How Streaming Services Have Impacted Movie Theater Industry Growth
By: Kimberly Grant
Growth. It is inevitable. It is a common belief that no growth means being stagnant. To put it in context, if a plant stops growing, it dies. So, growth is a huge part of anything in life. To be overly dramatic, without growth there is death.
In the movie industry, growth can be tracked based on the way movies are released. The most common forms of film releases are in movie theaters, streaming, and direct to DVD/Blu-ray. As I discussed in a previous post, the increase in streaming services since early 2020 and higher prices at the theaters have caused movie theater ticket prices to be more and more elastic as the years tick by. The global pandemic, while being devastating to the world, has exacerbated this situation and has helped stunt the growth of potential box office revenue.
Movies Aren’t What They Used to Be
In Brad Adgate’s Forbes article, he discusses the downward trend of movie theater ticket sales. In true capitalist fashion, as movie theater ticket sales declined (the opposite of growth), streaming services saw a tremendous growth. Some would say that growth was just coincidental and good timing. Others argue that streaming services like Disney+ and HBO Max sped up their go-live dates to maximize on the shutdown and capitalize for their pockets. Their growth strategy could have been:
More people at home + longer time at home + streaming new movies= Lots of dollars.
This strategy was pretty shrewd and has paid off for the streaming services, which also include Netflix, Apple TV, Amazon Prime, and Hulu. Although the latter streaming services are not releasing new movies on the same days as movie theaters. Therefore, there’s no conflict of interest, like Disney+ and HBO Max. Not to mention, Disney+ and HBO Max are still charging their subscribers to see new movies. And, that stunting of revenue growth by streaming services is why the movie theater companies are so angry.
Stunting Growth to Make a Dollar
According to Rebecca Rubin of Variety.com, movie theater owners are up in arms because they are losing potential profits with streaming services like Disney+ and HBO Max releasing new movies on their platforms on the same day as the movie theaters and charging extra for it. That loss in revenue has ushered in a decline in movie ticket sales compared to 2019. While it is not necessarily fair to compare the current movie ticket sales with a time where there was no pandemic, it does deserve a considerable look. Mainly because Disney+ and HBO Max were not live in 2019 and their revenue has soared.
To take a closer look at this fight, movie theaters are not the only casualties in this war. Major actors whose contracts were developed based on getting a percentage of their film’s total gross are at a huge loss.
Opposite of Growth
To give you an example, Black Widow has grossed $178 million domestically; as opposed to Avengers: Endgame’s 2019 domestic box office gross of $858 million. Black Widow star Scarlett Johansson’s contract stated that she would make “points on the back” end, which is a percentage of domestic box office gross. If her contract stated that she would make 10% on the back end, then she has earned an additional $17.8 million over and above her $20 million dollar initial salary. This is a pretty big paycheck.
Let’s factor in that Black Widow could have made, at least, $800 million as a movie theater-only release. That would mean Ms. Johansson would have made $80 million over her $20 million initial paycheck. That’s a $62.2 million dollar loss, which is the opposite of growth. Meanwhile, movie theaters would have made double that amount (if not more) within the terms of their own agreements. If it were me, I would be pretty angry about the loss of revenue, too.
The war between streaming giants, like Disney+ and HBO Max, and movie theaters has just begun. Now that Ms. Johansson has decided to take legal action against Marvel Entertainment parent company Disney, things could get even uglier. With millions of dollars and a major decline on the line, we may be poised to see the ugly side of Disney and movie theater companies like AMC Theatres and Regal Cinemas in the coming months. Stay tuned.
Growing anxious about missing my previous post? You can read it here.
