After a year where the movie business was defined almost entirely by pauses and delays, Warner Bros. took decisive action on December 3.
It had only been a couple of weeks since the studio had announced that in the face of surging coronavirus numbers, it wouldn’t be delaying the Christmas release of “Wonder Woman 1984” yet again. Instead, it would launch the movie simultaneously in theaters and on HBO Max, the new streaming service from its parent company WarnerMedia.
It turned out that this decision — already described as a transformative moment in the industry, and potentially the beginning of the end for theaters — was just the beginning. On December 3, Warner Bros. announced that it will follow the exact same strategy for every movie on its theatrical slate in 2021.
This was welcome news to moviegoers eager to finally see “In the Heights” (already delayed by about a year thanks to the pandemic) or “Dune” (ditto). But while “Wonder Woman” director Patty Jenkins and star Gal Gadot seemed to embrace this approach, declaring that it was time to share their movie with fans, other Warner Bros. filmmakers were less enthusiastic.
For example, “The Dark Knight” director Christopher Nolan complained that Warner Bros. executives “don’t even understand what they’re losing.” He claimed that filmmakers had gone to bed “thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service.” (Nolan’s “Tenet” was released in theaters in the fall, and its disappointing box office numbers, particularly in the U.S., probably played a big role in Warner’s decision.)
And in a guest column for Variety, “Dune” director Denis Villeneuve pointed his finger at AT&T, which acquired Time Warner several years earlier. He suggested that the streaming-centric strategy had less to do with the pandemic and more with the underwhelming launch of HBO Max over the summer.
“With HBO Max’s launch a failure thus far, AT&T decided to sacrifice Warner Bros.’ entire 2021 slate in a desperate attempt to grab the audience’s attention,” Villeneuve wrote.
Barely more than a week after the Warner Bros. announcement, Disney had a big presentation of its own, laying out ambitious streaming plans for the next few years, with 10 Marvel shows, 10 Star Wars shows, 15 Disney/Pixar series and 15 Disney/Pixar feature films all in the pipeline for Disney+.
Disney’s announcements weren’t greeted with the same uproar and controversy as Warner’s — it didn’t represent a wholesale shift in its theatrical strategy (the Marvel Studios film “Black Widow” is still scheduled for a traditional release in May, for example), and unlike WarnerMedia, its announcements didn’t blindside filmmakers and throw their compensation into question.
Still, the message to the industry and the public was similar: While Disney isn’t abandoning theaters outright, it clearly sees streaming as its future, with the studio willing to reboot any and every intellectual property (“Turner and Hooch”! “Swiss Family Robinson”! An “Alien” TV series!) to attract potential subscribers.
These back-to-back announcements felt like a fitting capstone to a best-of-times, worst-of-times year in the streaming business.
Netflix saw rapid growth in the first quarter of 2020, adding 15.77 million net subscribers — more than double expectations. Especially in those early months of the pandemic, everyone was stuck at home and had nothing better to do than watch “Tiger King.” The service also benefited from its massive content pipeline, allowing it to continue releasing new titles at a rapid pace despite widespread production shutdowns. (More recently, production resumed while user growth slowed.)
Disney had a similarly strong 2020, announcing at its December event that Disney+ has reached 86.8 million subscribers a year after launch and that its total streaming business (which also includes Hulu and ESPN+) has grown to 137 million subscribers, compared to Netflix’s 195 million. That was particularly impressive given the relative dearth of splashy launches on Disney+. While there’s plenty of original content in the works, in year one, the service released two seasons of “The Mandalorian,” a filmed version of the Broadway hit “Hamilton,” “Mulan” (where subscribers had to pay an additional $29.99 to watch) and not much else.
Beyond the big two, numbers haven’t been quite as strong. Quibi provided the most high-profile failure, shutting down after raising nearly $2 billion. Executives Jeffrey Katzenberg and Meg Whitman blamed the pandemic for eliminating the on-the-go lifestyle that Quibi was designed to serve (the company’s name, after all, was short for “quick bites”), while also admitting that the content they’d bankrolled simply may not have resonated with viewers.
Meanwhile, Comcast/NBCUniversal announced at the end of October that its Peacock streaming service had received nearly 22 million signups since launching in July, “exceeding our expectations on all engagement metrics in only a few months.” (Peacock has a free tier, so it’s probably safe to assume that the majority of signups don’t come from paying subscribers.)
NBCUniversal’s streaming service Peacock officially launches tomorrow
AT&T, meanwhile, said in December that HBO Max has seen 12.6 million activated subscribers so far, and while CEO John Stankey said he’s “pleased” with the results, Villeneuve is far from the only person to describe the launch as a failure.
For one thing, there’s been plenty of confusion around how the service differs from regular HBO, as well as the HBO Go and HBO Now apps. Both Peacock and HBO Max were also hindered by their absence from two of the biggest smart TV platforms, Amazon Fire TV and Roku, which had less to do with technical challenges and more with ongoing disagreements about how to split subscriber and advertising revenue. Those issues appear to have been largely resolved, with HBO Max finally launching on Amazon Fire TV in November and on Roku last week, just ahead of “Wonder Woman”’s release date.
Tal Chalozin has been keeping a close eye on these launches. Innovid, the video advertising company where Chalozin is CTO, is betting on a bright future for streaming and connected TVs (for example, it’s one of Peacock’s ad partners), and he compared the early months of services like Apple TV+, Disney+, HBO Max and Peacock to a first date.
After all, these services have benefited from trial periods and free subscriptions from partners like Verizon (which owns TechCrunch), as well as from splashy launches and an environment where audiences have been eager for any source of home entertainment.
“Next year, all of those services are leveling up to a different world, where people are going to need to start paying for it,” Chalozin said.
Disney+ has plans for 10 Marvel shows and 10 Star Wars shows in the next few years
Streaming services will also have to face financial reality in other ways. Launching a new streaming service is expensive — for example, despite its success, Disney’s direct-to-consumer division reported a net loss of $580 million in its most recent quarter. While media/telecom executives and Wall Street investors seem willing to make big investments for a streaming-centric future, they’ll expect to see actual profits soon — and the pressure will be particularly high if streaming is expected to make up for lost theatrical and cable revenue.
Chalozin added that many streaming providers are about to discover that the streaming business is “a lot more like e-commerce economics versus television economics.” After all, it’s much easier to unsubscribe from a streaming service than it is to cancel an entire cable bundle, which means streamers will see substantial churn rates. Meanwhile, as more and more competitors launch their own services, it could become even more expensive to attract new subscribers.
“At some point it becomes $45 to acquire a customer,” Chalozin predicted. “That becomes very hard to justify, when it takes me a long time to break even [and] the amount of time that you stay with the service is shorter.”
As a result, Chalozin suggested that media companies start looking for alternatives, which will mean more bundling and more consolidation.
There will be no shortage of new streaming services in the short term: Discovery+ is scheduled to launch on January 4, and ViacomCBS plans to relaunch its CBS All Access service as Paramount+ in the coming year. But it’s hard to escape Chalozin’s conclusion that everyone will have to make some tough choices in 2021.
“At some point all the novelty will wear off, the free trials will wear off,” he said. “Everyone will say, ‘I saw ‘The Mandalorian’ and I saw ‘Wonder Woman.’’ Now you need to roll up your sleeves … to shave dollars from every place you can. you need to be a lot more mathematical about the way that this will work.”
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