Warner Bros’s streaming strategy has infuriated cinemas – but will its release scheme work?

Warner Bros’s decision to put its entire slate of 2021 movies on its HBO Max service at the same time as they are released to cinemas was characterised as a surprise in some places. It wasn’t to anyone who’s been paying attention.

The hotly anticipated Wonder Woman 1984 was already lined up for a dual streaming/cinema release in the US. It was billed as a “one off” but you know what? Things change.

Warner giving Matrix 4, Dune, a rebooted Suicide Squad, Sopranos prequel The Many Saints of Newark, Judas and the Black Messiah and the rest a simultaneous digital release is the biggest move of its kind. But it’s far from the first and I’m going to discuss what Disney’s been doing below.

AMC, the biggest US cinema operator, was furious. “Clearly, Warner Media intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidise its HBO Max start-up. As for AMC, we will do all in our power to ensure that Warner does not do so at our expense. We will aggressively pursue economic terms that preserve our business,” said CEO Adam Aron.

Aron also made mention of the vaccines he hopes will allow his beleaguered business to recover.

But some perspective: AMC signed a deal with Universal, which it had earlier shook its fists at, in July allowing that studio’s offerings to bypass the 90-day window of exclusivity cinemas used to demand and go to premium VOD after just over two weeks. As I said, things change.

Cineworld, the UK listed owner of the number two US chain, Regal, was unimpressed with that. It has been dead set against any and all attempts to chip away at the window.

But Cineworld, which secured a financial lifeline last month, closed all its US and the UK cinemas in October. That makes it hard for it to enter the debate with any real authority. 

Regardless, 90 days is now toast. Netflix, for one, must be chortling. After this there’ll be no more sniffiness towards its offerings as a result of its attitude towards cinematic releases from the Academy come awards time.

The details of Warner’s strategy are somewhat curious. HBO Max subscribers will get the new offerings for a month after which they’ll go dark but remain in cinemas if they’re still doing good business, before going through the usual cycle of DVD release, VOD rental, and streaming again on HBO Max.

The latter has been struggling. It boasts a fancy price – $14.99 a month for those not part of the ultimate owner AT&T’s eco-system. The comparison with Netflix’s $8.99 basic, or even its $11.99, standard plan, is not at all favourable. It looks even worse when set against the $6.99 cost of Disney Plus.

The latter has 60 million subscribers. Netflix has 190 million. HBO Max is newer. But some 28.7 million AT&T customers were eligible to get HBO Max at the end of the third quarter for free. Only 12.7 million had activated it. There are only a few million people paying full whack.

The hope must be that the rush of big new films will lure new subscribers (and new revenue) because Aron was right in one respect. Warner’s is potentially sacrificing a lot of box office. Big films like Wonder Woman traditionally rely on the higher returns available through cinematic release to justify their enormous production and marketing costs, which can test half a billion dollars.

Just as Warner’s and Universal (to a lesser extent) have done, Disney has moved to prioritise digital and direct to consumer, shaking up its management and centralising its media businesses into a single unit, which will oversee how new content is released.

The big-budget remake of Mulan skipped cinemas, debuting as a premium add on for Disney Plus subscribers. The disappointing Artemis Fowl wasn’t good enough for Disney to ask for extra. But Pixar’s Soul looks more promising and there’ll be no premium for that when it debuts on the streaming service on Christmas Day in a transparent bid for festive sign ups.

It’s interesting that while HBO Max isn’t in the UK, Warner’s has been talking to Sky about an early streaming release for Wonder Woman 1984 here.

It all leaves cinemas and cinema chains, often heavily in debt and barely hanging on, out in the cold. It seems almost certain that some will close, and perhaps a lot.

Covid vaccines should lead to some level of recovery. The industry’s problem is that habits are subject to change, and have changed through the course of the pandemic.

Dedicated cinephiles will surely pick up their previous ones, particularly when it comes to characterful local outlets that show a more diverse range of films than those traditionally on show at larger rivals. The medium’s true believers have been delighted with some of the vintage movies that have been shown in lieu of new content in the meantime.

But what of more casual moviegoers? Perhaps they will still indulge in the occasional trip just to get out. But it’s not hard to imagine these becoming less frequent if they have access to big releases via streaming.

Cinemas will have to innovate to survive. The reel ’em in, sell ’em a bucket of popcorn and get ’em out as fast as possible multiplex model looks particularly vulnerable. A tweak or two would be no bad thing, that is if the money can be found to do it.

But somewhere down the line, cinema operators may yet be able to indulge in some schadenfreude. Streaming is in the middle phase of its development when everyone rushes in with new offerings. There are now too many of them for them all to have a sustainable future. Could a $14.99 service that can’t tempt people who can access it for free be among the casualties?