Will Theatrical Movies Still Make Money in a Streaming World?

Black Widow Box Office

How do film studios and movie theaters make money in a post-COVID world? Marvel Studios

If (when?) the world returns to normal, the movie industry will find itself in a vastly unfamiliar spot. After decades of new films playing exclusively in theaters for 60-90 days, allowing box office receipts to accumulate over a long period of time, the entire economics of film distribution have been altered as a result of the pandemic.

Warner Bros. will have the option to send films directly to HBO Max after 45 days in theaters beginning in 2022 after opening their entire film slate this year day-and-date in theaters and on streaming. Paramount Pictures is adopting a similar 30-45 day window before rerouting films such as A Quiet Place Part II and Mission: Impossible 7 to new streamer Paramount+. Universal struck unique deals with major exhibitors to simultaneously open films on premium video on demand after 17 or 31 days in theaters, depending on box office performance. Disney has been experimenting with hybrid releases on Disney+ (continuing with Marvel’s Black Widow this summer) while sending certain features such as Pixar’s Soul and Luca direct-to-streaming. Sony CEO Tony Vinciquerra has hinted that his studio will also take advantage of shorter windows this year.

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With such a dramatic shift in how and when consumer access new feature films, it’s fair to wonder how film studios and movie theaters continue to thrive as pop culture’s primary gatekeepers. Do we need to readjust our box office benchmarks of success? Will audiences prioritize streaming over theatrical after a year inside? Hollywood is entering a period of uncertainty. But that doesn’t mean the traditional film industry is going extinct.

“People don’t stop going to concerts just because Spotify gives them access to millions of songs.”

“Many are overestimating the power of streaming to supplant the big screen moviegoing experience,” Paul Dergarabedian, Senior Media Analyst at Comscore, told Observer. “Streaming is more disruptive to other streaming; the big screen is a unique experience in a different way. People don’t stop going to concerts just because Spotify gives them access to millions of songs.”

Over time, as the marketplace continues to normalize, Dergarabedian sees Hollywood’s immediate emphasis on blockbusters—films that can draw enough people to theaters to help with the monetary rebound—as anticipated weekly events for the public.

With such a backlog of major tentpole product from Black Widow to No Time to Die and Top Gun: Maverick, theaters will once again recapture that feeling of “must-see,” assuming conditions are safe. Over the last decade, the idea of blockbuster seasons has slowly eroded. Film studios have learned that, with the right product, it can release a successful film pretty much any time under normal circumstances, changing the way Hollywood operates in the process.

January was long thought to be a dead month following the spending spree of the holidays, yet films like 2015’s American Sniper ($89 million), 2020’s Bad Boys for Life ($62.5 million), and 2019’s Glass ($40 million) have generated surprisingly strong opening weekends in recent years. The same sentiment used to apply to February before 2017’s Black Panther ($202 million) and 2016’s Deadpool ($132 million) changed the equation. Even October has long been a vacant month outside of Halloween fare, yet films like 2019’s Joker ($96 million),  2019’s Venom ($80 million), and 2013’s Gravity ($56 million) have completely rewritten the financial rules of the release schedule over the last 10 years. If these paradigms could fall, so too can the pessimistic view of the future of theatrical cinema.

“Windows may be shortening, but there will still be periods of exclusivity for theaters and the biggest box office performers,” Shawn Robbins, Chief Analyst at Box Office Pro, told Observer. “We’ve already seen the industry shift toward more front-loaded box office performances during recent decades, a trend that may accelerate further as studios aim their marketing muscle in an even more concentrated effort toward the upfront days and weeks of a film’s theatrical run in order to maximize earnings and build the downstream business model of at-home releases.”

Robbins notes that even at 45 days, which is increasingly looking like a new normal for exclusivity to theaters, most films before the pandemic had already earned 80 to 90% or more of their final box office revenue. Avengers: Endgame, for example, earned 91% of its $858 million domestic gross in its first month of release.

None of this suggests that maintaining the status quo and ignoring the realities of change is the best practice for Hollywood’s old guard. We can likely expect a far more curated case-by-case movie experience moving forward. In the past, you might question a film’s big screen viability due to budget, cost of marketing, scheduling, or any number of factors. Now, studios will need to maintain a more strategic worldview about which films go to theaters, which films go to streaming, and which films can be tested on PVOD. There’s going to be more flexibility between the big and small screens and it won’t be a set it and forget distribution world. Dergarabedian even sees added-value elements to further incentivize customers for both.

“I could see an effort made to dovetail the big and small screen experience since they are complementary and not adversarial,” he said. “Maybe I go see a movie in a theater in the future, and my ticket purchase automatically guarantees me access to the film on an at-home platform as well. It can be part of an inclusive bang-for-your buck experience that improves your access when buying a movie ticket. Something creative to innovate the old theatrical model.”

Robbins agrees that streaming and movie theaters are not in opposition to one another. Both can co-exist successfully, even if the business model evolution is still ever-present. At the end of the day, with vaccinations available worldwide, movie theaters offer to scratch the most basic of human itches for exclusive films.

“Even more than a direct-to-consumer world, we live in a society that demands instant gratification,” he said. “That remains one of the biggest marketing tools studios and theaters have to bring in audiences for the kind of entertainment experience that’s almost never possible to replicate again after films have left theaters.” Will Theatrical Movies Still Make Money in a Streaming World?