Nathanson: 17-Day Theatrical Window a ‘Dangerous Precedent’

With the coronavirus pandemic shuttering movie theaters, studios have slowly embraced premium VOD and releasing lesser titles early into digital retail channels. When Universal Pictures and AMC Theatres announced plans to shrink the traditional 90-day theatrical window to 17 days for new-release movies, the studio business model was thrown on its ear.

Perennial box office champion Disney — a long-time champion of the traditional theatrical window — broke ranks announcing it would bypass theaters and offer live-action Mulan to consumers in the home next month.

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“We were not surprised by Mulan. We thought [the movie] would go SVOD direct,” Michael Nathanson, analyst with MoffitNathanson, said Aug. 20 on the DEG: The Digital Entertainment Group Mid-Year 2020 Digital Media Entertainment Report webcast. “We’ve speculated changing the theatrical window for years, and here we’re seeing it happen in real time. It’s been a year of experimentation.”

Nathanson said the theatrical business has been Disney’s domain for years (64% of all industry pre-tax earnings in 2019, according to Nathanson), and CEO Bob Chapek’s decision to alter traditional distribution models will “ripple” through the industry (including home video) for years to come. The analyst contends the country has too many movie screens operating under current market conditions.

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“The number [of screens] has to fall,” he said in response to the slate of original movies moving to SVOD and other digital channels. The analyst said that trend will accelerate as studios and their media parents roll out digital distribution platforms such as HBO Max, Peacock and Disney+.

Nathanson said he believes Disney has no plans to abandon the theatrical window altogether since the studio makes money ($1.4 billion operating profit) on most of its major releases at the box office. And theatrical releases often inspire amusement park rides and consumer goods.

“Disney is not all-in [on shrinking the window],” Nathanson said, adding he never expected the window to shrink below 30 days.

“We were shocked at AMC’s deal,” he said. “We think it’s a very dangerous precedent.”

The analyst said that when analyzing the percentage of box office revenue in the 90-day window, upwards of 30% of most $100 million movies’ box office is generated beyond 17 days.

“It didn’t make sense to us to cannibalize days 17 to 30,” he said. “We’re still puzzled by that decision to go to the shorter timeframe.”

He said much of the economics will be determined by how much Universal charges for the home video releases, but said that at the end of the day it will be a “bad outcome” for exhibitors.

Indeed, despite a saturation of movie screens, rising SVOD, AVOD and digital distribution for non-blockbuster movies has left plenty of opportunity for the traditional 90-day window, according to Nathanson.

“We are the most over-screened country in the world,” he said. “We don’t understand why we won’t see a reduction in screens first. We’ve been waiting for changes in the theatrical business for some time. And this crisis has really escalated behavior by some media companies that feel they have the green light to experiment.”

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