New Hollywood Needs New Metrics

How do you measure the financial success of a movie in the streaming era? 

This question keeps arising amid coverage of the Christmas Day showdown between Soul from Disney’s Pixar and Wonder Woman 1984 (WW84) from Warner Brothers.

What made these two film releases special was their streaming distribution strategy. Disney released Soul exclusively on its Disney+ streaming service. Warner Brothers distributed WW84 on HBO Max (owned by AT&T, which owns Warner Brothers) alongside a release in traditional movie theaters.

Both Disney and Warner Brothers bypassed the traditional approach of giving movie theaters a 90-day window to exhibit a film before going directly to viewers online. That’s because during the pandemic, attendance in movie theaters has plunged dramatically, and theaters are on the verge of collapse.

With the Old Hollywood distribution system dying, studios are adopting a New Hollywood, streaming-first approach. Soul and WW84 are two prominent examples being watched closely. And this much is clear: we don’t know what success looks like.

New Hollywood Rising

How did we get here? Let’s take a quick recap. First of all, the rise of streaming and the decline of movie theaters precede the pandemic. Before 2020, movie theater attendance was already declining.

Meanwhile, New Hollywood streaming companies emerged to upend the staid Old Hollywood system of distributing films through movie theaters. The Old Hollywood studios leaned first on movie theaters to earn money, and success was measured in box office sales. The movie theaters shared in that success, protected by a 90-day theatrical window before studios distributed movies direct to consumers via DVD or streaming and earned additional revenue.

But the streaming companies began to create their own movies, and when they did, they either shortened that 90-day window considerably or bypassed movie chains completely, which angered the Old Hollywood establishment, especially movie chains. And then, something unexpected happened: a global pandemic shut down movie theaters en masse, denying Old Hollywood their all-important global revenue streams.

As a result, movie studios, saddled with expensive films in the can for 2020-21 but nowhere to show them, find themselves crawling to the streaming services for help. Some studios have sold their titles to streaming companies. Others have taken their chances distributing movies in theaters. But others have tried some more creative approaches:

• Universal Pictures released Trolls World Tour by skipping theaters and going straight to digital rental for $19.99 – which accumulated $100 million in revenue. In fact, Trolls World Tour was more lucrative for Universal than its predecessor, Trolls, even though Trolls earned more revenue than Trolls World Tour, because Universal didn’t have to split Trolls World Tour revenue with movie theaters. 

• Disney and Warner Brothers are in the unusual position of enjoying access to in-house streaming platforms, which are proving to be labs for experimenting. Soul is not the first movie Disney has released on Disney+ -- the company released Mulan on Disney+ and movie theaters in September. And Warner Brothers said that in 2021, the studio will release its entire slate of films on HBO Max first before showing them in theaters, a highly controversial move especially because HBO Max subscribers lag far behind competitors such as Amazon Video, Disney+, and Netflix. 

Soul v. WW84: Who Won? 

And here’s where measuring success gets really complicated and murky. Several days after the release of Soul and WW84, the only clear yardstick of financial success is the $16.7 million domestic ticket sales that WW84 pulled down in theaters on its opening weekend – a far cry from the $103.3 million that the first Wonder Woman earned in pre-pandemic days, but a record for the pandemic era.

And that’s the only solid number we have for either Soul or WW84. AT&T also said that “nearly half” of HBO Max subscribers watched WW84 on Christmas Day. Disney released no viewer numbers for Soul. But measurement firm Samba TV says that 2.4 million Disney+ households in the U.S. watched Soul over the holiday weekend, versus 2.2 million U.S. households streaming WW84 on HBO Max. (Samba TV tracks data from audiences who have opted-in to share their viewing activity.) But who really knows? And how does tracking viewer data figure into understanding a movie’s success? 

Four Ways to Measure Success

Thus far, these measurement models have emerged:

• Traditional box office sales, which are still very relevant because they provide hard numbers, even if movie theaters are barely clinging to life. After all, Warner Brothers pointed to that $16.7 million in domestic movie ticket sales as a reason for approving the production of a new Wonder Woman movie, which will be distributed the old fashioned way, through theaters. According to Box Office Mojo, the action comedy film Bad Boys for Life, released during the dog days of January, was the Number One film of 2020, with a worldwide gross of $426 million. Most certainly its top ranking is a result of the January release date occurring before the pandemic took hold. By contrast, the top film of 2019, Avengers: End Game, raked in $2.8 billion globally. Up until 2020, every top movie since 2010 had earned at least $1 billion globally. 

• Digital rentals – another hard number because it’s all about revenue. As we’ve seen with Trolls World Tour, digital rental revenue can be even more lucrative for studios than theaters. Disney’s approach with Mulan also relied on digital rentals because Disney charged Disney+ subscribers $29.99 to watch the movie. Mulan earned $33.5 million on its opening weekend based on that fee. (So far, Mulan has also earned $66.8 million in theaters globally.) Digital Entertainment Group (DEG) tracks digital rentals and sales, but unlike Box Office Mojo, DEG does not provide actual figures. According to DEG, during the week of December 26, National Lampoon’s Christmas Vacation was the most watched film, based on U.S. Digital Sales, digital rentals (VOD), DVD, and Blu-ray sales. (The data does not premium video on demand or disc rentals.)

• App downloads. Although streaming services report subscriber totals, they do not attribute those numbers to any single movie. So industry watchers are relying on app downloads as a proxy statistics. According to Sensor Tower, research firm, downloads of Disney+ spiked 68 percent the weekend of Mulan’s release; and Disney+ saw a 28 percent surge in app downloads over Christmas weekend during Soul’s release.  According to market research firm Apptopia, 554,000 users signed up for HBO Max over Christmas weekend, when WW84 was released. Of course, app downloads provide an incomplete picture. But for now, app download data will need to suffice, and understanding the interplay between downloads and a movie’s streaming success remains a complicated affair. 

• Streaming views. Different companies use different formulas to measure audience viewership. For example, Nielsen said that the Martin Scorsese 2019 film The Irishman was watched by 17.1 million unique Netflix viewers in the United States in the first five days of its streaming release. Nielsen relies on a metric known as average minute audience -- a measure of time spent viewing (i.e., the average number of viewers calculated based on a movie’s total runtime) rather than the total number of people who watched a title. Meanwhile, Netflix released its own viewership totals for The Irishman. According to Netflix, more than 26 million accounts globally viewed The Irishman within its first seven days on Netflix. Netflix said it counts as a viewer anyone who completes 70 percent of a film. The aforementioned Samba TV tracks opt-in viewership with a technology known as automatic content recognition to track audience levels. But, it’s unclear how useful viewership data really is. Viewership totals are useful for marketing and PR. But those figures are typically used by networks to attract advertisers, and neither Disney+ nor Netflix accepts advertising.  

It’s clear that most New Hollywood streaming services as a whole are succeeding based on their soaring stock prices and subscriber growth. At the same time, creating movies (and original content for TV) is a costly business, and it remains a mystery how well individual movies contribute to the bottom line of a New Hollywood company. As Michael Pachter, an analyst from Wedbush, complained to CNBC, “The streaming metrics provided by Netflix are pretty useless. Who cares how many people watched a particular movie (other than them and the press)? It doesn’t translate to revenue unless the movie is the reason to join the streaming service.”

But as film viewership continues to shift online, and streaming becomes more competitive, New Hollywood may need to become more transparent.

Note: I invest in AT&T, Disney, and Netflix.