Virus Crisis Forces Hollywood to Reckon With Collapsing Theatrical Windows

As theaters across the U.S. shut down, studios are experimenting with releasing on-demand, but for tentpoles "the math really doesn't work."

As the global coronavirus pandemic has shut down movie theaters around the world, the film business faces a potentially transformative question: Should studios hold movies for a later, indefinitely postponed theatrical release or make them available as online attractions now?

While NBCUniversal and Sony Pictures are offering films on a pay-per-view basis, media analyst Rich Greenfield says “they're doing this out of complete distress and as some kind of unique learning experience rather than as a shift in strategy.”

A statement from Sony Pictures chairman Tom Rothman as the studio announced a March 24 on-demand release of the Vin Diesel movie Bloodshot underscored the unusual nature of the decision. “Sony Pictures is firmly committed to theatrical exhibition and we support windowing,” he said. “This is a unique and exceedingly rare circumstance.”

While the on-demand model may work or at least mitigate the damage for some movies that are shut out of theaters due to the virus, Greenfield says,“the math really doesn't work” for big films. For low-budget or mid-range movies, releasing them on demand remains a gamble — an exercise in trying to solve an equation when variables are unknown.

NBCUniversal is making The Invisible Man, The Hunt and Focus Features' Emma available on demand, as well as — most significantly, in terms of budget — the upcoming DreamWorks Animation sequel Trolls World Tour. The movies will be available for a 48-hour rental period on all on-demand platforms, with a suggested price of $19.99 in the U.S. and equivalent in international markets, starting Friday.

So far, Trolls, with its April 10 release date, is the only film that has had no domestic theatrical run that is set to debut as a pay-per-view offering. The 2016 original made $347 million worldwide on a budget of $125 million. The budget for the Trolls sequel is said to be above $90 million and the studio is locked into spending tens of millions on advertising. (The other films had abbreviated runs in theaters: Invisible Man grossed $64 million; Emma pulled in $9.9 million; and The Hunt took in $5.3 million during its very short release.) Sony’s Bloodshot opened in theaters briefly March 13 and grossed an estimated $9.3 million as the coronavirus crisis advanced.

Greenfield says that when it comes to the math of releasing a big-budget studio film on pay-per-view, much is unknown. “Let's say [Universal] thought Trolls would be a $600 million film. They could have made $260 million out of the theatrical window. At $20, can they sell 13 million copies? It's a big data point. They're going to learn a lot from doing Trolls,” he says.

But one veteran exec is skeptical. “No parent is looking to pay $20 so a child can watch a movie one or two times in the house,” he says. If a kid wanted to watch the Trolls sequel, says the exec, a parent — especially one with financial worries — might suggest watching Frozen 2 instead. Not only is a month’s subscription to Disney+ much cheaper than a movie on demand, but a child can stream a favorite movie over and over. And streamers have conditioned the public to wait for an on-demand movie to become available as part of their subscription. Overall, he says, “the pay-per-view business is likely to get smashed between a recession and streaming.” (HThe exec adds that he understands why Universal parent Comcast, as a cable operator and owner of Sky, would try to promote on-demand viewing.)

As for a potential blockbuster film aimed at more quadrants, Greenfield says no studio is likely to launch a movie with the potential to gross $1 billion on-demand, even in the current crisis. That explains Universal’s decision to push F9, the ninth installment of the Fast and Furious franchise, into 2021. (While some in the industry have speculated the studio might consider putting the film on its forthcoming Peacock streaming service to generate excitement — especially if the Olympics are postponed — studio sources rule that out, especially as the Peacock service is not international and the films derive a lot of revenue from China and Latin America. Minions: The Rise of Gru, set for the July 4 weekend, might be another option for Peacock, if the crisis does not abate, but the 2015 original grossed $1.2 billion.)

The pay-per-view strategy makes the most sense for low-budget films or movies that didn’t seem likely to pull in stellar box office numbers had they held out for theaters. “For The Hunt or Bloodshot, something like this could be a real good opportunity,” says one exec whose company released one of those films.

Greenfield points out that the most successful pay-per-view event to date — the 2015 Floyd Mayweather-Manny Pacquiao fight — grossed $400 million in the U.S. “That was for a once-in-a-lifetime event where if you didn't pay for it in the moment, it had no value,” Greenfield says. “One question is, is there urgency for a pay-per-view movie the way there is for a sporting event? The answer is probably not."

On the other hand, the Mayweather-Pacquiao revenue had to be split among various parties. With pay-per-view, a Universal exec notes, “the services [that distribute the films] have very little to do, so the split on VOD is going to be heavily favorable to the studio.” And in the current crisis, with millions of consumers stuck at home with their children, who knows how much a new movie like Trolls World Tour might be worth to a family?

Meanwhile, challenged theater owners fear that the premium VOD offerings could be perceived by the public as a permanent change. One source says some theater owners across the globe were angered when Universal announced its plans. A longtime studio exec says their anxiety is justified, especially as a pay-per-view rental is probably cheaper for a couple than a night at the movies. “People from 13 to 30 have already completely changed the way they consume entertainment,” he says. “The question is, will this shift another generation of people from 30 to 50?”

The National Association of Theatre Owners released a statement Tuesday in defense of the theatrical model. "People will return to movie theaters because that is who people are,” the group said. “When they return they will rediscover a cutting edge, immersive entertainment experience that they have been forcefully reminded they cannot replicate at home." NATO is calling on Congress and the administration for relief, “to ensure that America’s movie theater industry and its tens of thousands employees across the country can remain resilient.”

Additional reporting by Pamela McClintock and Tatiana Siegel.