The End of Movie Theaters

Some media outlets might have headlined this, "The Internet Killed Off Movie Theaters", but the killing blow here isn't coming from piracy or even competition, though they helped drastically reduce attendance among millennials, but from the same basic factors as Big Tech.

A handful of companies are consolidating control over the entertainment industry, some, Netflix and Amazon, are dot coms, others, like Disney, are existing companies who are becoming monopolistic giants, and movie theaters don't really fit into their plans for industry dominance. 

The pandemic allowed them to move away from theaters to streaming and there's no real reason for them to stop. Opposition from directors and celebrity stars is going to slow down the process, not stop it.

“We think we are at the cusp of a new non-virtuous circle emerging for moviegoing, similar to the cord-cutting cycle” in pay-TV, Robert Fishman of MoffettNathanson wrote in a note to clients today...

The more common day-and-date release patterns get, Fishman argues, the greater the pressure on theatrical grosses. Distributors then hesitate based on the weaker returns, and decide to feed their streaming services, and the cycle continues. Streaming subscriber growth is, of course, the alpha and omega for all media companies as they race to catch up with Netflix, making executives more willing to sacrifice theatrical revenue. And that makes it less and less likely, in Fishman’s view, that theatrical box office will ever return to its previous levels.

The business model for movie theaters was already pretty shaking with their revenues coming from concessions.

The entertainment industry had already successfully cannibalized ticket revenue and with tentpoles making much of their money on opening weekends, ticket sales are just a way to sell oversized sodas and snacks to anyone who comes in the door. The customers most likely to buy a lot of junk food are the younger audiences that mainly come in for comic book movies anyway. They're hard to get in the door and Disney has decided to adopt the Netflix model which breaks the theaters that had been using Marvel's trash delivery system to hang on to those customers.

But the whole point of the dot com model is to lock in customers through devices, if you have them, or subscription fees, if you don't.

The movie theater, in this model, is a device, and Disney doesn't own it, so it wants to move audiences from theaters to Disney+. So does everyone else, including Paramount, MGM (now owned by Amazon), Warners, and the remaining big boys.

Theaters are now in the bizarre position of raising enough money to produce original and exclusive content or reading the writing on the wall and going the way of the phonograph the way a lot of hipster theaters have.

 

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