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No time to die: Will Covid kill the cinema?

Back when the global economy followed a script, the entertainment industry was set to reach an epic $2.3 trillion revenue in 2020.

As in any traditional film, everyone in cinema, TV and streaming stuck to their clearly defined roles.  Then came Covid. 

This autumn it seems we are watching something more akin to a sci-fi movie, envisioning  alternative futures.   Two epic stories are playing out, each more complex than the parallel-universe plot of Christopher Nolan’s time-travel action movie Tenet.  First is the distribution disruption around major movies.  Second is what that uncertainty says about the future of the multiplex itself.

“The theatrical window has been shattered,” says the industry newspaper Variety.  “It’s a pretty good bet that it will never be patched back together. That means that the movie business will never look the same.”

That is because unlike Nolan – whose lifelong passion for cinema means he still has prints made of his film in analogue 35mm - not every media company is putting restocking the popcorn near the top of its to-do list.  Apple and Amazon, two of the world’s biggest companies, have very little interest in their own movies appearing in cinemas at all. 

The movie theatre has been propelled into the same industrial at-risk category as the high street or shopping mall where it’s located.

Certainly, some upcoming movies are slated for big screen debuts - Dune (out at Christmas), Wonder Woman: 1984 (just delayed by Warner Bros. from October to Christmas Day), and Candyman (15 October). 

But much else – including the release timing of other movies (like Disney’s Black Widow, reportedly slipping its planned 6 November release date) is in existential doubt. 

That includes production of many movies that were supposed to shoot this year too, and the question of how many socially distanced ticket buyers will turn up in theatres to see any of them.  Wall Street analyst Eric Handler recently told the Hollywood Reporter: “There just isn’t enough volume of film to sustain any momentum.”

Streaming as 'first window'

Adding to the existential doubt has been the recent and dramatic coup de theatre by Disney, when it chose to mark the tentative September post-Covid reopening of cinemas by sending the opposite signal and instead releasing its blockbuster Mulan on its own smash-hit streaming service, Disney +. 

This was a surprise to exhibitors; the cinemas had been convinced Disney would stick with them. In a perfect sign of the times, the company – nursing a precipitous, covid-driven $4.7bn quarterly loss and a 94% drop in adjusted earnings per share - effectively converted a $200m old-media film investment into a modest digital marketing expense for the fast-growth, high-multiple streaming service, which has picked up 60.5m subscribers from a standing start in its first year.  At $30 per view, they might even recoup much of that cost too, plus an injection of customer lifetime value from those who bought new subscriptions.

All this is part of a bigger picture: just as Tenet fast-forwards the future, so cinema itself is now undergoing turbo-charged generational change.

“The next three to four years of market development have been compressed into months,” says industry analyst David Hancock at OMDIA.  The movie theatre has been propelled into the same industrial at-risk category as the high street or shopping mall where it’s located.

Like a superhero franchise, global release planning – the process of studios slotting in blockbusters across the two month summer cinema window, then pushing them with sophisticated $100m digital marketing budgets – has turned into a multi-dimensional tussle.

Cinema multiplex interior

Exhibitors still posit the linear view, where films launch globally in cinemas and then sell second windows to TV or video on demand. 

But “streamers” (those platforms whose media distribution model relies largely on subscription-driven streaming content) come to the movies with a variety of collateralised content valuations.  This means that the value of content to streamers does not derive from what the content alone would be worth in the open market but has a greater value relating to the owner's business goals.

Amazon prizes the consumer loyalty of engaged subscribers, Apple the potential for bundling TV+ with its other cloud products and hardware (which it announced on 15 September), Netflix for the customer lifetime loyalty, Disney for the theme park synergies. 

Netflix v multiplex

Those digital industry valuations, driven by subscription view of the customer rather than the single trip to the foyer - can put a piece of content on a higher multiple than the box office can repay, even without Covid.   That means films can pay back without even going to the big screen.  At the same time, the price of cinema is being challenged: £12 for a single multiplex ticket compares poorly with £7 for Netflix for a month.   In the long term, you can’t sustain $400m films without a compelling value proposition in the market.

The remaining 2020 movie releases will reveal nuanced distribution options which could shape the decade in film.  The future of the cinema has potential outcomes as variable as the interactive Netflix drama Bandersnatch, from the Black Mirror series, where viewers choose between storylines, each leading to a different possible ending.

So, for audiences and the film industry contemplating the future of cinema, what are the choices now showing?

  • Screen One: Back to the Future: This version of the decade sees the Broccoli family’s  new Bond film (titled, as it happens, No Time to Die) and Tenet producers (it has been doing decent if not stellar figures at £9.7m in the UK and Ireland) restore the tradition of pure-play cinema-first release.  Bond could put the straight-to-stream genie back in the bottle if it does $1 billion at the box office, even before moving to secondary windows such as streaming.  As for Tenet in the cinemas, box office in late August was only 41% down on 2019, as opposed to over 90% down in all previous weeks this summer
  • Screen Two: Low Power Mode: This is the alternative universe – an iteration of the future which sees straight-to-streaming as a viable economic option even for the biggest movies.  Disney CEO Bob Chapek described the decision to offer Mulan online as a “one-off” rather than a change in strategy.  But the stock market told a different story – Disney’s shares were up on the news, while exhibitors Cinemark and AMC were both noticeably down. 
  • Screen Three: The Inbetweeners: This is a world where family-friendly films go straight to the living room, but bigger superhero and action movies go to the cinema, and art-house movies are funded or acquired by streamers – like Netflix’s Roma.   “I have a mixed market view of the future,” says David Hancock.  “I believe that cinema still has a future. But there has been so much change in this period … that there is going to have to be some form of accommodation which they weren’t going to do before.” 

A trailer for that in-between, compromise version of the future might have been a deal struck by cinema chain AMC with Universal in July.  It said the studio could release new movies on premium video-on-demand within three weeks of a cinema launch – a hitherto unheard-of proximity.  And perhaps a sign of things to come.