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The thing with this whole industry is that multi-million, even billion dollar decisions can be taken by a very small number of people behind the scenes. To be honest I'd call it complete chaos. To put my cards on the table I was looking to invest in CINE at 25p as I figured I might lose everything, but if things went the right way then that could treble in a couple of years - so basically a pure gamble, but with odds I thought were OK. But I've bottled it for now!
I'm not sure if anyone remembers when there was a battle between which format would take over the home entertainment market - Blu-ray or HD-DVD. HD-DVD looked like the clear winner at the start, but the whole thing turned almost instantly when Warner Bros. decided to go the Blu-ray way.
It's just that type of industry - big money; big egos; petty squabbles and long memories.
'It's not how hard you can hit, it's how hard you can be hit'.
Tom231,
I think I've accidentally made two points in one comment, so please let me clarify.
Cinemas have deliberately moved their experience towards the premium market. That's why they've all installed reclining seats, fancy vending machines and at-seat service. It's no secret that attendance at cinemas around the western world has, generally, been falling for decades. The solution for the cinemas was to up the quality of the experience, and in turn tried to increase the price. I say tried to because a healthy, competitive marketplace has generally kept the price lower than I think any chain is comfortable with. And coupled with some huge films in the last few years, the market has boomed, and the debt taken on by all the chains to facilitate this move to a premium offering wasn't a problem.
As it turns out the chains have ended up with exactly the opposite of what they need during a pandemic - fewer seats offering a premium experience rather than loads of seats where people can space out. That's nobody's fault - but in the old days it would have been so much easier to have got decent sized audiences into a screen.
Anyway - that's all happened since the last recession in 2008, so that's why I say it's untested. Average ticket prices have gone up by about 20% since then. They'd gone up nearly 50% between 2006-2015. Since 2000 they are up about 80%. I won't even get on to the cost of concessions, but it's really the same story - pay more for premium products. So if cinema chains have moved away from offering a cheap night out, and moviegoers have accepted that it's not a cheap night out, it's not a cheap night out. And probably about as recession proof as going to a West End musical.
Streaming has grown up during the period between the last recession and the one that's looming, so again it's all untested. What we do know is that viewing habits and costs have changed dramatically. If we are talking about this in the context of a recession; of people needed to stay entertained as cheaply as possible, how can the streamers lose? It's by far the cheapest way to get the most entertainment into the house to keep the family amused. I totally agree that it's chicken nuggets versus foie gras in terms of what you get - but the kids have got to eat (or watch Frozen 2 again)!
Quality entertainment has never been as cheap as it is now. Renting VHS's, buying DVD's, subscribing to Sky Movies - they all seem so expensive now. And all of this has come to pass since the last recession.
So to sum up - nobody knows!
Modern cinema is completely untested in a recession. The idea that it's a cheap night out doesn't hold up anymore - especially in a 'Netflix and chill' world.
Netflix might not have the spending power for these movies, but Apple and Amazon do.
But Bond is a strange case in all this anyway. It has a huge chunk of production paid for by product deals - about $75M on this one. Add in the problems of tax rebates on production, the relationship between Universal, Eon and MGM, and the fact that all this needs to be rebooted one last time after No Time to Die, and I think everyone would be much happier to see this on the big screen.
Disney doing badly doesn't mean things are going to go well for the cinemas.
This will all depend on how quickly Disney need to start turning movies into money, and how Disney+ fits into this.
My opinion has started to shift a little bit in the last week and I'm starting to believe that because they have their own streaming service they may, slightly paradoxically, need the cinemas more than the other studios. That's assuming they'd never sell their content to a third party streamer.
Bond might not be, but apparently MGM are.
Disney have big problems there's no doubt. They have a really diverse business - unfortunately every area they're in has been hit except for their perfectly timed move into streaming.
$40B is a lot to be in the hole - but they do have a lot of assets to balance that out. And Christmas is coming, so time for us all to buy our princess dress up.
Streaming is clearly nowhere near where the studios want it to be otherwise everything would be PVOD by now.
It's interesting that the films that have come out have tried slightly different things, so I guess they're trying to see what might work.
There's also the cold fact that PVOD will make more money for the studios than theatrical at this moment. How long they can wait it out for cinemas to reopen is unclear, and probably different from studio to studio.
I think it's a certainty that the studios want things back to normal, but with a shorter window. It's just how much they will want to hurt their own businesses to save cinemas that's in question.
They made a really bad call with Cuties. They're a big player now and can't possibly fly under the radar with things like this.
I think the debt level is ok as most of it is poured into creating IP - but it's only going to get tougher with all the new steamers getting up to speed.
It goes to show what a great position Disney were in when they started Disney+. They get to pull a huge, multi billion dollar archive off the shelf and start a service that's arguably better than anyone elses.
In the cinema industry there has always been talk about making going to the movies a habit. The last 10 years has created an environment where people got used to going to the cinema - and not just for the tentpoles. But has Covid broken the habit? It's now close to a year since there was a really big movie release that was generally available, so I think there's a chance that, for some, it has.
The idea that 'normal' for cinema is a $1B movie every other month is a very recent occurrence, and was probably unsustainable even without a pandemic. There are so many factors dragging on these big releases. Star Wars has floundered partly because of Chinese disinterest, but also a general lack of enthusiasm from fans. Marvel are at the end of a cycle and need to handle a crossover to the next phase. Craig is leaving Bond, plus the end of its copyright is looming. The Potter franchise has fallen flat. The ever present pressure to shorten the theatrical window. Ever reducing attendance counter-balanced by higher ticket prices.
Cinema will get back to how they were in the past, but will it be like 2019 or 1997?
Nobody knows what films are going to be made in the next few years - including Hollywood.
The big studios are risk-averse and they won't green light any big budget films until they know they can make their money back. That list of films has an amazing line up for 2021 - but the further down the list, the more speculative it gets. Things like Black Panther 2, Indy 5, the later Avatar films and all the Star Wars films might never happen for various reasons.
For the record, I'm not arguing that nobody will go to cinemas after Covid has gone or that streaming will kill off the blockbuster. But it's hardly wild speculation to say that several of those films won't make sense in a post-covid world.
It looks more and more like Star Wars is becoming central to Disney+'s content strategy, where as the films fizzled out.
Avatar is a decade old film that benefited from the now abandoned 3D craze. Surely it's not that crazy to think that actually this won't become a multi-billion franchise and gets dropped after 2 films.
Black Panther, sadly, no longer has a leading actor.
I said they won't all go ahead.
There's no way 4 and 5 will be green lit until 2 and 3 have come out and made at least a billion each. That's assuming that a lot goes right before 2022.
Star Wars is not going to have a new trilogy green lit for a decade. Disney will put their focus into Disney+ for Star Wars going forwards.
Hollywood isn't budgeting for big films at the moment, and it won't until it understands how cinemas, PVOD and Covid all play together.
There is no way that the Avatar and Star Wars films will all go ahead.
PVOD is still untested at the moment as a delivery platform for premiering big budget films. One thing that that document touches on which will be make or break for PVOD is the cost of promoting a film.
About 40% of a film's budget is promotion. If that can be significantly reduced by keeping viewers in a streamers' ecosystem, then the economics of PVOD will win out. It would mean that a PVOD release that brings in an initial $350M is probably making the studio the same money as a theatrical release.
It actually starts to make the Coming2America deal start to make financial sense, as Paramount are not only getting a lump sum towards the production, but they are also handing over the promotion to Amazon.
But all of that said I still think the pre-Covid model would win out in terms of overall revenue.
Using debt to expand so fast is a high risk strategy. Nobody could ever account for something like a pandemic - but when you have a business with no real assets, and all your profit comes from one product from a few suppliers, your going to be vulnerable.
You could argue that $8B of liabilities is trouble.
I've seen a figure of $50M a month of cash burn, but who knows how accurate they is - there are so many moving parts.
I'm not sure it shows a maximum, but the studios are certainly going to make the streamers share the risk in this experiment.
I will say $125M is a lot for this film. How much would Wonder Woman or Bond cost? Probably too much to risk unless Coming 2 America makes big numbers.
Paramount are obviously testing the PVOD waters here - trying to break even on what I suspect is a pretty mediocre film. $125M sounds like a lot for the streaming rights, but I guess Amazon need new stuff to show.
Things will get interesting when they start discussing a price for Top Gun 2.
The decree doesn't apply to Netflix. Or Disney for that matter.