What's Collapsing Next?

Welcome to your daily dose of COVID doom.

And the answer to my own question is; movie theaters.

Hollywood may be an SJW wasteland but when it comes to business matters they are as conservative as you can get. No real surprise there, since movies are by their nature a pretty high risk business and all companies try to manage risk as best they can. Frequently, film studios are the slowest to react to a new business opportunity.

Laser disks were a huge thing in Asia up until the introduction of the DVD because Hong Kong filmmakers gambled on LDs big time and cleaned up. American studios on the other hand had to be dragged kicking and screaming into the home video market.

From an older post of mine:

“My point is this. We just weren’t used to consuming movies on demand. It was as I said, a problem no one had.

Now a problem that everyone had was missing an episode of your favorite show. It’s hard to explain this to Millennials and especially Zoomers, but we structured our lives around our TV viewing schedule. Because if you missed an episode of your favorite show your only hope of seeing it was to wait for summer reruns. If you missed it then it was gone forever unless that series got picked up for syndication.

Worse still was the torment of having two favorite shows on at the same time.

The VCR answered these problems that everyone had.

BUT it wasn’t a medium for watching movies in the privacy of your own home.

Not at first anyway. Remember that vault I mentioned a little earlier? Yeah, the studios still felt that re-releases every seven years combined with sales to TV networks were the gooses that laid golden eggs.

Their view of releasing movies on VHS was, “are you kidding? Once that we publish a movie we can’t make money by re-releasing it. Worse still we would be giving up control of the product!”

However, the B-movie producers finally made their case to the Studio Moguls.

B-Movie Producer: Look, boss, nobody is going to watch Eat My Dust or Breaker, Breaker in the theaters ever again. Their R-rated so the networks won’t buy them and neither will UHF. Let’s give this video cassette thing a shot because we literally have nothing to lose here. There is no production expense at all because the movie is already made and they are not making any money in the vault. Bottom line: anything we make is pure profit.

Studio Mogul: Well, as you say our risk does appear to be non-existent and perhaps there is a market for… HOLY SHIT! WHO JUST GAVE US THAT LICENSE TO PRINT MONEY?!?!

However, that was just the B-movies for a long time. The A-movies stayed in the vault. In consequence, there were a few movies that took off on home video when they hadn’t in the theaters. Tron, Terminator and Blade Runner off the top of my head.

However, by the mid-eighties, it was apparent that the vault was a dead revenue stream. The reason was simple. Nobody would go to see these movies in a theater ever again because we all knew that sooner or later they would be out on tape.”

They were quicker on the uptake when it came to DVDs. The view had switched to, “hey, a new format is a chance to sell our old content again. Once a format was agreed upon there was a big push to put everything out on Blu-ray and eventually discontinue DVD as a format. That hasn’t really worked out because of a new and terrifying phenomena called “Streaming.”

Corona has come along at a big turning point in Hollywood. Everyone is starting up a streaming service which is leading to something of a Young Turks Rebellion behind the scenes in Hollywood.

Young Turk Producer: Why are we pumping all this money into theater exhibited movies? The risk to reward is gigantic. It ties up a shitload of resources (which is to say money). And how big is the reward when you add it all up? Sure Variety likes to go on about this billion-dollar blockbuster or that one but at the end of the day, I ain’t seeing a billion dollars. The theater take is somewhere between fifty percent to seventy-five percent depending on the country. We have to pay a shit-ton in marketing. We get pealed on the exchange rates and then we also got to pay percentages to all the big stars in the production. And oh yeah, taxes. Look at the Force Awakens; worldwide gross two billion, profit seven hundred million.

Old Timey Mogul: That was seven hundred million Disney didn’t have before.

Young Turk Producer: How much money did they make on John Carter?

Old Timey Mogul: Point. So what do you have in mind?

Young Turk Producer: Change how we do business. Our business is streaming movies now, so lean forward and commit. Forget the mega-tentpole films. We need a ton of medium budget content that we can make quickly and stream instantly.

Old Timey Mogul: But what about the theaters?

Young Turk Producer: Screw. The. Theaters.

And it appears that Universal has decided to give this strategy a shot. Trolls 2 is not going to have a theatrical release. And the theater owners are pissed.

John Fithian who is the chief of an organization that represents theaters owners wrote.

“[W]ith the exception of Universal, every studio has gone overboard to reassure exhibitors that the theatrical model works for them and that they look forward to releasing their movies theatrically once the virus is done. And every one of those studios called their exhibition partners and talked through their plans for delayed-release before they announced them. Only Universal on Trolls undermined the theatrical model. And Universal told no exhibitor about their plans on Trolls until approximately 20 minutes before their announcement. Exhibitors know who their partners are. And every other studio has demonstrated true partnership and belief in the theatrical model during this time of crisis for all Americans, and indeed all movie-goers around the world.”

Translation: we know the rest of the studios are looking closely to see how well Universal does with this and if it works, we are out of business. But if it doesn’t we are going to screw Universal in every way we can.

The wording of the message is the big give away. The theater owners have been dreading this for a long time.

My grandfather was born into a world where movie theaters didn’t exist. And I have lived my half-century of life with them as a background to American life. It was always an option for a cheap date. Movies in theaters gave us shared cultural touchstones. But there was once a world without nickelodeons and there eventually will be one again. It’s no secret that theaters don’t make their money off of movies, they make it off of ten-dollar buckets of popcorn. They were going to have to change their business model sooner or later.

Now it’s going to be sooner.