Kurt Rieder of Warner Bros. Discovery Delivers CineAsia 2022 Keynote

By Patrick von Sychowski | February 7, 2023 12:43 am PST

The following is a transcript of a keynote speech delivered at CineAsia 2022 in Bangkok by Kurt Rieder, Warner Bros. Discovery’s Senior Vice President, Head of Theatrical Distribution – APAC. It is presented here with his permission though, naturally, the full impact, intonation, emphasis and visual jokes were worth the trip to Thailand. We also only include a handful of the slides from Rieder’s presentation. However, we felt the message of the speech was important enough to be shared here. The speech has been edited for clarity.

It seems like we’ve been through so much: obviously a global pandemic, war in Ukraine, James Cameron finally finished a movie, [laughter] all in four years – it’s amazing.

So let’s start with what I’m calling “Where do we go from here?”

I need to give you a caveat here because when I produced this deck, it was on a tiny computer screen. Nobody told me it was gonna be projected up on that 80 foot IMAX screen. So if it looks like Pac Man circa 1982, please forgive me. But one thing I can tell you, I’ve never appreciated so much all the work those IMAX engineers do to make films look so good on the screen.

Before we talk about the future, let’s talk a little bit about the past. The section I’m calling “COVID Wins and Fails.” Obviously, there’s nothing like a brush with death to make you feel more alive. And it was really coming out of it that made us all remember how impactful cinema is to our world. And thanks to Tom [Cruise], and thanks to Spider-Man, thanks to “The Batman,” and thanks to Dr. Strange and the Minions, I think we’ve proven to the world that cinema has a place at the worldwide entertainment table.

One of the other wins was to restart shows in this room. And you especially in the cinema world, every single exhibitor I spoke with has had to cut costs across the board. So all of these learnings we need to hold on to; things can never go back to normal, we need to learn how to be efficient all the time. Obviously, we’re all aware that retail is struggling, especially in big malls. We’re seeing a lot of the big box and fast fashion retailers cutting down on their footprints. Some are either shifting to click and collect or drive-up models. When that happens, it’s actually an opportunity for exhibition because you’re becoming the new anchor tenant in every mall where you’re at. And because you’re the only traffic driver other than food courts, I think that’s gonna give you more leverage when you negotiate with your landlords.

Another win is private cinema. You will remember, out of caution, many families and groups of friends started booking cinemas in blocks. Exhibition has leaned into this to customize and redesign many of their auditoriums for this special use. And I think it’s a big win. I know in Korea recently, they’re developing a cinema with eight luxury boxes over the main seating deck, which is a great concept. Reissues were also a necessity, when no fresh content was available. We didn’t know how long it was gonna last. What we’ve realized is that Gen-Z especially can finally see on the big screen, those movies they’ve only seen on their phones or on TV. And it’s really worked. Here in Thailand, we’ve been able to make USD $1.2 million in box office just this year, with four “Harry Potter” films.

Kurt Reider, WBD, CineAsia 2022 PPT, Covid Fails

Let’s move to “Fails.” Obviously, debt was necessary for many exhibitors around the world during COVID as a way to keep the doors open and your payroll paid. Luckily, the interest rates are not so high here in Asia compared to other regions like Europe or North America. So we’re not seeing the same credit rationing or bankruptcies we’ve seen in other markets. In terms of inflation and supply chain issues, that’s impacted us in film production. And I know it’s impacted all your operating expenses. Fortunately, in most cases, our customers are accepting the prices at the box office. And let’s hope that continues.

The biggest challenges I think we have and something I know we’ve been speaking of earlier, is the pressure on smaller films. So this is actually a trend that started in 2015. And it was accelerated during the COVID period. Dramas and comedies especially have been squeezed out. What’s really driving the box office are obviously blockbusters and sequels. At the same time we’ve seen many local media, formerly newspapers, magazines, but even small websites, letting their film critics go. So we have fewer film critics than ever. And because of that we have fewer sponsors for the small and medium film. So it’s a bit of a perfect storm. Those critics still remain though they’re less mainstream than before and more arthouse focused. Of course, they’re not supportive of sequels and blockbusters, so we’re seeing this real divergence from what audience ratings suggest.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

Obviously, Netflix grew tremendously during the pandemic, and they completely disrupted the business model. Many studios took notice. It was Wall Street that said the traditional windowing approach was dead forever and so it looked like it was going in that direction. In fact, some said cinema was actually dying, and the cause of death would be murder by television. Obviously, we’ve been talking to cinemas about streaming for many years now, starting in 2017. Cinemas had noticed obviously, so it’s not like COVID brought about streaming, the floatation had already begun.

So by the peak of the pandemic, streamers had become the big jungle cat. And the dead monkey in the leopard’s mouth was us in theatrical because it looked like it was over. You, operating cinemas, were just hanging on for dear life. Many releases were exclusive to streaming or were [released] simultaneously and that looked like the new model going forward. Luckily, 2022 happened and the big Netflix stock crash. And so the whole ethos of subsidizing the cost, which was driving the growth of the streamers, was put on its head and the streaming execs had to rethink in terms of what they were charging and how they were making money. And Wall Street suddenly woke up and decided profits do matter, which was great for us because we started a pivot back to window monetization. And you guys in exhibition welcomed us back with open arms.

So again, the narrative all long coming from the media that streaming is killing cinema and streaming versus cinema, celebrity deathmatch. The reality is, it’s streaming versus cable. If you look on the chart on the left, it’s clear that cord cutting is decimating the cable business. And that’s only happening because people were pivoting to streaming and decided they don’t need to have so much media in their life, or at least ones with ad that they can control. And in the US, we’re finally seeing streaming eclipsing cable, which is probably already the case in many Asian markets already. But as we move into this very unsure environment, and a possible recession is Convichu referred to we’re seeing a pivot to ad supported platforms.

If you add up all the current cost of streaming at the list price, it’s almost 100 bucks in the United States if you’re a consumer. Now clearly, nobody wants to pay $100 because that’s as bad as cable, because you don’t have sports. So obviously seeing that each of the streamers has gone back and come up with a new advertising-supported tier. And even though the advertising load per minute / per hour is lower than traditional cable it’s starting to look a lot like cable. So I’m an optimist; I always try to look on the bright side; and I’m convinced that streaming and cinema can coexist. Let’s look at a couple examples.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

So, upgrades, we know that “Smile” was designed as a streaming movie, but thanks to very good test screening scores, Paramount took a chance to release the film internationally and made USD $200 million as a result, so that was a pretty smart move. Meanwhile, the “Predator” franchise was probably declared dead in 2018 when the last feature film was released. But luckily, Disney took that content, came up with a prequel, which has done very well on streaming, and suddenly that franchise is back to life. We may be seeing the Predator again on the big screen.

Now we’ve heard it before but David Zaslav, the CEO of Warner Bros. Discovery, has declared that actually theatrical improves the experience in streaming because what we’ve seen is if we have a proper window protected theatrical release, it increases engagement with the user on HBO Max five times more in a direct to streaming model with very little advertising support. So again, I think we can coexist.

So what is the threat? My thesis is it’s short form and it’s short form because the future of our business is our youth and the youth at this point is distracted by TikTok. TikTok is responsible for double the viewing minutes of Netflix at the moment in the US and it’s using the same eyeballs as both Facebook and Instagram combined. And again, that was 2021 numbers. So going forward, we’re gonna see Netflix get bigger and bigger. And a lot of it has to do with asymmetrical economics.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

If you look at the size of [TikTok’s] talent pool versus our talent, okay, those of us working in the media industry, and then you look at how little they spend in terms of their creative, versus just one company, for example, and see what Netflix has declared as their spending. They have the most efficient media company on Earth. And it’s something that is very hard for us to directly compete with. Slide. Let’s take another short form later; YouTube, growing immensely in Asia at this moment. And that’s set to continue, especially if you consider by 2027, there’ll be 1 billion connected screens in India alone. So if you look at the survey on the right hand side, you’ll see in the last seven years, there’s been a doubling of the number of teens who claim they’re on the internet almost constantly, it’s almost 50%.

This is a problem for our industry. Because if you can’t put down your phone, you don’t have time to go to the cinema. Or you won’t feel comfortable sitting through a two hour movie knowing that things are happening on your phone and with your circle of friends. So we need to find a way for people to take the time to come to the cinema and put down their phone. Even professional athletes can’t be trusted to put their phone down. Now, this is a real photo of a slugger from San Diego Padres, who got up to bat with an iPhone in his pocket. And it shows you, you know this is really a disease in our industry. It’s incredible.

So what do we as a cinema business say we need innovation, but not like this? So when your nephew the intern suggests NFTs, the Metaverse and crypto are the solution please ask him to grab a broom to clean up an auditorium because this is not what’s going to save us.

So this is a bit of an eye chart. I apologize for it. But I decided to list by decade all the innovations our business had come up with and what were the challenges. Now those innovations were not designed directly in response, but they helped us get through it. And my theory is that we can’t get through our current crises without further innovation. You exhibitors are investing a huge amount of money into your screens, your seats, the experience of food, we have to continue, there is no way out. Because if we do not innovate, we will die. So again, let’s keep this chart in mind next time you’re looking at a capex investment.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

So what do we have now? We need more of to really foster local and regional content. Now, many years ago, you’d never get a studio guy up here saying that because we saw local content as a distraction and annoyance and something that was taking our dates. What we’ve learned through a lot of research is that the more local content a market has, the better it is for Warner Bros. and the other studios.

So we’re also seeing a lot of regional content. And by that, I mean, when one country produces content, it works everywhere in the region, and in some cases internationally. And the hot new regional content in Asia is, the runner up is South Indian fare, but the leader by a mile is Japanese anime. Anime continues to do tremendously well, on the back of I must say a lot of support from the streamers as well. The one thing we must work on, though, is the titles, you know, they’ve got to get better.

So if you don’t know who those people are in the boxes on the left [photos of “Stranger Things” cast], I’m making my point, we need more teen friendly programming. And if we can get great teen friendly programming and pulling these people from streamers or other shows where they’re incredibly popular, they have a following. We feel that we can actually foster something which happened in the 80s with the Brat Pack and other things, “The Outsiders”, you get these kind of incubators of movies and you expand and then you build up a new cadre of stars for the next 20 years.

Obviously, we need great design and great design leads to Instagram moments and better dates when you bring in your girlfriend or wife. And it’s something that is very hard to do. But it’s worth doing because it differentiates ourselves from the cinemas of our past. We also need more audience engagement. And here’s some fan inspired art. “Barbie” obviously taken a riff off the “Oppenheimer” teaser poster. And it’s stuff that we can never create due to approvals within the studio system. But we’re delighted when we see this stuff being created, because it makes people laugh, and it makes people share and be creative themselves in terms of supporting our films.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

We also need a lot more representation, not as described by the photo on the left. There’s a table on the right, which is just the US, but it’s quite revealing because it shows you the evolution of the demographics in the country. And even though there’s this huge international market that you think would be feeding the casting of Hollywood movies, Hollywood casting directors think American, it is a fact of life. But thankfully, as the American landscape in terms of the faces and the cultures differentiates, we’re going to see the faces up on movies in the future look more like your audiences and become more diverse.

We also need to support and not reject team driven events like the Gentleminions. I’m sure you’re all aware of this, especially in the United Kingdom. It was big, to the point that some theaters were we’re not allowing any teenagers in the theater if they were wearing a suit. But basically, this completely viral and, ironically, TikTok led movement drove the opening weekend market share of teens and “Minions” to higher than any other animated film in the last year. So again, let’s get those teens back no matter what else we have to do.

This is what we need less of, not to be disrespectful. But we’ve seen a lot of independent genre films, sold by sales agents, who obviously put somebody in 10 to 20 minutes in a film to get the film sold around the world. But when young people see these movies in your theaters, they feel that this place is not for them. We also have too many long movies, which we need to work on. And I’m not saying you can’t upgrade movies over two and a half hours. I think Cameron, Spielberg and Scorsese should get a pass.

Kurt Reider, WBD, CineAsia 2022 Keynote PPT

But when audiences start checking first before they make the decision to see movie what the running time is, and that’s a new trend, we need to feed that back to directors. So they know that even though your opus takes 2 hours and 45 minutes, that’s going to reduce daily session times and convince some people to wait until it comes out on streaming. So under two and a half hours is the new standard. Even though we look back and “Raiders of the Lost Ark” was an hour forty-two, “Casablanca” was under an hour forty-five, we’ll never get there again. But as long as it’s under two and a half hours, that should be the new standard.

So this is something we’ve seen around Asia. And it’s 4K driven advertising supported, beautiful user experience pirated apps. And because it has advertising and looks great, it’s 4K and it’s not camcorder, consumers think this is 100% legal, or as the text says, super legit. We need to work with the Motion Picture Association and our own legal teams to try to get this stuff taken down.

We all suffer from cancel culture, both exhibition and distribution. We’ve got to find a way somehow to work with our industry so that audiences judge artists based on their work and not their antics off screen. So I’m going to end up with some free advice for you guys like this North Korean general, average is not enough.

I think we have very warm memories of being children and going to the cinemas with sticky floors, cramped seats, and watching some cheesy film in the 80s that we wouldn’t bear sit through today. That’s just not going to work these days. The standards, both in exhibition, and the films that we produce, are much higher. We have to live with those standards. We have no choice.

Now 27 years ago, when the first CineAsia kicked off in Singapore, all distributors wanted to talk about with exhibitors is build more screens. That’s the only thing we had to say. We were under-screened throughout Asia and we wanted you guys to build as many screens as you could. And you’ve exceeded our expectations. And we’re very thankful. But I think now we’ve got to be brutally honest. There are zones and cities and markets, where we have enough seats, and in fact, we probably have too many seats. Our goal is not the maximum number of seats. We want to get to a place where you’re healthy. You’re investing in technology, service, design, and if the price to pay for that is reducing screens or seats. I think we all have to accept that.

I think we also have to be focused on curation. Because curation is not just about programming. It’s food and beverage, it’s pricing, it’s audience outreach, it’s marketing, because every single cinema is a community. And it has to be fostered by customer loyalty and all the efforts of your team. So this build it and they will come method where we play everything everywhere and, you know, on the opening weekend of whatever the big superhero movie is, nine out of 10 screens are playing the same thing… I think it’s very short sighted. And I think we need to preserve those other markets. So they keep coming back and there’s a movie for them every weekend.

That way, we’ll have enough customers for everyone. I’m gonna wrap up with a word of caution. And I apologize if this sounds like I got it from a fortune cookie. But going back to small and medium films, my feeling is that’s our biggest problem at the moment and something that we control we can’t blame the outside world for. The thinking is this, if we keep telling audiences that cinemas are for blockbusters only, they’re gonna believe us. So we need to be very careful.

Thank you very much.

Patrick von Sychowski
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