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Making the Movie Industry Make Sense Again

When you slide into any discussion on the state of motion picture exhibition, there is the natural tendency to find a single cause of the problems that beset this sometimes-dynamic business. There have been cycles of downturn that are quickly forgotten once an upturn occurs. Hollywood was in the doldrums until the Jetstream of the New Hollywood movement started when “Bonnie and Clyde”, “Easy Rider “ and finally “The Godfather” took hold. When “Jaws” and “Star Wars” were likened to meteorites on the surface of exhibition things changed and were put on a path where we find ourselves today.

The business of television has faced usurpers before. Television made a significant and eroded market share. What television did was the edges of the market, the people that just wanted something to do, they were not particularly interested in seeing a particular movie, just were looking for an activity.. In the end it was hard to compare a 19 inch black and white snowy image with a Cinemascope “How The West Was Won”. No comparison. VHS came onto the scene and because they priced the movies in an intelligent way initially, VHS actually increased business at the box office. In many ways VHS introduced audiences back to the movies. When streaming arrived they took a proper windowed approach and started to grow the streaming business alongside the theatrical business.

This was the thoughtful measure to build both businesses. If you keep mediums in their own lanes you could thoughtfully market and contain perceptions. A problem arose though, a problem that has the potential of lessening both businesses. The analysts developed benchmarks for success and then started making the streamer start to go through hoops. The streamers needed a quick fix to satisfy their Wall Street masters and they started to take away some of the inertia from exhibition. This became a habit.

While in the short term, this did yield some perceived results for the streamers, we are now seeing issues in streaming as a result of a broken ecosystem. There was a commercial in the early 70’s that said it's not nice to fool with mother nature, well they did and they did it big time. The studios went along with them because often they shared owners. I place the blame on the feet of Netflix who saw itself as a competitor to exhibition and behaved according to that script.

Last week it was revealed that the growth at Neflix had stalled and that Disney +’s growth has stalled. I believe that much of the latest bump was COVID related. I believe the crowing over the numbers for Trolls World Tour was solely based on the entertainment void COVID had created. The numbers were fed into the data machine at Wall Street and the balance of the really truly pertinent information was purposefully ignored for the sake of the mantra of Wall Street. Over the past year I would say the streaming revenue should be cut in half and fully analyzed in the context of the Pandemic bump that was in place. You had kids at home driving their parents around the bend and an easy solution was 12 screenings of Trolls World Tour. Streaming was not fully embraced as the future of entertainment, Day in Date of family product was embraced as a digital babysitter.

As we slowly emerge from our Covid cocoon, Wall Street and the studios are finding themselves in a brave new world. Some studios have placed themselves fully in the streaming world, hello Disney. Others want to want to movie to streaming but are afraid to say it out loud, hello Warner Brothers, and there are those who have to work in both as a result of having no streaming services or having had failed streaming services, hello Sony. Yes both Sony and Warner’s have had failed services.

The business of motion picture exhibition has been dormant for more than a year. It has been beaten up, taken advantage of and treated badly by those quick fix boys known as the government.Here is a prime example of government foolishness. Theaters in Quebec Canada were allowed to open but were not allowed to sell concessions. Now the study of surface contact has shown that this area had a limited transmission issue, but in a typical knee jerk government reaction they threw the butter drizzled baby out with the bathwater.

There is no doubt that movie going will have to change and change significantly. It has in the past and it will in the future. The problem with this season of change is it is finding itself in a predatory relationship with companies who should be nurturing the movie going vertical. This twinned with the slow rise out of COVID will provide both problems and opportunity. The business of exhibition has been laid bare the de facto lack of leadership within it, the polarization between the independents and the major circuits, the reticence of the audience to move quickly to populating the auditoriums again. Audiences will come back, three “have to see” movies will change that. The two biggest issues that face exhibition are the bipolar nature of the studios in regards to streaming and the economies that are forced on the theaters by the studios.

I have discussed that the studios are trying to exploit two houses simultaneously. This is a tragic mistake on their part. I am hoping that Amy Kolbuchar’s antitrust efforts will send a shot across their bow and they will wake up from their Wall Street induced sleep. If they do not they will soon find that their purposeful derailment of the proper cinematic ecosystem will be the sword that they end up falling on. Hollywood is not the only source of entertainment.

There has been report after report that has shown a movie that has a theatrical release retains far more economic value than a movie that has only a streaming release. This is often at a multiple of 10. This provides very deep value for the studio. The studios of course do not acknowledge this, but it has been proven time and time again. There have been some Norwegian studies showing that the void created by Hollywood can be filled with local production . This strategy has proven successful and creates far more value in the localized movie economy.

My proposition is that if Hollywood wants to keep the patterning it has developed over the past year (kicking a guy when he is down) I am suggesting that they reduce all film rentals to a maximum of 40%. This will reflect the value the exhibitor is providing Hollywood in regards to its titles by allowing them to be exhibited on their screens. After all, Hollywood had no problem imposing a VPF for diverting its print savings (or portion thereof to the exhibitors). I say what is good for the goose is good for the gander.

If the exhibitors had a centralized negotiating body, a cooperative structure to avoid the false accusation of antitrust, a voice could be created that could effectively speak against the studios and provide entry into re-negotiating a balanced and equitable business relationship. It’s something to think about. Maybe why there is a leadership vacuum is because there is not a proper venue for expressing the goals of the business of exhibition as a whole.