WBs 2021 HBO Max Release Strategy is The Smartest Option

WB’s 2021 HBO Max Release Strategy is The Smartest Option

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WB is releasing all its 2021 films in both theaters and HBO Max, and it could prove to be the smartest way to handle the post-pandemic box office.

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WBs 2021 HBO Max Release Strategy is The Smartest Option

In a move sure to permanently alter the Hollywood distribution landscape, Warner Bros. will be releasing all their major 2021 theatrical films on HBO Max on the same day they arrive in movie theaters. Coronavirus has already changed the theater industry forever, with most major movies either delayed until next year, underperforming in a mostly closed (and lightly attended) market, or released straight to streaming.

Needless to say, the box office impact of these changes has been catastrophic, and concerns about the survival of the theater industry as we know it are real. A coronavirus vaccine is on the way, but even if consumers’ confidence in the safety of theaters is restored, the theatergoing audience isn’t likely to bounce back overnight, if at all, meaning the 2021 box office doesn’t look much more promising either.

Notably, all these changes are happening in an industry already in the middle of a seismic shift to streaming platforms where studios can more easily produce and monetize content, and revenue is already exceeding box office grosses. As the newest member to the streaming wars, WarnerMedia was already trying to compete with HBO Max, and now they’re putting all their chips on the newest streaming platform, and it’s a gamble that could pay off big.

2021 Box Office Revenue Wasn’t Guaranteed

WBs 2021 HBO Max Release Strategy is The Smartest Option

WB’s decision to make all its 2021 movies available on HBO Max the same day as theaters for one month certainly isn’t without risk, but it’s important to point out 2021 box office revenue is far from guaranteed, either. The box office will surely increase from 2020 levels, but even with a vaccine, some major markets are still closed, and consumer confidence also needs to be restored. WB was facing major losses on its 2021 slate either way, and delaying their big movies into 2022 would have brought an even swifter death to theaters by depriving them of their biggest revenue-generating opportunities for the second year in a row. And, of course, if theaters go under, then there’ll be no market to release those films to in 2022 anyway.

As a result, for WB, the choice between giving their film slate exclusive theatrical release with normal box office windows in 2021, or delaying again until 2022 weren’t really choices at all. In order to best monetize their 2021 slate, WB had to take drastic measures and think outside the box office to remain financially solvent. WarnerMedia already wanted HBO Max to become their biggest source of revenue, meaning bringing in subscribers is a number one priority, which makes the cost of giving WB’s movies a streaming release worth it. Fortunately, the movies are still releasing in theaters for those who wish to see them, which will hopefully provide theaters enough revenue to survive until audiences begin to return in larger numbers, granted they’ll need to take some similarly drastic measures of their own.

HBO Max Was Always the Future of WarnerMedia’s Revenue

WBs 2021 HBO Max Release Strategy is The Smartest Option

WarnerMedia transferring their focus to HBO Max is happening way faster than anyone anticipated, but as stated, the industry is already headed in this direction. With home media technology improving, more and more people are staying home to binge the newest streaming show instead of going to theaters. Big blockbusters may have been making more money than ever before the pandemic, but attendance numbers were trending downward, hitting a 25 year low in 2017, making only marginal gains in 2018 before decreasing again in 2019.

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Meanwhile, streaming services are booming, with Netflix’s $20 billion in revenue surpassing Disney’s record-setting 2019 theatrical revenue by 65%. It’s not the higher revenue alone making streaming attractive, though. When releasing theatrically, studios surrender a significant percentage of box office revenue to exhibitors, giving up around half of the theatrical grosses domestically, and even more at the international box office. If they own their own streaming platform, however, they don’t have to give up such a hefty percentage. With HBO Max priced at $15/month, and average domestic ticket prices hovering around $10, WarnerMedia is getting far more out of each consumer, and also keeping a larger percentage of it. At the same time, the consumer is getting far more bang for their buck, as they’re paying less on average than if they saw every one of WB’s 2021 releases theatrically, in addition to the fact they can watch new releases multiple times and access all the other programming in HBO Max’s catalog, which is one of the best libraries available.

Streaming Companies Can Accept Financial Losses to Compete

WBs 2021 HBO Max Release Strategy is The Smartest Option

One of the more overlooked aspects of this change is how it totally upends the way we evaluate the profitability of movie releases. Clearly the box office haul of these movies is not going to be apples to apples to similar films in past years, given the fallout of coronavirus and simultaneous HBO Max release, but the monetization on the streaming side is even more interesting. While theatrical releases are normally evaluated for profitability with an expectation of revenue being at least twice as much as the budget to account for marketing and exhibitor cuts, that equation is irrelevant to streaming.

The poster child for this scenario is Netflix. The streaming giant is nearly $15 billion in debt to finance a whole catalog of original content. Granted, the unique scenario with Netflix was they originally built their customer base off a library of licensed content, so in order to survive the eventuality of studios consolidating onto their own platforms as we’re seeing with Disney+ and HBO Max, they needed to build their own library. The side effect of this effort is an arms race for new, high quality, original streaming content.

HBO Max and Disney+ may have better back catalogs, but to compete for subscribers against Netflix, old movies and shows aren’t enough. Both Disney+ and HBO Max have a lot of big projects in the works with the high-value IP they own like Marvel and Star Wars for Disney or DC and Game of Thrones and more for HBO Max, but for HBO Max, other than Zack Snyder’s Justice League, most of that new original content is at least a year away, which is no help when they need to figure out how to reverse cash flow issues for 2021.

So, while detractors will say WB is taking a wash on all these movies by sacrificing box office for HBO Max subscribers, that’s a fairly ignorant assessment of the plethora of factors at play. First, the 2021 box office wasn’t likely to bounce back to 2019 levels; second, there’ll still be some box office revenue from WB’s movies (however, clearly less than theatrical exclusives would bring); third, the profitability of an HBO Max subscriber is way higher than theatrical consumers; and finally, and the economic model at play here is targetting future revenue growth, not to traditional box office = budget x 2 model.

So, while WarnerMedia would surely prefer for this content to pay for itself in the 2021 calendar year, any long term customers generated from this strategy will result in far more income down the road, meaning simply evaluating 2021 revenue as is normal with the box office haul won’t be the right way to assess the actual accounting value of this decision (although it’s surely the calculus many pundits will be making this time next year).

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HBO Max is Now the Most Essential Streaming Service for 2021

HBO Max already benefits from one of the best streaming libraries. The back catalog of Warner Bros. content is already one of the richest in the industry, especially when compared to a lot of the filler content on other platforms, particularly Netflix. Disney+ puts up stiff competition when it comes to branded IP with juggernauts like Marvel and Star Wars, but HBO Max’s overall catalog is widely regarded as one of the best as it’s packed with decades of blockbuster franchises and standalone classics, in addition to sub-brands like Cartoon Network, Studio Ghibli, Adult Swim, and more. And that’s not even mentioning the incoming originals.

Of course, there’s a Gotham Police show, Green Lantern, Peacemaker, and more coming from DC, along with more Game of Thrones a Dune show, and more but, unfortunately, much of HBO Max’s original content is still a way from release. More immediately, Zack Snyder’s Justice League has been hyped as a major draw to the platform after the buzz and drama surrounding that project for the last 3 years. Part of the appeal of something like Zack Snyder’s Justice League is the fact it’s a mostly unseen, high production value project and could be released ASAP with a modest investment, with the arrangement to split it into episodes helping to fill out HBO Max’s release calendar. However, now that HBO Max is injecting 17 brand new theatrical releases into its streaming schedule for 2021, meaning new content is coming around every 3 weeks, it’s not even necessary to cut up the Snyder Cut into 4 episodes anymore, and releasing it as a stand-alone 4-hour movie (which was planned to happen eventually anyway) could make it a part of WarnerMedia’s dual theatrical + HBO Max release plans, giving fans a chance to see it on the big screen.

Comparing the cost to consumers, HBO Max is the same price audiences were paying for Movie Pass. HBO Max obviously doesn’t give the same big-screen access as Movie Pass did, but it does get them unlimited views of blockbuster movies from the day of release (something Movie Pass was restricting more and more) in addition to the rest of HBO Max’s new original content and legacy catalog. While it was once seen as a steep price for a streaming service, HBO Max’s $15/month could be the best deal in the industry. The move is still a bit of a gamble, but it’s the most pragmatic decision available given the circumstances, and it’s sure to supercharge HBO Max’s growth into more direct competition with Disney+, securing more stable revenue for the future of the platform.

While this move seems like it was always an eventuality, George Lucas and Steven Spielberg were already predicting many theatrical releases would go straight to home media back in 2013, it’s still sad this move had to be accelerated in the face of a global pandemic with the theatrical experience seemingly hanging in the balance. But faced with uncertain (but guaranteed to be reduced) returns at the box office and a need to supercharge the growth of HBO Max at any cost, WarnerMedia isn’t simply making lemons out of lemonade, but also possibly redefining the future of cinema as we know it in the process.

Link Source : https://screenrant.com/wb-hbo-max-theater-strategy-impact-box-office/

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