What happens when the entire world effectively shuts down for the foreseeable future? Sadly, we are about to find out, and we are all of us in this together. Industry, however, has to find a way to make money. Absent government bailouts and maybe, in some cases, even with a bailout, industries of all kinds are looking through their emergency contingency plans and finding few concrete solutions for "pandemic." For those that can pivot to e-commerce without endangering their employees, however, this current crisis will lead to experimentation by necessity.
That's how we've ended up in a place which would have been unthinkable just a couple of months ago: Universal has announced it is breaking the exclusive theatrical release window.
What's Universal's Plan?
By this Friday, recently released films like The Invisible Man, The Hunt, and Emma will be available for a 48-hour rental at the price $19.99, or the equivalent value overseas. Even more significantly, Trolls: World Tour will also be available to rent online the same day it releases in theaters on April 10.
You can do the back-of-the-napkin math to try and figure out exactly how many $19.99-rentals it would take for a movie like Trolls: World Tour - which likely cost over $100 million to produce since the first Trolls carried a $125m production budget - to actually eke out a profit. That's almost beside the point, though. This isn't a normal-time experiment in distribution; it's a war-time effort to find some way to cut losses. ( Comcast - Universal's corporate parent - was off nearly 9 points by end-of-the-day trading on Wall Street.)
The official line from NBCUniversal CEO Jeff Shell, as quoted in The Wall Street Journal:
"Rather than delaying these films or releasing them into a challenged distribution landscape, we wanted to provide an option for people to view these titles in the home. We hope and believe that people will still go to the movies in theaters where available, but we understand that for people in different areas of the world, that is increasingly becoming less possible."
Shell, however, declined to say when or if these titles would move from VOD to the company's forthcoming streaming service, Peacock. He also repeatedly stressed this is not meant to be a permanent change for all releases going forward indefinitely but instead a "break-glass-in-case-of-emergency" limited strategy.
And the Theaters Are Cool With This?
"Like hell you will" would be the normal response from theaters since the National Association of Theater Owners (NATO) has long since viewed the exclusive release window as the last thing keeping it from going the way of the bookstore or record shop. In the short time since Universal made its announcement, however, Regal, AMC, Alamo Drafthouse, and just about every other major theater chain in America shuttered their doors, with AMC stating it doesn't expect to open again for at least another 6 to 12 weeks. Similar announcements have been made by theater chains overseas, and in other areas closures have been mandated by government action.
By the time Trolls: World Tour arrives, China, ironically, might be the only place with open movie theaters.
How Long Before the Other Studios Join?
As of this writing, none of the other studios have followed suit. They might be waiting to see Universal's numbers on the first batch of rentals Friday, or they could all announce similar moves by the end of today. Not to go all JFK on you, but we're through the looking glass here.
Disney, at least, has shown its own willingness to adapt, recently bucking the traditional home video release window by putting Frozen 2 on Disney+ three months ahead of schedule. WB has not yet given any indication as to where it might go with this, but it will be releasing Birds of Prey to VOD earlier than expected and STX is doing the same with The Gentlemen. And if AMC is serious about staying closed for as long as 12 weeks that could force Disney into deciding to finally either delay Black Widow or decided if it should go to Disney+ instead, likely at a huge loss, of course.
I Know All About the Exclusive Release Window, But I Have This Crazy Friend Who Doesn't Know What You're Talking About
The exclusive release window is quite simply the (often-handshake) agreement between the film studios and movie theaters that says, "Wanna see that new blockbuster? We're the only game in town for that, baby! Oh, sure, you can wait to rent it online, but only if you're cool with waiting 3 months! Everyone will be talking about this movie and you'll be totally confused because you'd rather wait to rent it. But, fine, you do you."
Except, ya know, they're nicer about it.
It's supposed to be a win-win for the theaters and studios - the theaters get the exclusive on all the big new movies and split ticket sales, on average 50/50 with the studios, and the studios not only get their cut of the pie but use the theatrical sales as a profile-boosting roadmap for all the additional release windows - home video, cable, streaming, etc. It's a system, however, born from a prior, pre-Netflix entertainment ecosystem, and many producers and studio executives have openly wondered if it really makes sense anymore in the age of streaming. As a result, the theaters have gradually been forced into making various concessions.
The exclusive window, for example, used to be 6 months, no exception. Then, like the Borg taking more and more territory from The Federation in Star Trek, the studios kept chipping away at it. The first big move came in 1989 when WB released Batman on home video a mere four and a half months after its original theatrical release and priced it at just $24.95 to buy at a time when new VHS movies typically sold for around $90.
Super awkward, though, because when Batman hit VHS smaller, second-run theaters were still exhibiting the movie, thinking they still had the exclusive for another month and a half. The theater owners were not amused:
The move paid off for WB, netting the studio $150m in home video sales, taking the leverage back from the theaters and setting the stage for decades of retrenchment until the release window had been whittled down to 90 days. In 2018, WB even floated - and eventually abandoned - the idea of converting to a minuscule 17-day window, much to the horror and outrage of NATO. Two years prior to that, Napster co-founder Sean Parker had an idea to basically make new movies available to the super-rich via special, expensive set-top boxes, and it, too, was eventually shouted down despite support from figures like Steven Spielberg and J.J. Abrams. Somewhat quietly, however, the studios have recently knocked the exclusive window down to just 75 days, according to The Wall Street Journal.
Now Is the Time to Experiment
The theaters, of course, aren't a monolith. The biggies - AMC and Regal - have consistently viewed streaming as an existential threat, but smaller competitors have been more willing to, for example, partner with Netflix and exhibit films due to hit the streamer several weeks later. Others have been perfectly fine with day-and-date releases, exhibiting movies that hit VOD the same day as theaters. Sadly, it is likely those smaller chains that will suffer the most during this crisis as they will lack the reserve funds to get through this.
IndieWire's Anne Thompson recently forecasted a scenario where many theaters might fail to pay their rent or declare bankruptcy, thus forced to lean on the studios or government for a potential bailout, "When the time comes for theaters to regroup and rebound, the studios may need to help exhibition get back on its feet, whether via favorable terms or some kind of share of streaming revenues." Should that come to pass, the exclusive release window will almost certainly be on the table for renegotiation.
A Shock to the System
Taking a wider view here, the theatrical release window is but one way the COVID-19 crisis might force industries into long-overdue change. The inequities and vulnerabilities in every part of society are being exposed right now, and there could hardly be a bigger shock to the system and old way of doing things than a complete stoppage to damn near everything. As a result, there will undoubtedly be a wide variety of new efficiencies and supply chain solutions discovered through this dire experiment of global self-isolation as well as confirmation that certain types of jobs simply cannot be converted to telework.
But there will also be lots of shuttered businesses, late rents, and struggling families and individuals, particularly for anyone with service or gig economy jobs. (2 out of every 10 Americans, for example, comes from the service economy.) We all need our escape, but if by early April we're still quarantined the choice between paying for necessities or shelling out $19.99 to rent Trolls: World Tour won't be any choice at all. And that hypothetical assumes good health. Should you or anyone in your family fall ill, VOD economy will hardly seem like a pressing concept.
I don't want to diminish that; I just think Universal is wise to at least try, especially at a price that is fairly reasonable for an average family of four. Given the staggering amount of other, cheaper streaming options, who knows if it will work, but at least Universal is trying to adapt. In truth, it's an experiment that once had plenty of support at the other studios, and in success, it could lead to permanent change.
One Final Note
On the opposite end of this crisis - whenever that end should mercifully come - there will theoretically be a pent-up demand to go out into public spaces and do all the things we used to. We'll need escape, entertainment, the comfort of being near our friends and family again, but things won't so easily go back to normal. China - which has at least temporarily halted the spread of COVID-19 - re-opened its first theater yesterday, with a skeleton crew of three employees running the projectors, sanitizing the entire building, and selling tickets. A tall task for just three people, but all for naught:
Not a single customer showed up.
Stay safe out there, everybody.
