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Theatrical Distribution Gets A Second Look Amid Growing Streaming Losses

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13 November 2022

This year’s third quarter earnings announcements for entertainment companies and exhibitors finally wrapped up last week and it was a mixed bag if ever there was one.

Consumer cord-cutting of pay-television subscriptions continued to grow. As well, with fewer viewers to reach via linear TV and continued discussion of economic uncertainty in the near future, advertisers throttled down their spending with media conglomerates leading to revenue shortfalls for companies like the Walt Disney Company and Warner Bros. Discovery which came in below analyst expectations.

The growth of streaming, on the other hand, continues at different paces for all of the major entertainment conglomerates, albeit none of the direct-to-consumer services is adding to their bottom lines. Over the last quarter losses from streaming amounted to:

  • Paramount: USD -$343 million
  • Comcast/NBCUniversal: USD -$614 million
  • Warner Bros. Discovery: USD $-634 million
  • The Walt Disney Company: USD -$1.47 billion

The valid question Wall Street is now asking is whether streaming revenue will ever make up for the earnings generated by historic distribution methods. This has led to senior management at more than a few of these media companies openly discussing the idea of balancing the distribution of feature films between theatrical and streaming using a more optimum strategy. Translation: Maybe it was a better idea to make audiences pay to watch movies in theatres first and then charge them again when those same movies are distributed via streaming.

David Zaslav, the CEO of Warner Bros. Discovery, said as much during the company’s earnings call:

“Let’s face it, the strategy to collapse all windows, starve linear and theatrical and spend money with abandon, while making a fraction in return, all in the service of growing sub numbers, has ultimately proven, in our view, to be deeply flawed…We learned what doesn’t work. And this is what doesn’t work for us based on everything that we’ve seen: direct-to-streaming movies. So spending a billion dollars or collapsing a motion picture window into a streaming service. The movies that we launch in theater do significantly better, and launching a 2-hour, 40-minute movie direct to streaming has done nothing for HBO Max in terms of viewership, retention or love of the service.”

We provided our thoughts and opinions on all this subject in our most recent CJ Analysis post which can be found below.

Meanwhile, some of the world’s biggest exhibitors appeared to be turning things around as they recover from the COVID-pandemic. Sure, AMC reported its twelfth consecutive quarterly loss – this time a loss of USD $226.9 million – however the company’s revenue increased 27% to USD 968.4 million. And they had previously predicted Q3 would be their worst quarter.

Cinemark also reported negative numbers, a loss of USD $24.5 million, during the last quarter but that is way better than the USD $77.8 million the chain lost during the third quarter in 2021. More importantly, the company’s revenue increased by 50% to USD $650 million with a lack of major releases in August and September.

Then there is Cineplex in Canada which posted a net income gain of USD $30.9 million last quarter, compared to the USD $33.6 million the exhibitor lost during the same period in 2021. This came on USD $339.8 million in revenue during Q3, a year-over-year increase of 35.7%.

Though these figures don’t represent a complete reversal of fortune the dark days of the pandemic a year prior, they are at least headed in the right direction. And unlike media companies exhibitors aren’t planning layoffs (Warner Bros. Discovery) or hiring freezes (Disney).

Finally, please be sure to join us on Thursday of this week for the CJ Cinema Summit. We’ll be announcing our inaugural Top Women in Global Distribution list and will be joined by some of the nominees.


Distributors

Theatrical Releases Profit As Streaming Losses Mount

Distributors Return to Theatrical-First Strategy as Streaming Profit Remains Elusive

Netflix transformed itself into a streaming media juggernaut over the last 10 years, driving its stock price so high that it was valued between five and ten times more than traditional media companies. Wanting to boost their own stock price, media conglomerates such as Comcast, Disney, NBCUniversal, Paramount and WarnerMedia (now Warner Bros. Discovery) spent the past three to five years trying to become Netflix as quickly as possible.

In fact these same companies dedicated most of their attention, energy and resources into launching streaming platforms so they could show Wall Street investors that they hadn’t missed the boat. In a race to scoop up subscribers, they spent billions on streaming series and movies to attract a steady flow of new customers, all but abandoning their traditional distribution channels. Revenue and profit no longer mattered as long as subscriber counts continued to grow. Eventually, it was assumed, with enough subscribers revenue and profit would magically materialize.

That hasn’t exactly been true, and with the growth of Netflix stalling earlier this year, and their share price taking a huge hit, many of these same media companies are publicly stating they plan to release most of their feature films to movie theatres rather than direct to their streaming services. We share our thoughts and opinions on the latest industry developments.

Source: Celluloid Junkie


Marketing & Promotions

Movio Launches New Cinema Marketing Solution That Utilizes Advanced AI

Movio, the marketing data analytics company that offers campaign management solutions to the cinema industry, launched a new product named Movio Cinema EQ geared at helping movie theatres better market film releases to audiences.

The new solution builds on more than a decade of movie marketing experience found in Movio’s current products. Movio’s AI now helps drive campaign creation so cinema marketers can more easily create dynamic, personalised communications to increase moviegoer visitation rates.

Movio’s proprietary AI tools use multiple algorithms to analyse cinema audiences’ past behaviours to predict how likely moviegoers are to watch a given movie. This is meant to help marketers avoid the guesswork of finding the best audience for each film, identifying opportunities to drive incremental attendance and deliver a better, more targeted moviegoer experience.

Source: Celluloid Junkie


Exhibitors

AMC Makes A Zoom Call With Latest Partnership

AMC Theatres has formed a partnership with Zoom Video Communications that will turn some AMC locations throughout the United States into Zoom Rooms. As hybrid work has become more commonplace throughout the United States, Zoom Rooms at AMC will enable companies and other entities with decentralized workforces and customer bases to bring people from different markets together at the same time for cohesive virtual and in-person events and meeting experiences.

So, starting sometime in 2023 the world’s largest cinema chain says customers will be able to hold Zoom meetings within the comfort and state-of-the-art sight and sound technology of AMC’s modern theatres. The goal is to have as many as 17 cities across the US with Zoom Rooms technology that can simultaneously connect small, medium, and large sized groups in different locations.

Some news stories about the initiative chided the company a bit, though since everyone is so quick to point out movie theatre capacity is only utilized 15% of the time, especially during the week, if AMC can find an unorthodox yet profitable way to fill the other 85% of the time than they will have the last laugh.

Source: Celluloid Junkie


Cinemas

Cinemark Expands In Houston With Updated Theatre Design

Cinemark, one of the world’s largest cinema chains, is touting its latest theatre opening with the Cinemark Missouri City and XD in southwest Houston. The 14-screen theatre is the first to showcase a reimagined design and features first-class amenities including two XD auditoriums and luxury recliners.

The new theatre is the first to fully reflect Cinemark’s updated brand, which forges a new look, feel and tone. The refreshed appearance is reflected throughout various customer touchpoints in the theatre including interior signage, employee uniforms and food and beverage vessels. Cinemark says the updated interior layout of the theatre that was carefully constructed based on extensive psychological research.

What exactly does that mean. Well, Wanda Gierhart Fearing, Cinemark Chief Marketing and Content Officer, explained that, “Everything from the ticket kiosks to the concession stand layout, to the colors of the décor has been carefully chosen in order to create a cinematic moment that extends beyond just the story on the screen.”

Source: Celluloid Junkie


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Celluloid Junkie is the leading online resource dedicated to the global film and cinema business. The Marquee is our newsletter focused on motion picture exhibition; keeping industry professionals informed of important news, the latest trends and insightful analysis

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