'Dune' at Home Turns Theaters Into Wasteland

Warner Bros. and HBO Max, two units of AT&T Inc., just delivered a crushing blow to movie theaters. All of the studio’s films set for release next year — including “The Suicide Squad,” “Dune” and “The Matrix 4” — will go straight to the HBO Max streaming service at the same time that they play in cinemas. While Warner executive Ann Sarnoff sees it as a “unique one-year plan,” let’s be honest, it’s not. 

Even as Covid-19 vaccines near approval, it could be a while before consumers feel safe returning to the close confines of a shut-in movie theater. In the latest Morning Consult poll of 2,200 U.S. adults conducted in the final days of November, 51% said it would be four to six months or even longer before they’d feel comfortable resuming trips to the movies; another 26% said they didn’t know or didn’t have an opinion on it. By the time most people do feel safe going, many still may not want to. What I wrote in October — as exhibitor AMC Entertainment Inc. warned of possible bankruptcy — bears repeating:

We have learned to live without movie theaters. Even the ones that make it through the crisis may find that online-streaming apps have stolen away audiences for good.

Unlike amusement-park rides and cruises, which have been equally paralyzed by the pandemic, the movie experience can be replicated at home — and sometimes more cheaply and conveniently. It will be that much harder for theater chains to bounce back. 

The place cinemas have in our culture and history, and the thousands of jobs they provide, makes it all the more tragic. But consumers keep signaling that going to the movies is more of an occasional treat when there’s a must-see blockbuster film than a regular habit. That’s not enough to support 40,449 movie screens in the U.S., the latest total published by the National Association of Theater Owners. As I noted in October, higher ticket prices have helped give the false sense that box-office sales are climbing, when in fact adjusting for inflation shows that they’ve gradually fallen over the last 20 years:

'Dune' at Home Turns Theaters Into Wasteland

Companies such as AT&T and Walt Disney Co. are responding as they must by going where audiences are. And that’s at home. The box office is a crucial source of profit for the Hollywood giants, but prioritizing that over streaming will only hurt them in the long run as Netflix Inc. rounds the corner on 200 million subscribers. The first domino fell in July, when Comcast Corp.’s Universal Studios struck an agreement with AMC to cut short the time its films play exclusively at theaters. Then Disney, the single most important company to movie-theater businesses, bypassed them and put “Mulan” directly on Disney+ in September for a viewing fee of $30. Last week, I wrote that Disney+ would be smart to offer a “box-office pass” subscription tier for movie fans willing to pay up for continuing virtual access to new theatrical releases. HBO Max, which costs $15 a month, won't charge anything extra for its films, for now at least.

Shares of AT&T popped slightly on its announcement Thursday, while AMC and Cinemark Holdings Inc. plunged 16% and 22%, respectively. Just beforehand, as my colleague Brian Chappatta noted, AMC’s most-traded bonds had rallied to 35 cents, up from only 5 cents in early November. 

As for Disney and its peers, streaming has been a money-losing venture so far. But the fastest way to start turning a profit is to sign up lots of people. And Netflix has shown that the way to do that is to flood them with content — all the better if it’s movie-theater-quality films. Now that Warner Bros. is planning to do just that in 2021, it’s hard to imagine them turning back. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.

©2020 Bloomberg L.P.

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