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Warner Bros. & Sony’s “Only in Theaters” Strategy Facing a Digital Revolution

2020 hasn’t been kind to anyone. COVID has made the life of many difficult and halted many prominent industries. The film industry has certainly been hit hard. Not only have all their productions been halted, but they also can’t air any of their finished films. Most tentpole productions have budgets that go beyond the $200 million mark. Every release past March was postponed either until the fourth quarter or even for a full year into 2021. September was the month that everything should change. Cinemas were slowly opening again. Tenet was promised to reignite the Box Office again.

Sadly, it brought in just $20 million and is barely scraping by in the States. We’ve already seen the results of this underperformance. Now, Warner Bros. has postponed Wonder Woman 1984 to December. This is just a week after Dune premieres which would cannibalize their own production. Sony is deciding to wait for COVID to be a thing of the past, which is still unknown. On the other hand, Disney is testing the waters with a brand new Premium Access option on its streaming service. Universal was the one that kickstarted a digital revolution by releasing films on video-on-demand.

Delaying the Inevitable

It’s more than just a question of time at this point. Even as cinemas open, people will be a bit cautious about returning to a cramped dark space. Even countries that reopened cinemas are now changing direction. Here in Austria, you have to wear a mask as of next month while watching a film. This state-mandated rule will just encourage people to stay home and not take the risk. There is the discussion point at what point can one even consider it to be “safe” to return to cinemas. Sony’s strategy could drag out well into 2021. This could go as far as delay the third Spider-Man‘s December release. Warner Bros. might also go mad by constantly delaying their productions without an end in sight.

Production budgets are borrowed money. The longer they drag out the releases, the more expensive it might become. Most 2020 productions will have to take some loss into account. We won’t be seeing any record-breaking releases anytime soon. In the end, Universal and Disney might be on track for the best strategy right now. Smaller production companies also combined physical and digital releases at this point so they don’t have to market each delay. Marketing budgets would continue to grow as they’d have to rework every trailer. At this point, it is all about cost minimization. Even if 2021 opens up the floodgates, it will be so packed with new productions they will cannibalize each other. There is a good chance, film productions won’t recover until 2022.

Facing a Digital Future

AMC already had issues with Universal’s strategy by banning them temporarily from cinemas. People criticized Disney+’s pricing for Mulan which was around $30. If you compare it to the $20 rental fee for Bill & Ted Face the Music, it’s surprisingly reasonable. Plus, Disney+ focuses its marketing towards families, so a four-headed family gets off pretty cheap than paying upwards of $40 for tickets. Plus, they can save money by avoiding the concession prices. For some, the price isn’t that bad. Disney might not just be able to cover costs but even turn in a profit. It not only boosts their subscription numbers but also makes up for the Box Office loss it would’ve faced otherwise. We can expect films like Black Widow to be added to Disney+. If you are interested in a deeper analysis to check out Edward’s analysis by clicking here.

Warner Bros. and Sony are simply postponing the inevitable. When we were discussing the implications of the WW84 delay, Charles made the good point that Disney might be able to dominate the market. They would be the only company to make their tentpole releases available to everyone without any competition. As such, they don’t have to worry about cannibalization. Even as AMC tries to lawyer up against these strategies, it’s the only option to keep the industry alive. If production companies can’t cover their costs, there won’t be any films to show in empty theatres. Believe me, I would want nothing more than to return to a cinema again but it’s still a massive risk. Right now, Disney and Universal have a better strategy and it wouldn’t be surprising for the others to follow suit. From this perspective, Sony and Warner Bros. are going to face a very rough 2021.

Source: CNet, The Verge, IndieWire, Forbes

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