Inside Hollywood's post-pandemic future, as it grapples with Netflix's growing influence and a movie-theater industry that could be permanently altered

  • Hollywood has been rocked by the coronavirus pandemic, with studios still shifting movie releases and finding alternatives to theaters.
  • Universal and AMC even reached a deal to shorten the theatrical window after a brief feud, which could have major ramifications for the future.
  • Meanwhile, Netflix has released hit movies this year like "The Old Guard" and "Extraction," but it's also looking for its own major franchise to rival Hollywood studios.
  • Business Insider spoke with Hollywood insiders to learn more about what its post-pandemic future might look like and how it could come to define a "hit" movie.
  • Have a tip? Email the author at tclark@businessinsider.com or DM him on Twitter @TravClark2.
  • Visit Business Insider's homepage for more stories.

Heading into 2020, it seemed unimaginable that "Trolls World Tour" would be one of the most important movies of the year.

But the Universal and Dreamworks animated sequel helped spark a major shift in the movie business that could have long-lasting ramifications, even after the coronavirus pandemic.

When the public-health crisis forced movie theaters across the US to shut down in mid-March, "Trolls World Tour" was the first movie to debut on premium video-on-demand (PVOD) platforms day-and-date with its initial theatrical release, and it quickly topped iTunes and other charts. NBCUniversal CEO Jeff Shell, thrilled with its success, told The Wall Street Journal, "as soon as theaters reopen, we expect to release movies on both formats," meaning in theaters and on PVOD services.

Shell's comments didn't sit well with AMC Theatres CEO Adam Aron, who quickly vowed to not play future Universal movies in AMC venues. Theatrical windows typically last two to three months; Shell's comments were perceived as a slap in the face to theaters.

After a brief feud, the largest theater chain in the world and Universal announced a deal in which future Universal movies could debut on digital platforms 17 days after playing in theaters. There would be the option to move them to PVOD after the 17-day window, but they would continue to play in theaters, and AMC would get a share of the revenue from digital rentals (PVOD digital rentals typically cost $20).

It's an extraordinary move that, again, seemed unimaginable heading into 2020. While there are still plenty of questions surrounding the deal, it suggests a massive shift in the movie business — and the movies themselves.

How will Hollywood define a "hit" in a post-pandemic industry, where the lines between the theatrical and at-home experience are blurring like never before? Studios have adopted new strategies to distribute movies that could have major effects in the months ahead, as the theatrical industry shows signs that it could not recover any time soon.

"A blockbuster doesn't have to be defined by box office," said a Universal insider, who requested anonymity because they weren't authorized to speak publicly about its strategy. "It can be defined by that, or PVOD transactions, or something else. The blockbuster isn't dead, but it will evolve."

Beyond Universal, Disney took the drastic step of debuting its $200 million "Mulan" remake on its Disney Plus streaming service over Labor Day weekend for an additional $30 fee, essentially making it a PVOD release exclusive to Disney Plus subscribers.

At the same time, Warner Bros. remained committed to theaters, releasing the $200 million "Tenet" in the US and Canada, where it got off to a slow start with $20.2 million in its debut (it's earned more than $200 million globally).

And Netflix has been redefining what a blockbuster looks like with action movies like "Extraction" and "The Old Guard" this year, which Netflix said in July were among its 10 most popular movies of all time. They aren't subject to box-office gross and are only defined by the viewership numbers Netflix releases, based on its own methodology — it counts a "view" if an account watches at least two minutes of a movie.

Business Insider spoke with several Hollywood insiders about how strategies implemented in recent months could impact the post-pandemic movie business, and how some of the movie industry's biggest players are responding.

Here were some key takeaways:

  • Universal is engaged in active talks with other exhibitors and Warner Bros. is also having conversations with exhibitors to strike its own potential deal. A Warner Bros. insider, who requested anonymity because they weren't authorized to speak publicly about talks that were ongoing, said this is the "new normal."
  • While the once-sacred theatrical window could change, theaters are still essential to Hollywood, as big-budget Hollywood tentpoles rely on international box office to make a profit.
  • Meanwhile, Netflix has had it's fair share of hits this year, from "Extraction" to "The Old Guard," highlighting the advantage the streamer has in this moment and its strategy for big-budget movies dating back to "Bright." But it still wants to find its own mega franchise like "Star Wars."
  • Disney found success with streaming after it dropped Pixar's "Onward" to Disney Plus, prompting it to go forward with debuting "Artemis Fowl" and "The One and Only Ivan" on the streamer.
  • But it's unclear whether Disney's release of "Mulan" on Disney Plus for a premium fee, which blurred streaming and PVOD, was a success. What Disney does with the upcoming Marvel movie "Black Widow" should give a glimpse as to the company's long-term strategy for blockbuster movies.

The traditional theatrical window may not survive, but blockbusters will

There's still a lot we don't know about the Universal and AMC deal, primarily how it impacts other movie studios and theater chains. But if the deal stands, it could be difficult for other studios and chains not to play ball. 

"Universal and AMC's deal basically forces the hand of the other studios and exhibitors to play a similar game, which could result in the most dynamic change the movie industry has seen since its inception," said Jeff Bock, the Exhibitor Relations senior media analyst, in July after the deal was announced.

The Universal insider said that the studio was in active discussions with other exhibitors. If it doesn't strike a deal with the other major chains like Regal and Cinemark, the implication is that future Universal movies may not play in them. But the person said that the talks "still have time" considering Universal isn't set to release a movie to theaters until November with Blumhouse's horror-comedy "Freaky" (if theaters are closed again at that point, it means even more time).

Warner Bros. is also engaged in active talks with exhibitors about "how to evolve," which even precede the Universal and AMC announcement, according to the company insider. Regarding the theatrical window, the person said that "one size wouldn't fit all," meaning movies would be evaluated on a case-by-case basis.

"Things will never be what they were," the Warner Bros. insider said. "The pandemic has accelerated a lot of shifts that will be the new normal."

As dramatic as the Universal/AMC agreement is, the traditional theatrical blockbuster will survive post-pandemic. The biggest PVOD market is North America, but global blockbusters like Universal's "Fast and Furious 9" — which it was quick to move from this May to April 2021 — rely on theaters in many markets, and vice versa. The last two movies in the franchise, "The Fate of the Furious" and "Furious 7," both earned more than $1 billion just from the international box office.

But the deal would at least allow studios to be flexible and evaluate releases on a case-by-case basis, as they've been doing during the pandemic, in a world where people can watch movies from the comfort of their homes on Netflix (or any of the other streaming services vying for audience attention). The Universal insider stressed that theaters will always come first, but if a movie isn't working, PVOD would be another option.

"The average person sees a few movies in theaters a year," the insider said. "Are [movie studios] supposed to concede the rest of people's time to Netflix?"

Netflix vs. Hollywood

Netflix, which had more than 190 million subscribers worldwide as of its latest earnings call in July, certainly hopes it can entice audiences to spend a big chunk of their leisure time with it.

It's done that during the pandemic with hits like the aforementioned "Old Guard" and "Extraction," which follow a formula dating back to the streaming giant's breakout movie hit: the fantasy action movie "Bright," starring Will Smith, in 2017. Though it was reviled by critics, Netflix said the movie was immensely popular with viewers and Nielsen estimated it was watched by 11 million users in the US in its first three days (this was before Netflix released its own numbers).

The movie's success set the template for some of Netflix's biggest movies in the following years, according to a Netflix insider, who requested anonymity because they weren't authorized to speak publicly about the company's strategy. In short: Get a major Hollywood star with global appeal driving an original action movie or thriller, something Hollywood had been focusing less on in favor of franchise IP like Disney and Marvel's "Avengers."

The star-led action movie isn't the only genre Hollywood used to dominate that Netflix has sunk its claws into, as it found an opening with the romantic comedy, as well. But it still wants to go bigger.

While Netflix has been a major Hollywood disrupter, it can still learn from Hollywood, according to co-CEO Reed Hastings.

"The thing that many studios are able to do is create great franchises," Hastings told The Hollywood Reporter in a recent interview. "We're making great progress on that with 'Stranger Things' and other properties, but compared to 'Harry Potter' and 'Star Wars,' we've got a long way to go."

Netflix has dived into the sci-fi and fantasy genres in recent years, scooping up IP from comic books and video games perfect for world building, from its hit fantasy series "The Witcher" to the comic-book company Millarworld. And the "Percy Jackson" author Rick Riordan announced recently that Netflix is adapting his "Kane Chronicles" book series into movies.

As Netflix tries to build its own "Star Wars" mega franchise, Hollywood will have to further adapt to stay relevant. The coronavirus accelerated that thinking.

The research firm Lightshed Partners even posited in a report on Monday that traditional movie studios should go all in on streaming video-on-demand services (SVOD) like Netflix during the pandemic, noting that PVOD can't duplicate the profitability of tentpole movies at the box office.

The report noted that Netflix generated more revenue in 2019 than the combined Disney and Warner Bros. film studios ($20 billion vs. $19 billion), and that streaming services "have an easy way of driving awareness from their existing subscribers."

"With Disney Plus and HBO Max, Disney and Warner have infrastructure and scale to make this transition," the report said. "Others like Paramount and Universal have building blocks and potentially could. But for studios that do not have an SVOD platform or who are unwilling to build one at scale, they likely will need to expand their focus on supplying movies directly to third-party SVOD platforms in lieu of the sequential release pattern."

It's a dramatic proposal, but Disney in particular has already taken steps down that path.

Disney has embraced streaming for theatrical movies

While "Mulan" is certainly the biggest movie meant for theaters that Disney has released to Disney Plus during the pandemic, it wasn't the first.

The Pixar movie "Onward" enjoyed a brief stint in theaters before they shut down across the US in March, at which point Disney quickly dropped it to PVOD services and then Disney Plus. The movie was successful enough on the streaming service that it pushed Disney to experiment with other titles that would skip theaters, including "Artemis Fowl" and "The One and Only Ivan," according to a former Disney Plus staffer, who requested anonymity to protect career prospects. Disney did not respond to a request for comment from Business Insider.

(The former staffer didn't know specific viewership numbers, though, and Disney doesn't make them public. The closest thing is a "trending" list that can be found on Disney Plus, which the former staffer said Disney implemented after Netflix introduced its own daily top 10 lists of popular titles earlier this year).

"Mulan" was different than "Artemis Fowl" or "The One and Only Ivan" because it cost so much to produce and was practically tailor-made for theaters, especially on a global scale. Movies like "Mulan" typically rely on international box office to make a profit. That's why Disney offered it to Disney Plus subscribers at an additional $30 fee and it's unclear whether the strategy was a success.

It's possible that "Mulan" could not be the last movie Disney releases this way as the pandemic continues to ravage the theatrical industry. Warner Bros. moved "Wonder Woman 1984" from October to December, leaving two months before the next tentpole theatrical release: Disney and Marvel's "Black Widow." And Variety reported on Tuesday that Disney is considering delaying that again.

The prospects are grim for theaters without any new major releases, especially with audiences hesitant to return in the first place.

"For [Disney's] movie studio, I'd guess that the only avenue [to release movies for the foreseeable future] is through Disney Plus," the former Disney Plus staffer said. "They have to be taking a long hard look at everything they are putting out and decide whether it's worth putting it on the service. It's the only thing making money for the company right now."

The former staffer's comments reflect the difficult situation movie studios find themselves in, as they weigh what is right for theaters and what is right for streaming or PVOD. Analysts have called this phenomenon a short-term solution to the current situation, and it is unlikely that a movie like "Black Widow" would be kicked to streaming under normal circumstances.

But the chances of the theatrical industry returning to normal any time soon, at least in the US, look slim. If studios find success among these new strategies in the meantime, Hollywood — and how it defines a "hit" — could be significantly altered.

What Disney does with "Black Widow" in particular could tell us a lot about Hollywood's future:

  • If Disney releases "Black Widow" via Disney Plus "premiere access," it would mean that the company was satisfied enough with "Mulan's" performance and feels "Black Widow" — a Marvel movie that hasn't been followed by controversy — would be attractive enough to subscribers and potential subscribers alike to do it again.
  • If Disney keeps pushing the movie's release date and holds out for theaters, it means the "Mulan" experiment was likely underwhelming, to the point that not even "Black Widow" could make it work.
  • The third option is debuting it on Disney Plus at no additional fee (and most likely in theaters in international territories where Disney Plus isn't available). This option would align with Lightshed Partners' proposal and suggest that Disney not only sees its streaming component as its most valuable entity right now, but is also pessimistic about the domestic theatrical industry's chances of near-term recovery. It would mean that the company feels making "Black Widow" available at no extra cost could drive a significant amount of paid subscribers.

Any of these decisions would have a ripple effect throughout the movie industry and tell us a great deal about what Hollywood will do not only in the near future as it grapples with the pandemic, but how it could evolve in the years to come.

Have a tip? Email the author at tclark@businessinsider.com or DM him on Twitter @TravClark2

Disclosure: Mathias Döpfner, CEO of Business Insider’s parent company, Axel Springer, is a Netflix board member.

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