The Move to Max
By: Rohit Padmakumar
Tags: Hollywood, Warner Bros, Streaming, Hbo Max, Warnermedia

The Move to Max

I decided to let the dust settle a little before writing about WarnerMedia’s decision to release their entire 2021 slate of movies into theaters and onto their up and coming (more importantly, struggling) streaming service HBO Max at the same time. I figured there would be a lot of say from many industry insiders off the bat… and the reactions were rough.

Agents are in an uproar because their talent may get the short end of the stick and not get paid as much with an exclusive theatrical release. The “back-end” would have to be recalculated for talent since it would be partly from the theaters and partly from HBO Max’s subscribers. Talent agencies also weren’t happy that Wonder Woman 1984 had the privilege of negotiation with Gal Gadot and director Patty Jenkins in terms of compensation (which was high) before WarnerMedia made the step to release the film on HBO Max (now called “Wonder Woman Money”).

Creatives, who are in my mind, the most important, aren’t taking it easy either. Surely, Christopher Nolan calling it the “worst streaming service” doesn’t help and many share his opinion. Timothée Chalamet made a not so subtle stand on the issue at the end of last weekend’s SNL since Legendary may sue. And overall, it’s not looking good.

To be fair, WarnerMedia basically blindsided the industry since they practically told no one of this decision. Though bad practice, it was probably the only way to get a fast decision out. Had they tried to tell everyone, it would have been a back and forth battle that would have taken so long, the pandemic would be over.

Personally, I’m happy WarnerMedia made this decision for now. The pandemic accelerated the inevitable for the theater business. It may still be king in terms of money, but it’s fading as streaming becomes a core business model for Hollywood. People won’t be going to theaters for a while (even after the pandemic ends it’ll be a slow curve for months as people get used to being out more). Why lose out on 2021 by betting on the few people who may go to a theater? Moving to Max could benefit a lot of average families, who don’t really go to a theater normally, but who would love to watch these tentpole movies at home.

Plus, I see it as one of the few options of trying to stay afloat during a pandemic and kickstarting the change Hollywood needs. One of the reasons why this decision excites me, regardless if it works or not, is that Jason Kilar, CEO of WarnerMedia, actually took a bold step in a direction when everyone else is hoping for people to magically come back to theaters… in a pandemic. He’s making a bet on the future of entertainment, something that’s rare for Hollywood (and I’m sure his time running Hulu had some influence on this decision). I respect the risk-takers in Hollywood and I believe that Kilar could be on to something. Sure, the industry isn’t happy and calling the company “Former Bros.”(yikes!) is rough, but that’ll pass over eventually. I see this more as a rude awakening that shocked the classic directors and big agencies and widened the pre-existing cracks in Hollywood’s theatrical business model.

WarnerMedia is starting to look at the industry through a new lens.

M.G. Siegler said it nicely here:

I’m not sure why it’s the role of the studios to sacrifice their own business to help the theaters. AMC is saying that the two sides need one another to survive, but this move is essentially Warner calling that bluff… If the theaters only true business is the result of a window — an artificial construct — then yes, they’re in trouble.

Here are the pros and cons of this decision from how I see it:

PROS:

HBO Max gets a substantial increase in new subscribers that puts them on the map against other streamers.

WarnerMedia (with intense number crunching and back-end deals to talent) does much better with this plan and could make decent money. I can’t imagine this move is worse than just releasing your movies in theaters to crickets or constantly pushing release dates. Though, it all depends on subscribers, talent back-end deals, lawsuits, etc..

AT&T, which owns WarnerMedia, gets more business out of this since HBO Max, unlike other streamers, can be packaged into internet and phone plans for households. Having better movies on Max only incentivizes more customers to roll with AT&T for everything. Keep in mind, their a telecom company and have different goals than traditional entertainment giants.

WarnerMedia sets a new precedent for the Hollywood release model… and their the first to take a big (potentially successful) swing at it.

The studio should be able to keep the entire gross from each film since they won’t have to split 50% of it with theaters. So even if they make half of what they would in a normal world, Warner Bros. does pretty well.

It directs people towards HBO Max after some very understandable confusion with the many previous HBO services.

CONS:

WarnerMedia angered their top talent, agents, and the majority of big hitters in Hollywood, effectively straining their relationships with key people that produce their priceless stories. If that gets real bad, that’ll hurt them.

This massively fails and HBO Max doesn’t get the subscribers it needs. So WarnerMedia can’t even prove that it works and they lose out on both money and relationships.

Theaters are less inclined to release Warner Bros.’ movies again, hurting WarnerMedia’s plans to release movies normally after 2021 (if that’s their plan… who knows).

This is the true guillotine to theaters’ necks. The big chains like AMC go bankrupt and are bought out by a Disney or an Amazon to basically only release tentpole movies (which I think is going to happen at some point, as this pandemic has shown that smaller movies, like Love Birds, which Paramount released on Netflix, can go to streamers directly just fine). I actually think I’d like this. If Hollywood could release all of the B-movies, romcoms, chick flicks, etc. to streamers and make tentpole movies spectacular events in nice theaters, like the Alamo Drafthouse (or maybe even bring back the palaces?!), the movie-going experience would be more rare, but better. Plus, streamers get a boatload of content. Maybe this deserves to go into the “Pro” column…

Overall, this issue is something that has been coming for a while in the industry and, quite frankly, has never been tested on such a scale. I think Disney could follow this strategy given how well they’re doing with Disney Plus… and I’d be all for it. Keep in mind I do love going to the theater, but it’s not a very sustainable part of the business and its model is pretty inconsistent with people’s consumption habits today. In a pandemic where content is blowing up, I find it hard that Hollywood can’t take better advantage of new mediums and ways of storytelling.

I know entertainment is changing; I just don’t know exactly where it’s going, but at least WarnerMedia is taking a stab at it with a new idea … and they might hit gold in the long-run.