Dim The Lights
By: Justin Suttles
Tags: Netflix, Movie Theater, Hollywood, Streaming, Pandemic

The simple truth is that the film industry is part and parcel with exhibition. As long as movies are made, the desire to experience them collectively will be there in some form or another, and where there is demand, there will be profit. I’m already seeing the trend back towards this direction.

Why would Indiewire market various ways to beef up your home theater system ahead of Wonder Woman, if there wasn’t an implicit awareness deep down in their Netflix-loving solar plexus, that the gold standard was and still is, I don’t know, a movie theater?

Even if you strip away any sentimental attachment to movie-going, the basic economics speak for themselves. For example, if we refer back to the film from my opening story, you’re looking at a single piece of work that turned a worldwide box office profit of $1,005,082,390, from a $180,000,000 budget. This is before home video, merchandising and subsequent streaming. If you factor in inflation, those numbers are nothing short of monolithic.

The Irishman, 2019

By contrast, the Netflix original The Irishman earned somewhere in the neighborhood of $38,000,000 for Netflix worldwide, also from a roughly $180 million budget, effectively losing nearly $280,000,000 once you factor in general marketing, and the specific marketing campaign for the Oscars. The Chicago Tribune published an excellent breakdown on how these numbers shake out, if you’re looking for some more robust analytics. Suffice it to say, Netflix is in the red for this particular film, which serves as a handsome admonition against placing event film expectations on a streaming service.

The simple fact is, despite Netflix’s steadily rising stock price, no single movie could manage tent-pole exhibition numbers on a streaming platform. Granted, the streaming model is a fundamentally different vehicle, aggregating profit-per-subscription, not profit-per-film. However you spin it though, the NET result is less profit per movie, not to mention limiting what free range potential the film does have, in lieu of blanket acquisition deals. From a financial standpoint, streaming and theatrical exhibition are different means to different ends, not to be conflated.

Alas, they are being conflated. Thanks, I suspect, in no small part to Warner Brother’s colossal decision to release their entire theatrical 2021 slate in theaters and on HBO Max simultaneously. Yes, you read that correctly.

The 2021 Slate

From a short term business perspective, I understand the need for a loss leader to recoup as much of their investments as possible amidst a global pandemic. They have films collecting dust on the shelf that are ready to go and they need some semblance of confidence that 2021 will be profitable, if for no other reason, than to make good with their financiers. At the present moment, it is the safe decision. It’s also a myopic decision, if you consider the seismic ripple effects this choice will have among the general public and the Hollywood cognoscenti alike.

Thank you internet, I understand now

In my circles alone, this news has engendered reactions, from filmmakers no less, that confound me..

Did I miss the memo?

I simply cannot understand the invective for such a beloved aspect of the industry to me. Where is this hatred coming from? Why are people so ready to abandon ship? As if the very concepts of movie theaters and streaming are mutually exclusive, and are ever shifting towards the latter.

How has this sentiment quietly risen to such prominence despite the general good will I’ve encountered towards the emotional sense-memory of seeing a great film on the big screen? I will hazard a guess —

For the longest time, there were movies and there was the lesser step child of movies, television. To move from television to movies was a massive vertical leap, and the inverse was also true. They were their own worlds that rarely cross-pollinated. Then, streaming came along and shattered that glass ceiling that told us TV was of lesser quality. Suddenly, name actors and directors were helming shows such as House Of Cards, Daredevil and Orange is the New Black. It challenged the notion of what it means to be cinematic, because historically, what is cinematic if not at the cinema?

House of Cards, Netflix

As awareness in this new and improved form of content increased, so did the commonly held fallacy that since streaming is of equal quality to cinema, it must therefore be the future of cinema. It’s the natural human impulse to pit one thing against another to see which one emerges victorious. Add one tablespoon of industry destabilizing pandemic to the mix, and voilà; theaters are irrelevant or even worse, dangerous.

Photo credit to Jay Janner

Speaking of which, I understand the collective reticence of going to the movies during the pandemic. Unfortunately, theater going as an activity is uniquely vulnerable to an airborne respiratory virus that renders any crowded indoor space as a potential super-spreader event. What I take umbrage with is the long term prognosis that theaters as an institution will never again see the light of day, and “good riddance! Who wants it anyways?”

Speaking in this way strikes me as more than a little sensational. I would like to suggest that theaters and streaming could work in concert with one another, instead of in opposition. But that certainly hasn’t stopped many tent-pole films from being sacrificed on the altar of streaming; a move designed to recoup some short term gains at the expense of long term viability.

“Warner Brothers had an incredible machine for getting a filmmaker’s work out everywhere, and they are dismantling it as we speak. They don’t even understand what they’re losing. Their decision makes no economic sense, and even the most casual Wall Street investor can see the difference between disruption and dysfunction.”

Christopher Nolan didn’t mince words in an unusually pointed statement to The Hollywood Reporter, referring to the basic principle of supply and demand. He went on to elaborate on the Happy, Sad, Confused Podcast, saying —

You have to create the sense of anticipation, as with every other industry, you control the supply and demand, you don’t throw everything out to everybody all at once and say “you wanted it, here you got it”. Every other industry, every other marketing department in the world, they understand that it’s all about supply and demand & controlling the release of those assets. Whether it’s a car company or a publishing company. You put out the hardback edition, then you wait before you put out the paperback edition. It’s basic economics.

From my perspective, this kind of business savvy is sobering in its simplicity, and vindicates the economic efficacy of theatrical exhibition. The simple and indisputable fact is that the hypothetical abandonment of movie theaters for streaming is leaving very real money on the table in spades.

Let us also dispel a few red herrings that are often cited when theaters are on the chopping block. Such as the notion that theater attendance is declining, which is simply fallacious. Just take a casual gander at BoxOfficeMojo to rule out that idea. Like any industry, the film business waxes and wanes. But at the end of the day, it’s dependent on the movies that come out in a given year (looking at you Avengers Endgame). That’s just the nature of the business.

Let us also reevaluate the grievance that ticket prices are skyrocketing at an untenable rate, making movies a less desirable pastime. The National Association of Theatre Owners (NATO) maintains that ticket prices have remained relatively static once you account for inflation (the average ticket price of $2.23 in 1977 was roughly $9.26 once adjusted) discrediting the “when I was your age, I could go to the movies for a nickel” argument.

The economic reality is that fluctuations in price are due to the strength of the marketplace, as well as the demand for IMAX and other premium formats. The more people spend, the more the average cost of going to the cinema increases.

Even a cursory glance at the analytics quickly reveal the reality that theatrical exhibition doesn’t align with the narrative of its economic irrelevancy. It’s a real bait and switch. But at the end of the day, numbers are numbers are numbers, and movie-going is about so much more than that.