Innovation

Movie Theaters Are Closed, But Consumers Don’t Seem To Miss Them

How We Will Change: Let’s Go Stream The Movies!

In the week of April 20, something truly unusual happened in the history of the American film industry: The total weekend box office take came in at $33,456. That is not a typo. It’s a record-creakingly low figure, but that is actually not the most remarkable part of the story – the unprecedented part is that all of the money came from a single movie theater.

The entirety of the U.S. Box Office returns came care of the Ocala Drive-In Theater of Ocala, Florida, which showed a double bill of the World War II biopic “Resistance” and the indie psychological thriller “Swallow” for a ticket price of $6.  

Now technically, the Ocala Drive-In is not the only movie theater that is open in the U.S. – as PYMNTS has previously covered, a handful of drive-in movie theaters have remained open nationwide and are showing films to the general public. Ocala is unique in that it is the only theater in the nation that is currently showing new releases and reporting their grosses.  

And it’s in a part of the country that has nice weather.

It’s an anecdote that illustrates just how strange – and in some segments, how dire – the situation has gotten for the U.S. movie industry in the wake of COVID-19. The vast majority of the nation’s theaters are shut down at present, with limited openings only happening in a handful of states starting this week.

By comparison, a year ago at this time, Avengers Endgame was hitting theaters nationwide in what would become the largest domestic box office opening in U.S. history. The domestic box office was at $3.37 billion by this time in 2019, compared to $1.816 billion this year for a 46.2 percent decrease, according to Comscore. 

And hard times caused by the mass shutdowns may not necessarily be alleviated by the phased recovery that will start allowing movie theaters to re-open over the next several weeks. While theaters may have closed down, consumers' demand for movies has not disappeared. In fact, social distancing has left consumers with a greatly enhanced desire for digital entertainment sources they can access from their couches, which means demand for new-release films has increased.

That demand has been met by movie studios. With basically no theaters open to play their new releases, the studios have opted to send them directly to streaming on-demand services, for a price – and, in many cases, to great effect. 

For example, Universal’s “Trolls World Tour” was directly released for streaming on April 10 for $19.99. Over the last three weeks, the film has netted over $100 million in rentals. That is admittedly less than the $153.7 million that the first “Trolls” film collected at the domestic box office, but it’s a more lucrative outcome from Universal on the whole.

As a general rule, movie studios split the box office take with movie theater operators 50-50, whereas they pocket roughly 80 percent of the streaming-on-demand revenue. That means for the original “Trolls,” the studio picked up roughly $77 million, and with the digital release, they have picked up $80 million, making streaming the more lucrative option.

And Universal isn’t an outlier. Disney’s Pixar release “Onward” was considered a “disappointment” by Pixar standards, with roughly $40 million in opening box office earnings compared to the $80 million to $120 million that is more of the norm. The film, however, was pulled early in the social distancing milieu (in mid-March) and received mixed reviews. Most importantly, perhaps, Disney announced that alongside the digital release to paid on-demand streaming, it would be release “Onward” for free on its Disney+ digital streaming service within two weeks. We suspect that box office might have been higher had consumers not known they could save themselves $20 by waiting a few days.

And we aren’t the only ones becoming suspicious of the world of direct-to-stream releases – movie theater operators are watching the development of this trend with a very jaundiced eye. Earlier this week, AMC Theatres announced it will no longer play Universal films effective immediately, a response to comments made by NBCUniversal CEO Jeff Shell on the future of film releases that the theater chain found “unacceptable,” according to The Hollywood Reporter.

The comment in question? Shell noted in an interview with The Wall Street Journal that given the success of “Trolls World Tour,” “as soon as theaters reopen, we expect to release movies on both formats.” In other words, some movies will be theatrical releases, while some would release on streaming or possibly proceed straight to NBCUniversal’s new streaming service, Peacock.

As the largest cinema chain in the U.S., AMC Theatres is not amenable to this idea, according to their CEO Adam Aron. 

“It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice,” Aron wrote. “Therefore, effectively immediately, AMC will no longer play any Universal movies in any of our theatres in the United States, Europe or the Middle East.”

Given AMC’s size and scale, that could be a massive threat to NBC. Losing AMC screens could be a crippling blow for its upcoming releases. Aron has been clear that AMC is firm on its policy and that this move is “not some hollow or ill-considered threat.”

It could also be the equivalent of a tree falling in the forest that no one notices, since we will likely have a consumer who is perfectly fine with watching movies in their living room instead of a theater.

The last several weeks have demonstrated that consumers like streaming first-run movies right to their couch – so much, in fact, that digital releases can be more lucrative than their theatrically released counterparts. Whether that will hold true over the next several weeks remains to be seen as theaters reopen, but PYMNTS’ recent data indicates that consumers’ enthusiasm about flooding back into crowded, closed-off venues like movies theaters might not be too high. Even with theaters back in the mix, consumers might decide they’d rather stay home and stream for a while. 

If that’s the case, an exclusion by AMC or any movie theater operator won’t hold all that much weight, as blocking access to a venue that consumers are intentionally shying away from isn’t much of a threat if those movie studios have an equally lucrative venue – the living room – to get their films to consumers.

This means for the next few months, the movie industry may end up being just as interesting to watch as the films it produces, as we see whether consumer behavior has changed to the point that movie theaters no longer have the leverage they once did to dictate terms to studios.

——————————

PYMNTS TV LIVE OCTOBER SERIES: B2B PAYMENTS 2021 – WHAT WILL YOU CHANGE? 

Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

TRENDING RIGHT NOW