest drivers to our expectation for a meaningful rebound in domestic box office revenues this year is the return of exclusive theatrical windows for major film releases, after what is widely viewed as the failed experiment with day-and-date releases and direct to streaming moves by the studios. In our opinion, if studios could not make these release strategies work during the great litmus test of consumers essentially being forced to stay home, it makes sense to move back to theatrical windows….”

Sure, but it’s still unclear what impact the shortened windows will have on theater revenue in general. Some studios, like Disney and Warner Bros., are still pushing most of the windowing value directly to their respective streaming services. Yet for certain customers, a movie in a theater must be valued differently if it’s gonna be on TV in a couple weeks, right? Warners did a nice job downplaying its new 45 day window when marketing the theatrical release of The Batman, which has grossed $765 million worldwide. But how many HBO Max subscribers saw it pop up there so quickly, then thought to themselves, Wait, why did I see this in the theater? Great for HBO Max, but potentially bad for the next DC movie. Consumers will get wise to the windowing game, at least some will wait it out, and those holdouts will likely impact theatrical grosses on all but the biggest spectacles.   

That’s especially true because the biggest competition this summer will come not from movies opening opposite each other in theaters, but rather from big-budget streaming offerings that drop the same day as a theatrical release. For instance, Top Gun: Maverick has no major rivals on Memorial Day weekend, but it must face the premieres of Obi-Wan Kenobi on Disney+ and the fourth season of Stranger Things on Netflix. If I’m Cruise, the trailers for those massive shows scare the Thetans out of me. 

And he’s not alone. Warner Bros. doesn’t even have a big, pre-branded summer movie for theaters (unless you count the animated DC League of Superpets), but it does have two I.P.-driven direct-to-Max reboots in Father of the Bride and House Party. Plus, oh yeah, the Game of Thrones prequel in August, which is looking like a graveyard of horror and action throwaways in theaters. With that competition, it’s no wonder that the studios have thinned their slates.

People are referring to the 45 day theatrical window as the “new normal,” but to me, these studio windowing models all seem in flux. Thanks to the vanquishing of the theater owners, the studios are essentially free to experiment as they wish. David Zaslav, the new C.E.O. of Warner Bros. Discovery, is trying to figure out the right film strategy, one that includes the ideal mix of pushing value to HBO Max while also extracting it from theaters. That’s a tough balance, but I’d point him to what NBC Universal president Jeff Shell and film chief Donna Langley are doing.

Here’s the Universal strategy, pre-pandemic and now: 

Theatrical Window
Was: 74 days
Now: 17 to 31 days. A huge shift. It’s three full weekends if a movie opens to under $50 million, or five full weekends if a movie opens to over $50 million, with exceptions for things like Fast/Furious movies.

Premium Video on Demand
Was: This window didn’t exist pre-pandemic
Now: Most Universal titles are available to rent or buy from Day 17 (or Day 31) to Day 45, at a premium price point. So kids like mine can guilt their parents into paying $25 to watch Sing 2 while it’s still in theaters. Universal, which captures more revenue than in a theatrical split, has turned this window into a huge cash generator, according to sources. It also shares a small portion of revenue with theater owners.

Pay 1 Window
Was: About 245 days after theatrical release.
Now: Most titles go to Peacock, NBC Universal’s subscription streamer, just 45 days after theatrical release. Then in just four months, they jump to Amazon for 10 months (for live action) or Netflix (for animation), then 4 months back to Peacock, before they go to Pay 2 (the “network” window).

Network TV Window
Was: For about six years, movies would end up with one or more cable partners, like FX.
Now: Universal carved up the network window, with movies appearing on services for one year increments, rotating between NBC Universal channels (including Peacock and other NBCU properties) or outside channels.  

A few smaller titles, like Firestarter (May 12), will go day-and-date on Peacock. And all the while, there are still transactional opportunities to rent or buy the film physically or digitally.

Got all that? It’s confusing, I know, and most studios aren’t announcing specific theatrical windows, so consumers won’t think twice about going to a theater. “We expect studios to learn from their mistakes during the pandemic and remain firm with theatrical windows in a manner that keeps consumers guessing that maximizes box office ahead of any streaming move,” B. Riley noted.

Still, it’s interesting how Universal, owned by Comcast, differs from rivals. For instance, Universal really cares about that pay per view revenue, while Disney, which is still chasing Netflix scale, would rather direct viewers from theatrical to either Disney+ or Hulu. My guess is Warner Bros. Discovery and Paramount will soon switch to something more like the Universal model.

Or, if you’re Tom Cruise, you can demand your movie adhere to a full 120-day theatrical window, which seems downright ancient these days. That’s what happened on Top Gun: Maverick, I’m told. Paramount wouldn’t confirm the six months of exclusivity, so the term could still change (and pay per view will play a role). But if it ends up that way, Cruise would get his long theatrical runway—and Paramount would potentially leave a bunch of value on the table.