Will New Hollywood Save Old Hollywood?

Remember when Warner Brothers announced that it will release its entire 2021 slate of films simultaneously in movie theaters and the HBO Max streaming service? The move sounded like a bold action to save Old Hollywood from the ravages of the COVID-19 pandemic, when movie theaters were shut down, and streaming was practically the only way to see movies.

Not so fast.

Old Hollywood over-reached. Too many movies were dumped on to streaming services during the worst of the pandemic. True, simultaneous in-theater and streaming releases were understandable. No one was going to movie theaters as the pandemic raged. But partly as a result of the pandemic-era release strategy, the film industry now faces a shortage of movies available to exhibit in theaters. 

In 2021, The Wall Street Journal reported that with major Hollywood studios paring back their release calendars (or shipping movies to their own streaming services) theater chains were expecting to be short of programming for at least three years. We’re now seeing the outcome as Thanksgiving Week 2022 experiences a shortfall of available movies. Usually, Thanksgiving Week produces a bumper crop of new movies, but only four movies have hit theaters in 2022, and none has produced impressive results. Fortunately, Walt Disney’s November 11 release Black Panther: Wakanda Forever, has been a monster hit. 

All told, the number of releases on 2,000 screens or more is down by 36 percent. But people are returning to theaters in 2022. According to Box Office Mojo, total gross sales are nearing $6.6 billion in 2022, up nearly 50 percent from 2021 (but still about $5 billion short of 2019 sales). In fact, two movies released in recent months – Spider-Man: No Way Home and Top Gun: Maverick – are among the 15 highest grossing movies of all time. But there are just not as many movies to see in theaters. Box Office Mojo reports there have been 442 releases in 2022, compared to 993 in 2019; on a per-movie basis, the average gross is at its highest mark since 2010.

But ironically, the Old Hollywood film distribution system might receive a boost from New Hollywood streaming companies.

“Knives Out” for Netflix

In an interesting move, Netflix agreed with movie theaters to exhibit Glass Onion: A Knives Out Mystery in movie theaters during Thanksgiving Week before going dark until December 23, when the film will re-appear on Netflix exclusively. Netflix won’t release financial results for Glass Onion, but it’s estimated to have raked in $14.5 million during its one-week showing in only 638 theaters. By contrast, Disney’s Thanksgiving release Strange World was on track to make about $24 million during Thanksgiving Week – but the movie was distributed across 4,174 theaters.

Is Glass Onion a lost opportunity to make even more for Netflix? In fact, there is ample evidence to suggest that New Hollywood should release movies in theaters first in order to build buzz for streaming releases. For instance, The Batman earned $750 million globally before Warner Brothers premiered the film the HBO Max streaming service. The Batman then enjoyed a first-week viewership of an estimated 4.1 million households (per Samba TV) – the second best first-week for a theatrical release on HBO Max.

With Netflix releasing on about one movie a week for viewers at home, the potential for gaining more revenue streams is big. Netflix, to date, has resisted exhibiting movies in theaters first.  But amid an economic downturn and a harsh year for New Hollywood, Netflix must surely be tempted to rethink its strategy going into 2023. 

A Big Move for Amazon?

Even more significantly, it was reported recently that Amazon plans to spend $1 billion a year on theatrical film releases in 2023. Amazon seeks to make between 12 and 15 movies annually that will get a theatrical release. In 2023, Amazon will release a handful of films and increase its output over time. (That number of releases puts Amazon on a par with major studios such as Paramount Pictures.)

To date, Amazon has been steadily getting into the movie business over a period of years by purchasing titles and releasing them under the Amazon Studios name. It earned Academy Award nominations for The Big Sick and Manchester by the Sea, which were modest box office successes. Recently Amazon announced its intent to become major movie studio to be reckoned with when the company purchased MGM. 

The news about Amazon making titles for theatrical release will spark an ongoing conversation about Amazon potentially buying theaters. Well, it’s clear that one way or another, New Hollywood streaming companies are expanding their presence through the Old Hollywood distribution system, too. (Of course, New Hollywood/Old Hollywood hybrid Disney is already there.)

A few New Hollywood companies actually own theaters: Netflix owns the Egyptian Theater in Hollywood, and the Paris Theater in New York. Disney owns the El Capitan Hollywood theater, where it plays its own movies. Owning a limited number of brick-and-mortar theaters gives New Hollywood a means to hold special events and build buzz for major releases without competing with chains.

But would it make sense for a streaming company to expand even further?  I could see movie theaters becoming cash cows for Amazon to hustle its private label brands in the lobbies and offer special rewards for Prime members. The time may or may not be right for Amazon given the economic headwinds the company faces right now. But then again, theater chains are still hurting financially. And Amazon is clearly moving into brick-and-mortar industries such as retailing (most notably via the acquisition of Whole Foods a few years ago). Will Amazon make a move?

As for Warner Brothers: the company dropped its simultaneous movie/streaming strategy (known as day-and-date releases) for 2022 releases. This was a wise strategy given that The Batman’s phenomenal success.

Moviegoing ain’t dead by any means. In fact, it’s quite possible that movie going is being reborn into a new kind of experience where theatrical exhibits drive buzz for the streaming release. No one has figured out the right approach yet. New Hollywood and Old Hollywood are in test-and-learn mode.