April 13, 2020
The novel coronavirus pandemic has given movie studios a taste of something they’ve always wanted: premium video-on-demand, or PVOD.
Long talked about as the antidote to shrinking film profits, PVOD allows consumers to watch big movies at home on the same day as their theatrical release — at a premium price, of course. Three years ago, a Morgan Stanley Research report looked at the viability of PVOD and found “significant upside for film studios,” according to the report’s lead author, Benjamin Swinburne. Swinburne and his team estimated that PVOD could boost studios revenues by as much as $2 billion a year, with hardly any extra costs.
PVOD talk died down a short time later when theater owners made it perfectly clear they were not on board.
Then came the pandemic. All of a sudden, the country was effectively shut down. The big movie theater chains at first said they would remain open, but sell fewer seats to maintain social distancing. But within days, both AMC and Regal Cinemas, the No. 1 and No. 2 theater chains, went dark.
Productions were halted and, for films already in the can, premieres were canceled and theatrical openings delayed. On March 16, Universal Pictures announced its current theatrical slate would be available for home viewing at a premium rental rate of $19.99 — and that it would release DreamWorks Animation’s Trolls World Tour digitally on the same day as its scheduled theatrical debut, also at $19.99.
Other studios quickly followed suit, smashing the traditional 90-day theatrical window with a wide range of movies — including Disney’s Onward, which was released digitally on March 20, two weeks after its theatrical opening, and Sony Pictures’ Bloodshot, released to home audiences just 11 days after its box office debut.
But now that studios have gotten a taste of PVOD, they have been conspicuously silent about its success — and about its future.
That’s because studios need movie theaters as much as theaters need Hollywood movies. Simply put, one cannot survive without the other — which is why studios are treading carefully with PVOD. As the Morgan Stanley study found, there’s a significant upside to releasing movies early through digital channels. But $2 billion is a fraction of the estimated $22.5 billion studios earned globally from theatrical ticket sales.
Regardless of how well studios do with PVOD during the pandemic, once theaters reopen the genie will be put back into the bottle — with PVOD’s ultimate fate still dependent on theater owners, whose opposition to PVOD stems in large part to the fact that they derive 40% of their profits from concessions.
Studios, however, will have a little more leverage when the crisis is over. In a survey of 1,000 U.S. consumers, Performance Research found that 49% of respondents said it would take “a few months” to “possibly never” for them to return to movie theaters, while just 15% said they intend to frequent movie theaters more often after the pandemic is over. As Variety observed, “the net effect suggests an alarming erosion of theatrical returns that exhibitors and studios alike can ill afford.”