- [Narrator] The coronavirus pandemic has shut down
movie theaters across the country.
With people bound to their homes,
they're streaming more than ever,
and some Hollywood studios are releasing some films
direct to streaming services and digital platforms,
shaking up a distribution model
that's been in place for decades.
- The theaters are saying you're taking advantage
of a crisis here, and the studios are saying no,
we're meeting consumers where they are,
and a lot of them are stuck at home.
- [Narrator] This trend away from theaters
and toward digital platforms began years ago,
but experts say the pandemic could accelerate that shift.
Here's how.
This is the path a film typically follows
as it's distributed in the US.
The top big-five studios own the legal rights
to movies they produce, and they distribute them
to several destinations.
Say a film is made and distributed by Sony.
Normally, the distributing studio makes deals
with movie theaters like AMC to organize
a wide theatrical release to over 3,000 screens.
Theaters traditionally have exclusive rights
to show the film for 75 to 90 days,
a period known as the theatrical release window.
After that window ends, the film usually goes
to digital platforms like Apple or Amazon
where it might be available for digital rental or purchase.
Later, the film is distributed again at a lower price
and may become available on DVD or Blu Ray.
Finally, the studio can sign a deal with Netflix
or another third-party streaming service
or head to cable channels like HBO,
but the coronavirus crisis is shaking up that model.
Take "Trolls World Tour." - Yes, Papa Fur?
- [Narrator] On April 10th,
Universal Pictures digitally released the film
straight to platforms like AppleTV for 19.99
for a 48-hour digital rental,
bypassing the theatrical opening.
- So theaters have viewed this as a philosophical
and an existential threat for many years.
They wanna safeguard that exclusivity window
because they know that it is still one of the main reasons
people go to the theater, right, is because they're
showing movies that you cannot see anywhere else,
and the experimentation over the last several weeks
with the theaters closed has really been a source
of friction between studios and exhibitors.
- [Narrator] The move was a gamble, but it paid off.
In just three weeks,
"Trolls World Tour" made nearly $100 million in rentals,
the biggest opening day and weekend
for a digital title ever.
NBC-Universal CEO Jeff Shell told the "Wall Street Journal"
that the results for "Trolls World Tour" have exceeded
our expectations and demonstrated the viability
of PVOD, or premium video on demand.
Theaters were less enthusiastic.
- Whenever Universal announced that they were
going to do it with other movies and planning then,
this is key, planning to release movies
with some more fluidity between theaters
and digital platforms even after theaters re-opened,
it really became open warfare.
- [Narrator] AMC CEO Adam Aron sent an open letter
to Universal saying that his theater chain,
the largest in the world, would refuse to show
any Universal films going forward.
- Universal's decision to send "Trolls World Tour"
straight to the digital platforms is going to be remembered
as a turning point in the relationship between
studios and exhibitors because it's going to force
some very hard conversations when the theaters re-open
about why that might not be a viable alternative
to the exclusive theatrical distribution model.
- [Narrator] This all happening
at a very bad time for theaters.
Analysts predict there will be zero box office revenue
in May and a 30% drop for domestic ticket sales this year.
Some are predicting that domestic box office earnings
will be around 6.7 billion for the year
down from more than 11 billion for each
of the past five years putting 2020 on track to become
the worst year for the film industry since 1997.
- A lot of analysts expect a lot of smaller,
independent theaters to really struggle through this
and potentially have to close.
It remains to be seen though, once theaters re-open,
how many screens come back online.
- [Narrator] At the same time,
streaming services are seeing a rise in viewership.
In April, Netflix reported 15.8 million new subscribers
for the first quarter of the year,
more than double their forecast from the year before.
- Now the big question is what is temporary
and what is permanent?
Do consumers say hey look,
why was I going out to the movie theater at all
when I could get all this right here,
or will they be so desperate to go out
and get outside of the house, get outside of the living room
that they return to movie theaters
with even more vigor than before?
That's a real, looming question.
- [Narrator] One thing that's clear is that
"Trolls World Tour" isn't the only movie
being released straight to streaming right now.
While big-budget tentpole movies like "Mulan"
will still have a delayed wide theatrical release,
studios are releasing more than a dozen smaller movies
direct to digital because of the pandemic.
In April, The Academy announced that movies released
via streaming would be eligible for the upcoming Oscars
just this year because of coronavirus.
- A, we don't know how comfortable people might be
going back to the theater, and B, we don't know how long
that might take to get them there,
but the other things that's happened
is that because so many of the big movies,
the James Bond movies, the Marvel movies,
have been pushed to next year,
many analysts are saying we might see some cannibalization
at the box office next year, too.
- [Narrator] Experts say that the box office
isn't likely to disappear forever.
- One lesson from the pandemic will be that studios
have been emboldened to experiment
with these distribution strategies more than they ever were.
(pleasant music)