“That was the best acting I’ve ever seen in my whole life.”—Trudi, Once Upon a Time in Hollywood, Columbia, 2019

When 2022 wound down, theater owners everywhere were saying the movie industry is back. Now they’re moaning that it will be another year before it recovers. We don’t know how to tell you, but the movie industry never left. 

Let’s attack the subject from a different way. Bear with us…. If a tree falls in the forest and no one hears it, did it make a sound? If a movie is produced/released but was never shown in a theater, was it really done?

We should probably note that there are over 208,000 movie theater screens around the world (about 44,000 in the Americas), an estimated 530 million home screens (TV sets), more than 6.6 billion small-screen smartphone users (about 84% of the population) worldwide.

Now, for the sake of full disclosure, we did go to the movie theater last year more than we did during the past three years combined. Three times, for Top Gun: Maverick, Black Panther: Wakanda Forever, and Avatar: The Way of the Water.

We lost count of the number of projects we streamed with our VOD services. We have a backlog of “boy I wanna see that” stuff that looked interesting, really interesting. All we need is time.

Depending on whose numbers you believe, nearly 750,000 people around the globe worked in the industry last year writing, creating, producing, and posting about 5,000 films for a market that topped $95.45 billion. And with so many screens around the globe, the demand for video stories will be even stronger this year.

During the second half of last year, there was an overabundance of outstanding films in theaters. Every studio/streamer pushed their content to get their stuff on the big screen, so it was little wonder that theater owners were happy. People were buying popcorn, tickets, and other stuff because the blockbuster and breathtaking projects were good/great and very effectively marketed using creators, producers, and stars to be seen everywhere in order to build audience suspense/demand.

By the time they came to a big screen near you, if you didn’t see them in a dark room with expertly balanced audio/video systems with a bunch of strangers, you had nothing to contribute the next time you were with folks.

Before he retired late last year, John Fithian, former head of NATO (National Association of Theater Owners), said the cinema folks didn’t expect their movie supply to improve for another 12–18 months. Still, he was optimistic, saying, “When the movies are there, moviegoers are coming.”

Heck, you’d be optimistic, too, if you jacked up ticket and concession prices and still the Gen Zers and millennials jammed into the seats to see Tom Cruise—one of the few of a fading breed of real movie stars—take to the air again. Then, too, you saw two long-awaited sequels finally on the calendar that would take folks back to Wakanda and Pandora. It doesn’t take a rocket scientist to see that they would suck in the heavy ticket buyers as well as the seldom/rarely theatergoers.

Cinemas—and their studio providers—need to increase their focus on slotting and promoting (heavily) those projects that will entice the seldom and rarely attendees. The guys/gals who you would normally expect in the seats “may” cover the overhead, but it’s the millennials-plus that can deliver the long-term movie house profits. The ideal solution would be one that gets millennials back into the habit of going to the movie theaters to the same degree of intensity as baby boomers did in the past. 

Increasing the perceived value of a cinema visit should have a positive effect on attendance.

The franchise extensions and horror flicks combined with a backlog of sequels and franchise extensions helped the cinema industry end the year on a high note, but tomorrow looks foggy at best. On the other hand, there was more than a decent smattering of pretty good stuff from the leading streamers—Netflix, Amazon, Apple—but you shouldn’t be surprised and probably shouldn’t read too much into it. The three streamers are in the business of entertaining their members on their service. They don’t hide the fact that this is their first priority, so why were they all committing to theatrical windows?

The first reason was obvious… it was the opening volley for awards season. The Academy still has this outdated idea that a movie isn’t a movie unless it appears in several theaters for a certain period of time. 

Being heavily featured and covered at film festivals around the globe also helps.

But we believe there are other, not-so-subtle reasons for having a theatrical window—a week or more—for many, if not most, projects. In fact, making profit on a film, even with a global 45- to 90-day window, has been freakin’ impossible, especially because of the added expenses! However, good/favorable coverage at film festivals, positive social media reviews by theatergoers, and perhaps a statue or two should tip the film/show toward profit.

The efforts/activities add value to the subscribers’ service—added MAU (monthly active user) performance—and attract the attention of added subscribers.

Paramount, Disney, Universal, Sony, Skydance, and a few other studios have the depth and breadth of experience to know how to make the most out of the theatrical window for solid financial performance before moving to the OTT service, so they serve both the cinematic and streaming audiences. 

The key for the studios and streamers is to keep their options open and remain flexible to do what is best for the project and the viewing public. Right now, a week (or more) at the theater seems to be a well-leveraged solution for some projects, while others such as mid-budget, non-franchise dramas and action projects should probably best go directly to their streaming audience and provide them with exclusivity.

The big question mark in the equation is WBD. David Zaslav, president and CEO of Warner Bros. Discovery, has publicly walked on the edge of a firm answer to the issue by stating that he is committed to the 45-day window for theatrical; however, if they can monetize better by having another window or going directly to their streaming service, they will do what’s best for WBD. At the same time, the company has shelved numerous in-process and completed projects, leveraging the cancellations as hefty write-offs to help whittle down the firm’s $44 billion debt.

In addition to what project may or may not be available, when, and where, Zaslav and his CFO, Gunnar Wiedenfels, have been thinning the ranks and reorganizing the organization chart in an effort to find a winning combination of talent that they can live/work with. One of their visions was originally a 10-year plan to become another Marvel. Then it was shifted to be another Pixar. They are also rearranging their release calendar for next year… just in case.

For the time being, the cinema, financial, and creative industries are sitting in their movie seats with popcorn and drinks in hand to see how the unscripted drama plays out. Regardless of the outcome, all three industry segments agree that the box office had a good 2022 and that modest growth, about $8.5 billion, is possible this year even if it is down 26% from 2019. 

Despite some reasons for optimism in the year ahead, movie houses are very over-screened, and major changes will have to take place in the next two to three years.

The bottom line: Despite enjoying reasons for optimism last year, the movie industry is still in a hard reset mode and will have modest growth through 2023 (depending on fresh, unique content), and maybe even into 2024. The shifting landscape puts studios, streamers, and movie houses into uncharted waters. 

Theatrical windows are important to lock down production financing to ensure a steady flow of content for the consumer. At the same time, streaming services are the way for content developers/producers to directly connect with the audience.

Over the past two to five years, consumers have come to expect convenience, quality, and immediacy for their entertainment budgets. It’s not an apples-to-apples comparison because each of the options has a place in the new environment. The key is understanding and getting closer to the consumer and delivering greater entertainment value. 

There are different delivery mechanisms, but the art of video storytelling doesn’t change, regardless of the consumer’s screen.

As Rick Dalton said in Once Upon a Time in Hollywood, “In this town, it can all change like that.”

And a tree doesn’t have to fall on you to make you realize change is taking place, now!