As much as I hated writing that headline, it’s true. And, despite years of warnings that the future of the cineplex was nothing but apocalyptic, Hollywood wasn’t prepared.
Back in the late ’90s, companies started building DVD servers for home theaters. The idea was that a homeowner could buy a cache of DVDs and load them into a giant player and play whatever movie he or she wanted to see – as long as they owned a physical copy. Then, in 2001, a company called Kaleidescape, founded by Michael Malcolm and Cheena Srinivasan, came up with a novel idea — instead of loading the physical DVDs into a player, you would copy your purchased DVDs onto a giant hard drive-like device that served them out as digital content whenever you wanted to watch them — anywhere in the house! But instead of embracing it, Hollywood sued them — over and over and over.
You see, Hollywood studios have loved their monopolistic system of making, distributing, playing and redistributing movies and have attempted to keep control of the entire distribution process so that they can collect nearly all the profits for themselves, as well as control the prices. Case in point: When the latest installment of Star Wars came out over the past six years, the actual movie theaters made less than 7% of the revenue on the film. Disney not only demanded more than 93% of the revenue but also required the trifecta of sequels to play in the theaters for months, too.
But this is nothing new. For decades, the studios have made way, way more on movie distribution rights than anyone else in the food chain of entertainment. That’s why you paid fives times more for soda and popcorn at the theaters than you would elsewhere — it’s the only way the theaters made money.
More than two decades ago, I wrote a blog for an entertainment pub that refused to publish it, laying out a suggested plan for changing how movies were distributed. In it, I said that Hollywood should embrace the new ways of distributing movies — rather than trying to sue them out of existence — including allowing first-run movies to debut at home on the same day as they do inside the theaters. Mind you, this was before streaming. So, my suggestions centered on DVD distribution, allowing companies like Netflix, Blockbuster (who was still a big-time player back in 2000) and Redbox help in the process.
Speaking of Redbox, that’s another example of how Hollywood Studios attempted to stop innovation. Back in 2002, when Redbox debuted with kiosks inside grocery stores with $1 overnight rentals of DVDs, the Hollywood studios unleashed a host of complicated claims saying that what they were doing was illegal. Their issue? Well, it came down to NIHS: “not invented here syndrome.” Basically, since a third party company, Redbox, who was outside the Hollywood good ole boys club came up with it, they didn’t like it. You see, Redbox wasn’t buying the DVDs from Hollywood studios, like Netflix and Blockbuster did, they were buying them from retailers — like you and I would if we walked into a Walmart and purchased DVDs — and then sticking them inside the kiosks and renting them for $1. NONE of the money was sent directly back to Hollywood.
Blockbuster and Netflix also experienced the wrath of Hollywood in the early days, too. So, every innovation was bad, unless it was an innovation from within.
Take HBO and Hulu, for examples. HBO was started by Charles Dolan back in 1971, just as cable TV started to roll out in New York City. In fact, originally, it was part of his own Manhattan Cable TV Company, which had an initial investment from Time Life, now Time Warner (i.e., Warner Bros Studios). Originally called THE Green Channel, it was changed to Home Box Office (HBO) in 1972. Its first broadcast was actually for an NHL game and, monthly, would release four of five movies that had debuted theatrically in the past 12-16 months. Although not owned exclusively by a Hollywood studio, Warner Bros had a direct investment in it. It was part of the club.
Hulu, started mostly by Jason Kilar, included investment capital and management from NBC (owned by Universal Studios), AOL, Facebook and Yahoo!. Soon after its 2007 debut, ABC (i.e., Disney) added themselves as an investor. With two of the six big studios behind it, it was easy to predict success. Nearly anything Hulu tried was successful. And now Disney has a controlling interest (more than 60%) in Hulu, so its future is guaranteed.
In the early 2010s, the big-six studios — Walt Disney, Warner Bros, Universal, 20th Century Fox (now owned by Disney), Columbia (owned by Sony) and Paramount, saw the streaming success of Netflix and others, none of which, at the time, were exclusively owned by or operated by Hollywood. Naturally, each set out on a path to create its own “direct-to-consumer” access. And, aside from Disney+, which debuted in late 2019, none was ready for what happened in March 2020: the shutdown of the movie theaters. Even Disney’s own plan was to not initially to release first-run movies on Disney+, but instead to create exclusive content for it — like The Mandalorian — as well as serve up old Disney movies and content.
NBC Universal’s Peacock streaming service, plagued by quality and timing issues, debuted in July 2020 and is also filled with old content. No movies, yet. And, you can’t even get it if you don’t have an AppleTV or Roku — Amazon devices still can’t handle it.
Then there’s HBOMAX — owned by Warner Bros. Always intended to be the place for Warner content, HBOMAX has nearly all of Warner’s TV and movie content, including the 10-season cache of Friends episodes as well as The Big Bang Theory’s 12 seasons.
But the salvo fired upon the movie theater chains came on December 3, 2020, when Warner Bros announced that all of its 2021 movies would be streamed on HBOMAX the same day it hits the theaters. This includes some biggies like Dune, Matrix 4, the new Space Jam, Godzilla vs. Kong and Clint Eastwood’s newest, Cry Macho.
There’s the nail in the proverbial coffin.
You can bet Disney will do more of this in 2021, too. In late 2020, Disney debuted the long-awaited Mulan remake on Disney+, keeping all the money for themselves by adding nearly 140 Million subscribers in less than a year!
In the meantime, AMC Entertainment Holdings’ (owner of AMC Theaters) stock has been pummeled. It’s down over 70% for the year — to less than $2.40 a share — and every other movie theater chain, worldwide, has had their stock sink at least 50%.
There will always be people like me — people who want to see big-budget movies in big-time exhibition houses. In fact, I nearly always see the big movies either in an IMAX theater (whose stock has nearly recovered from its lows in March 2020 to pre-pandemic levels) or in a Dolby Cinema theater. But, for all others, I’ve always been fine seeing them in my home theater or even on my 75″ Samsung QLED.
What happens next is clear. Just watch the big-five studios (since Fox is now also part of Disney). Three of the five have streaming outlets and the other two will by mid-2021. If they start releasing movies there, the theater chains will never recover. Never. It’s all about the money. If they can keep it all, they will.
What will we do with all those theaters? Any nearby colleges will take them, for sure, as lecture halls. But, I suspect companies like Facebook and Google have some ideas regarding ways to use them for VR and XR — stay tuned!
Oh, what about Apple and Apple+? For now, TV, TV and more TV. But, that said, watch for them to buy Sony Pictures. Yep, you heard that right — and then, Apple would own Columbia Pictures too.