In Cinemark’s third-quarter earnings call November 3, CEO Mark Zoradi announced a loss of $148 million — and, going forward, theatrical windows would be a matter of case-by-case negotiation with distributors. In AMC’s third-quarter earnings statement the day prior, which included losses of $905 million, the exhibitor touted its deal with Universal as an important asset for the future.
Exhibition fought off encroachments for decades, but theaters have never been so weak. Some theater owners would like to cast these new precedents as COVID-era exception, but neither the AMC-Universal deal nor Cinemark’s willingness to play films with limited window would happen if theaters felt there was an alternative.
There’s another, more optimistic element that may also be in play. By addressing VOD head on, AMC and Cinemark are becoming active participants in its future. It also means they chose a side in a major battle, and it’s not theaters vs. studios. It’s VOD vs. streaming.
Compared to streaming, VOD is in theaters’ greater interest. Netflix has not been a friend. Disney and Warner Bros. have established streaming subscription sites for their films. (NBCUniversal parent Comcast has the TV-oriented Peacock Network, but also has an interest in transactional VOD since Comcast is a cable company and a VOD platform.) The VOD paradigm still gives primacy to theaters; by contrast, Disney’s priorities were reflected in the decision to release “Soul” on Disney+ Christmas Day.
It also means that exhibitors have a chance to learn from their mistakes. Four decades ago, video rentals were not yet invented and the nascent video industry had no certain path for retail sales. There was early interest between independent exhibition and Warner Bros. that theaters might serve as a retail franchise — but other exhibitors, and theater trade organization NATO, wanted nothing to do with supporting the video interloper. Like TV decades prior, they hoped it would go away. Instead, they lost the chance for partnership and a place at the table.
Theaters had sole rights to films for nearly a year when the video industry began. It shrank over the decades, until it was 90-day exclusivity for DVDs and VOD. With premium VOD, access came about two weeks earlier. Like video before it, exhibitors missed that opportunity to negotiate from strength.
Imagine: A few years ago, when it was becoming clear that Netflix would be a threat to the studio and theater universes, what if some forward-thinking exhibitor came to terms with the concept that 90-day windows might not last? If theaters acted when their strength was greater, they might have been able to achieve contractual commitments to longer, flexible windows based on the strength of a film’s gross. They might have been able to negotiate a bigger share of VOD revenues. Theaters might even have enjoyed a period of exclusive VOD rights on their own platforms.
At this point, theaters have lost nearly all leverage.The first film to break the windows barrier was Focus Features’ “Come Play,” which opened October 30. It opened in over 2,000 theaters, despite plans for home availability three weeks later.
Bookings of “Freaky,” which opens next Friday, and “Croods 2: New Age”(November 20) came with preset premium VOD dates (three and four weeks ahead, respectively). Among domestic leading circuits, only Regal will not play them (and only a handful of its theaters are open).
It was inevitable that studios would press their advantage on the lucrative PVOD and streaming platforms. Exhibitors hoped, when that happened, theatrical revenues would be enough. Not only was it the best and most reliable way to turn a profit, those returns also played a role in a film’s entire lifecycle.
COVID called that bluff. Studios could choose to put their titles on ice, or they could aggressively pursue the alternatives they’d gamed out long before. Now that it’s happened, theaters have perhaps one last chance to position themselves for the future.