Warner Brothers, HBO Max, and the Future of Film Distribution

Since the pandemic has struck the film distribution model has been disrupted. Many companies have tried and failed to make a profit from the Premium Video-on-Demand. Warner Brothers have made the radical decision to release all their 2021 scheduled films in cinemas and HBO Max at the same time.

Reactions to Warner Brothers’ has been mixed. On social media there have been people praising the decision as revolutionary, seeing the death of cinemas and streaming being the future. Whilst executives, directors, and cinema owners have been angered by the decision and lack of consultation.

This decision can have a huge impact on Warner Brothers, HBO Max, and the film industry as a whole. Now’s the time to look at the potential impact.

HBO Max increasing subscribers

HBO Max is one of the newer streaming services on the market. It in May 2020 and as of September of the same year has amassed 8.6 million subscribers. They lag behind Netflix, Amazon Prime, and Disney+ in numbers. HBO Max is also one of the more expensive services with a $14.99 monthly fee.

In the streaming wars, content is king and HBO Max is looking for a killer app to help them stand out. The release of big films like Wonder Woman 1984, The Matrix 4, Dune, and Godzilla vs. King Kong could be a temping lull for many consumers, and they could stick around due to HBO Max’s access to Warner Brothers back catalogue.

The 2021 slate could be used as a way to subsidise their streaming service in the short term. Warner Brothers could also be using HBO Max to avoid box-office embarrassment. However, there is a risk of the streaming crunch and HBO Max may fall victim.

International Market

Warner Brothers’ decision is an American-centric one because HBO Max does not operate in many countries. HBO has made deals with local broadcasters like Sky in the UK, Germany, and Italy, Foxtel in Australia, and OCS in France, so HBO Max is either unable to launch in those nations or doesn’t need to. Because of this, there are three potential outcomes for international distribution.

The first outcome is international distribution can remind as it is and films get a cinema release in the rest of the world. The second is the multi-platform model where Warner Brothers release their films in cinemas and on PVOD at the same time. The final potential outcome is Warner Brothers might have kneecapped the international market because their content released on HBO Max would quickly be pirated.

The Future of Blockbusters

The 2010s were a lucrative time for big-budget films. It was the era of the Marvel Cinema Universe and there were many films that broke the billion mark. Warner Brothers are releasing some major tentpoles on HBO Max like Wonder Woman 1984 and The Suicide Squad. Wonder Woman 1984 had a budget of $200 million, Dune‘s budget was $165 million, and Avatar 2‘s estimated cost is $400 million.

That’s a lot of money being spent and for them to be profitable on streaming HBO Max would need to constantly grow its subscriber base. If there is a decline in cinema audiences or cinemas overall, then it could lead to fewer tentpole films being made because they would be less profitable.

The other extreme is Hollywood becoming more dependent on blockbusters. The selection of streaming services outside of the USA isn’t as extensive and the foreign box-office could become more important. This in turn this could lead to Hollywood making more big action films because fist fights, gun battles, car chases, and explosions are universal.

The Future for Cinemas

The pandemic has been a huge blow to entertainment and hospitality industries – including cinemas. It has been a difficult time for cinemas because of lockdowns, a lack of releases, and audiences hesitating to return. AMC Theatres, America’s largest cinema chain, were already in trouble before the pandemic and their financial troubles have been reported on. There have been people in the online film community claiming that cinemas are dead and that streaming is the future. The lockdowns have given us a flavour of what a cinemaless world would be like.

However, the death of cinema has been predicted before. In the 1950s television was seen as the new threat and then it was VHS that would spell the doom of cinemas in the 1980s. Cinemas have been able to reinvent themselves. In the 1950s there was a boom of Technicolor epics and the 1980s saw more blockbusters and the rise of multiplexes. Cinemas can adapt again – they can update their equipment and facilities to make them more of a draw.

American cinema chains could follow the example of the British chains, Odeon and Cineworld. Both offer a monthly subscription to regular cinemagoers and perks like early screenings and a discount on snacks.  Or cinemas might focus on being a high-end experience or combined with a bar/café experience like the Watershed in Bristol or Tivoli in Bath.

The types of films at cinemas could also change because older audiences are still regular filmgoers and studios may make more films to cater to that audience.

The Fallout

Warner Brothers’ announcement has already had a backlash from people working in the film industry. Warner Brothers barely gave anyone a warning about their plans. This includes Legendary Entertainment, the production company behind Godzilla vs. Kong and Dune. They only got 30 minutes warning from their partners.

Legendary Entertainment had a deal to sell Godzilla vs. Kong to Netflix, but Warner Brothers vetoed it. This despite Legendary providing most of the money for Godzilla vs. Kong and Dune. According to Deadline Legendary are planning on taking legal action against Warner Brothers. An added issue is Legendary is owned by the Wanda Group and the Wanda Group owns 38% of AMC Theatre, so they have a vested interest in keeping cinemas alive. The potential outcome is Warner Brothers having to backtrack or have to compensate Legendary.

Warner Brothers’ decision has already been costly because the studio has had to pay talent who worked on Wonder Woman 1984 who would have been entitled to a percentage of the gross. Actors, directors, and talent agencies have also been angered by the lack of warning the studio gave them and there are talks within the Directors Guild of America of a boycott of the studio. Even Christopher Nolan, a director who has been loyal to Warner Brothers has blasted the move. Whilst Denis Villeneuve wrote in Variety that the move was just a desperate move by a telecom mammoth and that Dune was made for the big screen.

The Great Movie Selloff

As stated in an earlier point Legendary did try to sell Godzilla vs. Kong to Netflix and even MGM considered selling No Time to Die to either Apple TV+ or Netflix. This could be a sign of things to come as there is a massive stale of films and studios could decide to play it safe and sell some films to streaming services. 2021 has a cluttered cinematic schedule, Apple is desperate for content, and Netflix, Amazon, and Hulu would be interested in prestige films, well-received films, and features with some big-name stars.

Streaming services have become a home for smaller and mid-budget films and festival hits. Netflix has earned a reputation for its high-quality documentaries. Netflix and Apple have offered filmmakers a lot of creative freedom and Netflix has been able to attach big-name directors like Martin Scorsese and David Fincher.

The Potential Streaming Crunch

We at Pop Culture Maniacs have previously discussed the potential streaming crunch in an article and the podcast. The streaming market has been come oversaturated with many studios and tech companies have been launching services and this has led to a race to make and buy content. Disney has launched a massive salvo by announcing a new wave of Star Wars and Marvel content for Disney+. However, prices for content have also become inflated and streaming services are fighting to gain new subscribers in a competitive market.

The business model of many streaming services is simply to subscribers and that’s getting harder for some companies to grow. Because of this, some may have to reduce their content as subscriber numbers flatline or do what Disney announced and raise prices and that could result in a backlash. The medium-to-long-term is uncertain.

Flash in the Pan

Warner Brothers’ move could simply be a move that only lasts for a year. There are vaccines being approved and vaccination programs have either started or about to start. We could get back to something resembling normal life by 2022. People will be itching for entertainment and activities that could include going to the cinema. To me, the cinema is similar going to the theatre, live music, or sporting venues and no one is calling for an end to those.