In the last few days a brewing conflict over how audiences consume content has boiled over thanks to some questionable language used by Universal CEO Jeff Shell when explaining the viability of PVOD (Premium View on Demand) after the success of the entirely online release of Trolls: World Tour. While these comments, which I will discuss later, proved the tipping point in an invisible conflict that has been raging for years now, it also highlighted two vastly different viewpoints by audiences themselves as their viewing habits change, oftentimes without them even realising it. However to fully understand where we are today, lockdown or no lockdown, it is important to look back.
Why The Change? – A Brief Recap
For anyone over the age of 25, home cinema as a kid usually meant going with your parents to the local Blockbuster, renting a movie (or three) and sitting down with the whole family to watch something that had been in cinemas at least six months earlier. It was a way of catching up on films missed or things you heard about too late in their release. That soon evolved into services like LoveFilm (for us British audiences) and Netflix in America. These rental services pounced on the emergence of DVD’s and took Blockbusters business model and made it contactless.
While the idea was fresh and meant people didn’t have to go out at all to enjoy a night at the ‘cinema’, it required the public to trust an entirely new form of media. In the early days, DVD players were expensive and the internet was an unknown quantity, which meant word of mouth was slow. Because of this the Netflix we know today almost never existed but in early 2002 their gamble paid off while not impacting cinemas themselves. Cinemas remained the first port of call for new releases, physical media just complimented it and postal services meant more opportunity for movie studios to sell their products.
It wasn’t until the advent of broadband and increased internet speeds that cinemas began to get nervous. In 2007 Netflix began to offer a VOD service. Limited at first, it grew exponentionlly as demand did. Managing to remove the time delay of a postal service it became the next big thing and it saw the decline of DVD rentals as well as the destruction of the Blockbuster brand. While society still had a need for physical media, it was a chore going out to get it. While the possibilities of digital media were endless, Netflix had only taken the first steps to realising it. Much like their original business model, they relied entirely on cinema released product that companies like AMC and Cineworld had first access to. While subscriptions continued to grow, Netflix needed content previously unseen to really push the limits of its new strategy.
At the same time, Amazon began dipping it’s feet in the waters of online distribution in a bid to keep up with Netflix. Between 2007 and 2013, Amazon followed in their competitors footsteps and upped the number of movies available to their consumers. Movie studios had a field day selling distribution rights with more chances to gain supplementary income after its initial box office run. Both companies became testers for a new normal that sidelined the cinema experience. It wasn’t out, but it was down.
Up until that point, cinemas remained unthreatened, a night at the movies was always new and exciting. That didn’t mean they weren’t growing increasingly nervous. Attendance was down, not only because of the advent of streaming but the influx of video piracy. In 2013, Netflix began expanding into original content and the cinematic cold war really began. Seeing something new meant turning the tv on or logging into your laptop. What started as a few TV shows evolved into a wealth of movies and suddenly everyone wanted a piece of the action.
PVOD content ballooned and companies like Apple and Disney took notice. However all of these companies relied heavily on subscriber based business, meaning that their content either exclusively went to their platforms or it respected the opening window of big budget cinema releases. Independent films, which have become a financial gamble in a world of big budget superhero movies and franchise films, began to break from the cinematic norms. A simultaneous release in cinemas and as PVOD content has grown to become the new normal, with some choosing to forgo conventional cinema releases entirely.
Films that many cinema chains assumed would flounder on the internet where there is an overabundance of choice, did exactly the opposite. Today, services like Curzon Home Cinema actively embrace this new normal so that they can have the best of both worlds. Today streaming services are everywhere with Disney and Apple entering the fray over the course of 2019. The internet has become oversaturated with options and cinemas are feeling the squeeze. Studios have embraced a new technology, a vastly shifting economy and a landscape that requires constant innovation to stay relevant. Cinemas, which leaves little room for dramatic change, haven’t. A successful run in cinemas has become less necessary, and the once close relationship between studios and theatre chains have been allowed to atrophy.
This has led to a corruption of the classic opening window, as studios have sought to shorten it to fit their financial needs. Today the conventional window is a minimum of 90 days and although there have been attempts to change it, most have been squashed because this window protects not only cinema chains but also the institution in general. A change that may produce a profit for major studios could mean disaster in the long run. Studios risk making the trip to the movies and the chains that afford us this luxury, just another Blockbuster in the changing financial landscape.
A Defining Moment or Another Blip?
That almost brings us to today. Back in December of last year, Covid-19 began to ravage the city of Wuhan. As it picked up speed, infrastructure began to shut down, not only in Wuhan but across China as a whole. At that point, at least in terms relating to this article, the only issue was major releases missing the lucrative Chinese market. Fast forward three months and cinemas are closed almost everywhere and cinema chains are in limbo, wondering how to cover the costs of temporary closures that seem to get longer and longer, effecting not just major studio releases but independent movies banking on a successful limited run.
The notion that this will blow over has been and gone and cinemas are prepping for a new normal. While they remain in limbo however, movie studios have used the downtime to experiment with new approaches to releases. Small studios have resorted to online only distribution with movies like The Assistant (which released on the 1st May), Misbehavior ( which had a limited run in the UK before cinemas shut down) and Blumhouse’s The Invisible Man (which had generated positive buzz before lockdown began and only seemed to gain momentum as it became a PVOD title) making the move to the internet.
These damaged the viability of cinemas moving forward but it was silently understood that these are extraordinary times and entertainment, despite being non-essential is vitally important during a time of emotional turmoil. It was understood that studios needed to recoup costs and cinemas would just need to take some hits on the chin. What they didn’t take too kindly to was the release of major tentpoles which they expected to financially gain from being released online too. That brings us to Universal’s decision to release the sequel to Trolls, Trolls: World Tour as a PVOD title. This decision, while fruitful for Universal was a shot across the bow for cinemas.
Chains remained silent as they understood the nature of the ‘new world order’ they were coping through but when Universal CEO Jeff Shell, on the 28th of April, effused in a quarterly earnings report that the online release of World Tour had been a glorious financial success, netting the company over $100 million over the course of its first 19 days online, it led to a standoff that could signify a major distribution shift. Shell proceeded to tell investors that in the future, multiple big budget releases would see simultaneous release in cinemas and online, a move that would almost certainly mean diminished returns for movie theatres.
Almost immediately, cinema chains began to announce they would no longer show Universal movies that did not respect the 90 day window. Although they stopped short of saying all of their releases would no longer show, chains such as AMC in America and Odeon and Cineworld (which also owns Regal in the US) in the UK effectively demanded that any changes to their joint business model would not be tolerated. Many European cinemas followed suit as they took a collective stand to defend themselves from the ground shifting beneath their very feet.
Now, a week later, both parties appear to be at an impasse with no real updates between now and then. With both sides seemingly set in their views, one holding steadfast to cinematic tradition and the other embracing the new, it is anyone’s guess how this all plays out. The only part that seems set in stone is that both sides are in store for some lengthy negotiations, ones for which rival movie studios will be watching intently along with independent cinemas caught in the crossfire.
Both Sides Now
While it is easy to say that this is an issue blown out of proportion, an argument about a mid-range sequel profiting from a time of strife but that would be oversimplifying an issue with moving parts that go back as far as the early 2000s. Neither side is wrong, neither is right. If anything, this brewing battle is a litmus test, a way to gauge where people stand when it comes to how they view their media and how willing they are to move away from tradition. Much like with the studios, every opinion is valid.
By far the most prevalent opinion, at least on social media it seems, is that this decision was made at the wrong time. A battle is hardly what studios and cinemas need right now, especially when information is scarce. Not only do we not know when cinemas will re-open but World Tour was just one movie, one that had an invested audience because of the situation, not specifically because viewing patterns have changed. Universal carried out one very limited test case and without more information it doesn’t mean much. On the other hand, AMC and Cineworld seem to be reacting to the same limited data, meaning it might just be period induced panic on their part and bullish resilience on Universal’s.
For the sake of context however, the theatrical window has been shrinking for years, a series of concessions made by theatre chains over the course of the last 10 years. What used to be at least six months has shrunk to just under four on average. This reaction isn’t just combatting a single action but years of small, unnoticed encroachment on the studios part. There was never going to be a good time for this kind of deadlock but in some regards, this might just be time to sort this whole thing out.
What is clear is that this isn’t an argument where people stand behind one party or another. Nobody is in Universal’s camp or standing behind the cinemas, this is multiple issues and nobody involved comes out of it smelling of roses. It entirely depends upon what is most important to you, be it increases in home viewing opportunities, the defence of big screen experiences or just finding a happy medium, we are all invested in a resolution but that looks different to each and every one of us.
The least supported argument, the one that sees cinemas as underdogs in a story of corperate greed, is one that feels unrealistic, a rewriting of a story to allow for a heroes and villains story where there isn’t one. Both sides are huge companies, making millions of dollars and accounting for hundreds, if not thousands of jobs. Neither is interested in ruining the other, a symbiotic relationship is mutually benefitial to both but some sort of resolution means at least some kind of compromise. The argument that these are the end times for cinemas and Universal is actively pursuing this is utter madness. However an argument for Universal playing fast and loose with a system that up to this point was working for both parties is hard to deny.
Although to ask Universal to back down is asking them not to update and modernise and we live in a world of constant competition. Asking companies not to compete is nonsensical but this pandemic has ultimately pressed pause on multiple industries, entertainment included, and the push to continue profitting has made Universal cut-throat in how they approach businesses they no longer make money from. A time where kindness and understanding should be encouraged, Universal’s actions paint a picture of exactly the opposite, forcing a similar reaction from AMC etc.
A friend of mine recently stated that cinemas were being ‘petty in the current climate’ which is hard to deny. These are trying and isolating times without conflicts like these adding to the uncertainty. However its hard not to see AMC’s side of the arguement. Universal were afforded a certain freedom to release World Tour because of the current market but they ran with it while everyone else was stuck on the starting line waiting for a gun that isn’t coming anytime soon.
Ultimately I see it as an issue where peoples changing habits feel more important than a much needed institution and considering the concessions made in recent years, cinemas are reaching a tipping point. While this combative reaction could have been avoided, studios need to understand that if they begin to cut into box office takings in such a brazen way they are going to kill what we know as the modern cinema, all for the sake of testing out something that might not prove successful. I’d say if it ain’t broke, don’t fix it but constant change is expected and inevitable, it just shouldn’t be right now.
The only people that suffer from this whole debacle is customers and the employees that rely on both companies making money. The notion that Universal films wont screen in hundreds of cinemas across the world is a wound that affects every little part of each and every business involved. It is hard to imagine that this won’t be rectified as the alternative is financially moronic. If either company at this point isn’t at the negotiation table frantically trying to salvage something out of this mess then that is the moment they really are being truly petty.
If they don’t fix this, audiences may miss their chances to see big budget films such as the 25th James Bond film No Time To Die (which Universal is distributing internationally), the 9th instalment of the Fast and Furious series as well as the latest Jurassic World film. These big hitters represent a huge wealth of profit for everyone involved and with No Time to Die coming out in November (after being pushed off its original April 22 release) both sides have good reason to reach an understanding rapidly for the sake of all involved.
Moreover, if they don’t solve their issues now, we could come back to a vastly different landscape, one which could mean dire consequences for everyone involved.