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WarnerMedia is making a clear bet for 2021 that its movie roster won’t generate the revenue its studio division needs, but it can help boost HBO Max’s long-term success.
The company announced yesterday that each of its 2021 films will debut on HBO Max in the US at the same time they play in theaters. They will be available for one month at no additional cost, and available for streaming in 4K HDR. It sounds like an inevitable change; COVID-19 cases are on the rise again around the world, new content from streaming services is drying up, and WarnerMedia must find a way to continue to generate revenue. Look at a year when theaters might not open beyond 25% of their capacity in the United States, and people might not want to sit in a room full of strangers until a vaccine to be released, it makes perfect sense that Warner Bros. take the opportunity to see how a simultaneous release could benefit HBO Max.
This is still not a good answer for anyone involved. It’s a loss for Warner Bros., it’s a loss for AT&T (which owns WarnerMedia), and it’s a loss for theaters. Warner Bros. will not generate the per-movie revenue it might have from a theatrical release in a pre-COVID era. AT&T could lose $ 1.2 billion, according to analyst firm MoffettNathanson, as the company grapples with $ 160 billion in debt it is trying to reduce quickly and its pay-TV business collapses . Movie chains need big blockbusters and sprawling movies to draw people in, but now a lot of those movies are available to people at home – where’s the incentive to go out when a virus is raging?
But the switch to HBO Max is a gamble on long-term growth in streaming that offsets the immediate loss of movie and other revenue streams. It’s part of a long-term game to make streaming a core business for WarnerMedia that has been accelerated by the effects of the pandemic. With that comes some declines that it’s impossible to ignore: In 2019, Warner Bros. was WarnerMedia’s top earner, bringing in $ 14.4 billion – just under 50% of all division revenue. . Some came from the box office, but a large portion came from purchases and syndication of home videos. Since HBO Max pays Warner Bros. for the rights to the films, this is not additional revenue but moving the catalogs from one WarnerMedia property to another.
WarnerMedia has had problems growing its streaming service as fast as competitors like Disney. Part of this is because HBO Max is not available on Roku (which the team is working on), but part of it is a lack of event-type movies to draw people in. By moving the titles to HBO Max at the same time, they’re in theaters, WarnerMedia is giving current subscribers a reason to stay, and he’s hoping that many new customers will sign up and continue paying $ 15 a month.
“We’re going to have some really good content here, which is spoiled and can be used for other purposes,” AT&T CEO John Stankey said in an interview with the Washington post Friday.
Disney has had similar success with Hamilton, a movie that attracted a large number of Disney Plus subscribers, and the number of people canceling their subscriptions remained relatively low even months after. If WarnerMedia can recreate that success – by signing millions of people each month with a great headline, without seeing them unsubscribe later – could the long-term recurring revenue make up for the initial losses and put HBO Max in a truly competitive position? with other streaming platforms? It seems to be part of the gamble.
2021 will be a difficult year for studios regardless of the pandemic. There are currently 55 major features slated to open in 2021. Between May 28 and July 16 – a seven-week period that includes big releases from all major studios – several blockbusters are vying for attention and money. people.
Warner Bros. ‘ Godzilla vs. Kong will face disney Black Widow early May, then there is F9, In the heights, Venom: May the Carnage Be, Top Gun: Maverick, Shang-Chi and the legend of the ten rings, and Unexplored to name a few. Warner Bros. has 17 films in 2021 – not all of them were going to be $ 800 million to $ 1 billion hits. Some may have lost money. It helps build a streaming business, even if it means sacrificing a few that maybe have worked really well.
As it stands in 2021, most films are going to lose out because there is too much competition in a tight space. Additionally, theaters may still operate at a much lower capacity (as recommended by the CDC) in COVID-19 times, venues may remain closed in prime markets like New York and Los Angeles, and people may fail. not feel comfortable going back to theaters. Add to this that attendance was declining before the pandemic: in 2019, movie theater attendance per capita was at a century-low, the number of young people going to the movies throughout the year is dropping (well that this is the bracket that consumes the most content), and more than half of “frequent” moviegoers have stopped going as much, according to analyst Matthew Ball.
WarnerMedia and AT&T were probably forecasting losses regardless of jumping theaters, but it appears they are trying to reposition some of that loss into impactful growth potential for HBO Max. Christopher Nolan’s Principle showed that studios can take different approaches internationally and in the United States. Internationally, where more theaters were open and cases of coronavirus weren’t as big, the film performed well, grossing $ 300.4 million, but in the United States the film did raised that $ 57 million. Growing HBO Max in the United States and exploring more traditional revenue options internationally is a combination executives seem willing to bet on.
No one really knows if this will work. Shareholders don’t, executives don’t, industry insiders don’t – but people know it Something must happen. WarnerMedia cannot hope for the best from its films while trying to figure out how to develop HBO Max. The simplest thing to do – not the easiest, and not necessarily the most immediately beneficial – is to take a year of probable losses theatrically and use that to scale HBO Max as quickly as possible in 12 months.
Don’t be surprised when Disney announces it’s doing something similar next week.
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