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The 7 December 2020 Jason Kilar, founder of Hulu and since May 2020 CEO of Warner Media, has made a shocking revelation: Wonder Woman 1984 and 17 other Warner Bros. films (including Godzilla, Dune and The Matrix 4), due out in 2021, will be available simultaneously in theaters and on the HBO Max streaming service owned by Warner Media, now part of AT&T. Thus the historic privileged window of 90 days for the first viewing of cinemas is no longer in effect compared to other means of viewing and distributing the film, which are also regulated by windows. The least of these are streaming services.
To quell the reactions, Kilar said that 30 days after its release, the film will disappear from HBO Max. HBO Max will pay a fee to have the film for a month, but the amount was not specified. Furthermore, he declared that this decision applies to 2021 and that we will see later. Not to be malicious, it could be seen as a sensible response to the pandemic and its consequences.
But many are willing to bet that we will never go back to it. The window of the rooms is a closed, buried affair. We are at a turning point, from 2021 new practices will be established and consolidated.
A bombshell in Hollywood
There is no doubt that streaming is reconfiguring the entire entertainment industry and its established practices. Kilar is part of that new generation of culture industry executives who comes from technology and not from that industry. For this he is seen as the "villan" from Hollywood.
In fact, the news fell on the capital of cinema like a meteorite in an already agitated pond. The Wonder Woman 1984 director and cast said they were amazed and astonished by Warner's decision.
Denise Villeneuve, director of Dune (in the package of films intended for HBO Max) did not hesitate to declare:
“The future of cinema is on the big screen, no matter what the amateurs on Wall Street say.”
Even sharper Christopher Nolan's commentary, whose last film Tenet, was produced by Warner. The director told the "Hollywood Reporter":
“Some of the top directors in our industry and many of the biggest movie stars have gone to bed thinking they were working for the biggest movie studio in the world and awoke the next morning to learn they were instead working for the worst movie studio. streaming of the world”.
Nolan's astonishment is understandable. Warner's announcement came by surprise in a unilateral way as if to present the cinema ecosystem with a fait accompli. There was no consultation with the other players in the game. And it was perceived precisely as a kind of betrayal, at least as an act of blitzkrieg.
But Kilar, who is unaccustomed to Hollywood customs, justified it with these words:
“I don't think this would have been possible if we had to spend months and months of discussions with every operator in the sector. At some point, you need to know who is driving. And the consumer is the driver. We have to decide in his name… Innovation happens like this”
The revolt of the creatives
Talent and creative agencies have made it clear that not a cent should be subtracted from the fees of their clients who, as has been the case for decades, are paid a fixed rate and with a percentage that comes mainly from box office revenues. If this choice were to penalize these subjects, the agents say, their willingness to promote the films would cease. Thus there would be a sort of boycott of the Warner film. A temptation with which the Directors Guild of America, the association of American directors, would also begin to filter.
Michael Nathanson, founder of Moffett Nathanson a film research agency, put the matter in clear terms by telling the "New York Times":
“Warner Bros. has always been the best home for talent and that has given them a strong competitive advantage. This move risks alienating many talents that have been difficult to recruit. Talents are not engineers that can be easily replaced”.
After close negotiations with the agencies, Warner has decided to keep the creatives and their powerful representatives on its side: it will pay out what is necessary to ferry them towards the new way of operating.
But there are also the theater managers to consider. And they are certainly not calm. Adam Aron of AMC Entertainment, the largest movie theater chain, told the "New York Times":
“Evidently Warner Media is willing to sacrifice a substantial portion of its film studio profits to support the launch of HBO Max… We will work to block that decision.”
A Napoleonic Wars-style grand coalition is truly forming against Kilar and Warner
HBO Max Penalties
Of course, behind Warner's decision there is also the desire to push the HBO Max service which is significantly extending its competition. With just 8,5 million subscribers, and a fee of 15 euros per month, it is a far cry from the numbers of Netflix (200 million subscribers, 8,99 per month), Amazon Prime (112 million, free for those with Prime) , Disney Plus ($78 million, $5) or Apple TV+ ($5, free for one year if you buy an Apple product).
The traditional HBO cable service has 38 million subscribers, but only 30% have subscribed to Max. But cable is, moreover, a business in decline, a space eroded precisely by streaming and by the change in habits of consumers.
And it happens that HBO Max got off to a bad start and it is not surprising that we want to support it by giving it the best of Warner Bros. film production.
There is also Covid
Kilar has probably done his math in a year that will still be marked by Covid 19. With cinemas in the condition they are in, it will be impossible to recover production costs and it is well known that a film is all played out in the first few weeks at the box office.
Coming to diminish that resource, all Hollywood Studios have to invent something new by deferring the releases and it is not difficult to guess what something new could be.
It is estimated that revenues from cinemas in the world have decreased by as much as 70% in 2020. Only China seems to be able to withstand the challenge of the pandemic and China is becoming the most important market for the film industry. But as the case of Mulan shows, it is not easy for studios to produce films for the Chinese market without somehow irritating the Chinese (with Western models) or Westerners (with Chinese models).
In any case there is more than the contingency of the Covid. There is indeed a general paradigm shift.
Signs from other Hollywood studios
Warner isn't the only Studio to have shifted the focus of its business to the small screen. In July 2020, Universal Pictures, of the Comcast media conglomerate, struck a deal with AMC (the association of cinema operators) to reduce the first-run window in theaters to 17 days before making the film available online.
Paramount Pictures, of Viacom — another media conglomerate — has preferred to cede several films to Netflix rather than show them to a non-existent audience.
Finally, at the beginning of December, the largest Hollywood studio, Disney, declared that it saw the future of cinema in streaming. And Disney has already moved like the battleship that it is, launching Disney+, its own content streaming service, which, at 5 euros a month, has garnered acclaim beyond any wildest expectation.
Disney +
Precisely on the strength of this success, Disney will pass a nice package of content to Disney+: 10 Star Wars series, 10 series based on Marvel comics, 15 new original series and 15 films. From 2021 to 2024, Disney will quadruple its investment in originals for Disney+.
Mickey's house won't stop there. The other two streaming services it owns, ESPN+ (which broadcasts sports events) and Hulu (the streaming service of The Handmaid's Tale) will receive a mountain of money in 2021: from 14 to 16 billion dollars, close to equaling Netflix's $17 billion investment in originals. It is a real "content tsunamy" as the "Economist" labels it.
The day after this tsunami was announced, Disney stock jumped 14 points, adding $38 billion to its capitalization. These are initiatives that make the "amateurs of Wall Street" go crazy. In the end, though, they are the ones who run the show.
Observers estimate that by 2024 Disney will break even thanks to a user base estimated at 300 million subscribers. Streaming will become Disney's biggest source of revenue and profit.
The hybrid model
There is an undoubtedly new fact compared to just a year ago, due to the acceleration that the pandemic has impressed on all digital services distributed online. Even the traditional film industry is starting to realize, with pain, that the future is in the hands of streaming rather than on the big screen in projection rooms.
Jason Kilar comes from Hulu which contends Netflix for the role of dean of the streaming industry. An experience and also a privileged observatory, that of Hulu, to observe the dominant trend of the entertainment industry.
And the trend says streaming even if Kilar continues to talk about a "hybrid business model", which, of course, still includes theaters as a core element of the business, even if the new Warner CEO does not provide details on how to implement this model and above all on the times.
What many observers note for now is that films like Dune and Matrix 4, scheduled for release in the last quarter of 2021, therefore with the anticovid vaccination campaign already in an advanced stage, do not foresee the usual window for cinemas, but the simultaneous screening on HBO Max.
The meaning of hybrid model
To cinema purists, the "hybrid model" seems like a provocation. The dominant thought is this: if even an old-fashioned Studio with Warner Bos. give up maximizing its revenues through the box office, to also focus on streaming, what will happen to the big screen and to the entire cinema ecosystem that still bases its economy on the box office?
There is no doubt that the Studios that will follow in Warner's footsteps will have to go through the ordeal, probably also littered with lawsuits, and will have to bear huge costs to send
forward and affirm the hybrid model and above all to abolish the window system on which the whole industry has been based for more than half a century.
For the moment there is the pandemic acting as a fig leaf, but when it falls there will be those who don't want to watch the show as it will be horrendous.
