Perfect Storm: How Coronavirus Could Kill Movie Theaters

As many of you know, I am a freelance writer for TechSpot. I recently wrote about how Disney & Pixar are bringing their new movie, Onward, to digital download and Disney+ early. This is obviously because movie theaters are closed due to coronavirus fears. However, in that article I talked briefly about if traditional movie theaters are needed and if this temporary situation will have long term implications. I wanted to expand on those thoughts in this post.

There’s a well-defined way that movies go from production to distribution to movie theaters. Because I’m not well-versed in the literal behind the scenes of movie distribution, I’m going to borrow this helpful bullet list from HowStuffWorks:

  • Someone has an idea for a movie.
  • They create an outline and use it to promote interest in the idea.
  • A studio or independent investor decides to purchase rights to the film.
  • People are brought together to make the film (screenwriter, producer, director, cast, crew).
  • The film is completed and sent to the studio.
  • The studio makes a licensing agreement with a distribution company.
  • The distribution company determines how many copies (prints) of the film to make.
  • The distribution company shows the movie (screening) to prospective buyers representing the theaters.
  • The buyers negotiate with the distribution company on which movies they wish to lease and the terms of the lease agreement.
  • The prints are sent to the theaters a few days before the opening day.
  • The theater shows the movie for a specified number of weeks (engagement).
  • You buy a ticket and watch the movie.
  • At the end of the engagement, the theater sends the print back to the distribution company and makes payment on the lease agreement.

By my count, that’s about 13 steps from movie conception to the end of the theater run. There are numerous deals, marketing, and logistics that go into the production and delivery of a film. But what if most of that could be taken out? Take out the distribution deals and a movie studio could save possibly millions of dollars. There seems to be a perfect storm brewing that could put traditional movie theaters in jeopardy.

The first ingredient of this perfect storm is consumer need. Government and health officials are strongly recommending that people practice “social distancing” to avoid possibly spreading the coronavirus. Some states have even implemented “shelter in place” regulations that require citizens stay in their homes and only venture outside for necessities like groceries and medicine. This, of course, means that more people will be stuck at home binge watching their favorite shows on Netflix, Hulu, Disney Plus…etc. But that also means they’re not going to movie theaters.

The second ingredient in this perfect storm of movie theater irrelevancy is the prevalence and growth of streaming video services. Netflix started the streaming trend, followed by Hulu and Amazon Prime. With more people cutting the cord, services such as Sling TV, YouTube TV, and Philo have allowed people to watch the networks and shows they want without being tied to a two-year contract and high fees (although AT&T seems to think that’s what people want for some reason).

The final ingredient to this perfect storm is profitability. Many major networks have starting rolling out their own respective streaming services to capitalize on the growth of streaming services. Of course, Disney has Disney+ and ESPN+, and controlling interest in Hulu. AT&T has HBO Go, HBO Now, and DC Universe. NBCUniversal is rolling out Peacock, CBS has CBS All Access. We’ve already talked about this topic on one of our podcast episodes here. Many networks and content providers have realized that they can create a continuing revenue stream by creating their own streaming service. As long as the content is compelling enough, people are willing to spend $5-15 per month to consume that content.

Combine the rise in consumer spending on streaming service and the resulting revenue stream for content providers with most of the world being stuck at home for weeks or months at a time and you create a scenario in which movie theaters may not see as much growth as before. If you’re a family of four and you wanted to see Onward in theaters, that would cost about $35 (the average ticket price in 2019 was about $9). Add in the exorbitant costs for popcorn and drinks, you’re well over $50 for just ONE movie. Alternatively, you could just spend $5 on Disney+ and watch it on the giant 4K TV with surround sound speakers that you already own and eat food that you already own. Tell me which one would you’d rather happen.

There is one wrinkle to this scenario. The social aspect. [Warning: Major spoilers for Avengers: Endgame follow]

Marvel Studio’s Avengers: Endgame was one of the biggest blockbusters in the history of cinema. Part of what made it so successful was the buildup of ten years of interconnected films that led to this one moment. It’s become such a cultural phenomenon that even people who weren’t comicbook geeks still plunked down money to see it. Would the reveal of Captain America being able to wield Mjolnir or the return of every MCU hero in the iconic portals scene be as impacting if you watched it by yourself at home instead of being in a theater full of people? I mean just watch this reaction video:

That gave me goosebumps and I’ve seen the movie at least three times. Nothing beats being inside of a theater and an epic moment happens that causes the entire theater to react. The same goes for sporting events. There’s just a certain fulfillment that comes with experiencing important events with friends, family, and even complete strangers. This may be the single greatest ally that traditional movie theaters have when it comes to preserving their business model.

Humans are relational creatures by nature. We crave being around people we care about. We want to experience life with other people. During my conversation with Kevin Nether aka the Tech Ninja, he lamented that the cancellation of major tech events like CES and Mobile World Congress have meant that he doesn’t get a chance to experience those events with his friends. While the topic of how the coronavirus will affect tech conferences moving forward is a blog post and podcast topic in and of itself, it already has people wondering if more events will simply be live-streamed instead of offering in-person attendance. If so, how does that affect the social component of networking and forming relationships?

For the movie theater business to succeed after the threat of coronavirus is over, it’s going to have to emphasize the social aspect of experiencing movies in an auditorium with random strangers. They’re going to have to stress the importance of getting out of the house. However, in an age where $50 movies for a family of four are competing with $5 Disney+, It may be hard convincing people why they should experience movies in a traditional theater rather than a home theater.

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