TheWrap just released a lengthy report on the many ways studios expedited the breakdown of their own theatrical profits, and the result can more or less be summarized as Tim Robinson in a hot dog suit saying “We’re all trying to find the guy who did this.” Studios like Disney “weren’t thinking at the time that we would change or disrupt the theatrical experience” when pivoting to streaming, in the words of former executive Kevin Mayer. Instead, they assumed that they would be able to profit off of consumers’ increased ability to choose where they watched their films, while also maintaining steady revenue from the modern, elevated theatrical experience, including stadium-style seating and state-of-the-art Dolby sound systems. That’s not what happened.
TheWrap’s report tracks the butterfly effect that occurred when Netflix’s platform changed the industry forever in 2007. As we all know, everyone else rushed to follow suit. “You could just taste it,” Mayer said of Disney+’s initial launch announcement in 2019. “This is going to transform our company, transform the industry, and our shareholders are going to massively benefit from it. We were sure of it. And we were right, by the way. It did happen that way—until it didn’t.”
The box office has been decimated over the past few years—in part due to a pandemic and joint strikes. But, according to the outlet, the push into streaming was initially meant to address an entirely different problem. Netflix’s business model didn’t just disrupt theatrical opportunities; it also spelled the end for traditional cable—a major revenue source—as well as high-profit DVD and Blu-Ray sales. “There’s a big component of revenue that essentially disappeared for studios,” Daniel Loria, SVP content strategy and editorial director at Box Office Pro, told TheWrap.
This initial band-aid of a strategy, paired with the months-long theatrical shuttering in 2020, ricocheted into a complete rewiring of moviegoer behavior. Every studio addressed the shutdown slightly differently (remember when Disney tried to sell Mulan on streaming for $30?), but the general result was a drastic cut to the expected window between a film’s theatrical and VOD/streaming release.
While TheWrap uses The Fall Guy as an example of films with overlapping theatrical and VOD windows “not seeing a major drop in theatrical revenue” after their digital release, sources also say that they’re concerned this practice “may train audiences to expect that certain films, even at a premium price, will be available in their living rooms faster.” While one anonymous theater executive explained that “theaters get a cut” when people choose to wait to watch a film on VOD, they still “lose out on any concessions they would have bought.”
With the exception of Netflix, most of these streaming services have yet to turn a profit. While both Disney and Paramount say they’re on track to reach streaming profitability in fiscal years 2024 and 2025 respectively, that’s still a lot of hemorrhaged funds, especially considering the additional theatrical losses. All considered, current studio innovations and acquisitions feel a bit like playing music on the deck of the Titanic. Truthfully, the whole report from TheWrap is worth reading, and can be found here.