AT&T CFO Defends Warner Bros. Pictures Streaming Movies Concurrently With Theatrical Release

WarnerMedia’s decision to release Warner Bros. Pictures’ entire slate through 2021 — beginning with Wonder Woman 1984 on Christmas Day 2020 — concurrently with streaming access on HBO Max was one of the biggest entertainment stories of 2020. It was also controversial and a shot across the bow to how Hollywood has traditionally distributed major motion pictures.

Speaking Jan. 5 on the virtual Citi Global TMT Conference, retiring AT&T CFO John Stephens said the move, triggered by the ongoing pandemic and shuttered movie theaters, underscored Hollywood’s ongoing migration to distribute content direct to consumers while keeping a foot in the exhibition business.

AT&T CFO John Stephens

“We’re trying to utilize what is really a difficult situation,” Stephens said about the dual release strategy, adding that the studio found itself with a slate of movies “ready for utilization” in an uncertain healthcare environment.

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While declining to offer specifics surrounding the WW84 release, Stephens said management is pleased with what’s going on with HBO Max engagement and with customers.

“We’re utilizing these pieces of content in the best way we can,” he said. “We’re ahead of our [combined HBO, HBO Max sub growth] for the full year at the end of the third quarter [ended Sept. 30].” Stephens said that making theatrical titles available on Max has grown AT&T’s broadband business.

“We are seeing a movement to upgrading to our elite unlimited [data] plan, our highest-tired unlimited plan … and as such we’re seeing those positively impact revenue,” he said.

Indeed, WarnerMedia ended Q3 with more than 38 million combined HBO and HBO Max subscribers. That tally is expected to reach upwards of 50 million by the end of 2021, according to a majority of conference survey respondents.

When asked if the decision to release major movies into the streaming channel had impacted Warner’s ability to attract top talent and creators, Stephens said the studio has a near 100-year record working relationship with talent across the board.

“This is a unique situation” Stephens said. “We can’t change that, that is just the reality. So we’re just working to keep this system moving healthily forward and to utilizing the great content that is already there.”

Cinemark Upbeat on Theatrical Comeback Following Vaccine Deployment

Cinemark Holdings, the third-largest movie theater operator in the U.S., has what No. 1 exhibitor AMC Entertainment doesn’t: $750 million in free cash for sustaining operations. That much was disclosed Dec. 16 at the MKM Partners Virtual Investor Conference by Cinemark CFO Sean Gamble, who said the chain with 4,500 screens across 345 theaters has enough cash to fund operations — without consumers — into 2022.

No. 1 exhibitor AMC Theatres is looking for $750 million from the sale of stock and debt to sustain operations past next January. AMC, like Regal and Cinemark, saw its business shut down overnight in March following government-mandated closures to stop the spread of the coronavirus. Screens in major markets of California and New York remain mostly shuttered.

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Gamble said Cinemark also expects to get $100 million in tax refunds from the CARES Act, the bipartisan pandemic stimulus bill approved earlier this year.

CEO Mark Zoradi said the chain’s first priority entering 2021 is rebuilding the balance sheet, and not acquiring assets from fiscally distressed competitors such as AMC. News reports suggested Cinemark was looking to acquire select AMC screens.

“We are going to be very careful in taking cash that we have on hand … and risking it with acquisitions where we’re not certain what that particular outlet is going to do in a post-pandemic environment,” Zoradi said. “Until a landlord actually owns a property, it obviously is not appropriate for us to be negotiating with that landlord prior to that moment.”

The CEO, like others in Hollywood, said he was “shocked” by Warner Bros.’ decision to release its entire 2021 theatrical slate concurrently into homes through HBO Max. Zoradi said he remained positive Disney would not replicate Warner’s move following discussions with Disney CEO Bob Chapek.

“It’s a bit of an anomaly [in movie distribution] we’re seeing right now,” Zoradi said.

NBCUniversal Boss Defends Expedited Movie Access in the Home

Long before Warner Bros. decided to release its entire 2021 theatrical movie slate (beginning with Wonder Woman 1984 on Christmas Day) into the home and cineplex simultaneously, Universal Pictures made waves generating more than $100 million in premium VOD revenue early in the pandemic releasing animated sequel Trolls World Tour into homes instead of on the big screen.

The studio then slashed the 90-day theatrical window down to 17 days. Instead of affording exhibitors three months of exclusivity, Universal offered to revenue-share PVOD sales with accommodating movie chains such as AMC Theatres and Cinemark.

What is clear about the film business is that while the rest of the entertainment business evolved in a rapid way across the world, the film business stayed stuck in the mud on the traditional theatrical windowing basis, says Jeff Shell, CEO of NBCUniversal, parent of Universal Studios.

Speaking Dec. 8 on the virtual the virtual UBS Global Investor confab, Shell said the traditional release window ignored a market segment of consumers who love movies, but who either don’t go to the theater as often or prefer to watch new releases in their home.

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“Somebody gets excited about a movie that weekend, can’t get a babysitter, and decides they’ll see it in a couple months or next year on HBO,” Shell said. “We, as a movie company, did not serve those customers. And that is not the right way to maximize what is the Rolls Royce content of the entertainment business. We’re leaving a lot money on the table [ignoring $19.99 PVOD].”

Shell said Universal Pictures remains a staunch advocate of the moviegoing experience, including driving to the cineplex and watching content on a big screen with enhanced sound the way filmmakers intended viewers to consume the content.

“I think when the pandemic ends, it’s going to be a bit like the roaring ’20s, when you’re not going to want to be at home anymore,” Shell said. “The idea of sitting at home in your apartment on a Friday night watching Netflix is going to be less appealing.”

But he said the studio is also cognizant to the reality about changing consumer habits watching movies, including on portable devices. Shell reiterated that to Universal, the transactional business model of movies remains of primary importance.

Shell admitted he has been outspoken advocating for the collapse of the theatrical window, arguing it brings enhanced value to the overall business, including theaters.

“There are a lot of people who want to watch a movie in a non-premium way, which is in the home” he said. “I think theatrical will continue to thrive and as more windows collapse … more money is going to made by everybody involved in the movie business. And it’s better for consumers.”

AT&T CEO Defends Warner Bros./HBO Max Movie Release Strategy, Says User Engagement Up 36% in Past 30 Days

AT&T CEO John Stankey Dec. 8 defended WarnerMedia’s landmark decision to release all 2021 Warner Bros. movies in theaters concurrently with subscription streaming video service HBO Max in the home. Speaking at the UBS Global TMT Virtual Investor confab, Stankey said the move was done in response to the “psyche of the population” during the ongoing pandemic that has decimated the theatrical business through mandated closures, limited seating at operating screens and wary moviegoers.

“We’re all participants in a market that serves customers,” Stankey said. “The longer-term impacts are going to be dictated by what consumers wish to do.”

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Contending the streaming video horse has “left the barn,” Stankey said response among existing HBO subscribers to Max continues to resonate. He said adoption is now 12.6 million subs, up from 8.6 million at the end of the most-recent fiscal period. Since launching HBO Max on May 27, AT&T has made the $15 monthly SVOD service free to its 42 million combined HBO pay-TV (and HBO Now) subs in the United States. Adoption of HBO Max has been slow, with fewer than 3 million HBO pay-TV subs signing up through June — a reality driven by confusing access rules and unavailability on the Roku platform.

By comparison, rival streaming service Disney+ generated almost 74 million subs globally in its first year.

Stankey said offering Warner’s theatrical slate in the home adds an incentive to subscribe to HBO Max while affording diehard moviegoers equal access.

“Customers have a tremendous amount of choice as to how they choose to engage with content,” Stankey said. “If we just simply sit here and say, ‘This is about whether or not people go to movie theaters,’ I think we’re missing the broader point. Today, even before WarnerMedia made this decision, customers could go watch great, two-hour content on a variety of competitive services. Customers are going to drive what happens in a market, ultimately.”

The executive said the distribution strategy could change should the new coronavirus vaccine pan out and consumers return to theaters.

“We’re not putting one [distribution channel] over the other,” Stankey said. “This to me seems like a very friendly and innovative approach.”

Director Christopher Nolan Blasts WarnerMedia’s Movie Streaming Release Strategy

Acclaimed movie director Christopher Nolan is not happy about WarnerMedia’s decision to release all 2021 Warner Bros. theatrical releases concurrently on subscription streaming video platform HBO Max. And he’s not afraid to say so publicly.

In interviews with entertainment media, Nolan called WarnerMedia’s decision “a real bait and switch,” contending major theatrical releases are being used a loss-leader lures for HBO Max.

“There’s a lot of controversy,” the 50-year-old director told “Entertainment Tonight.” “It’s very, very, very, very messy.”

Nolan, whose latest release, Tenet, was one of the few major theatrical releases during the pandemic, has a long history with Warner Bros. His “Dark Knight” trilogy with Christian Bale in the title role is widely viewed as the best movies ever in the Batman franchise. Other Warner releases include award-winning Dunkirk, Inception and Insomnia.

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Warner is bowing the new HBO Max release strategy on Christmas Day with Wonder Woman 1984. It will apply to such films as the Dune remake, The Matrix 4 and The Suicide Squad, among others, which will be available for 30 days on the streaming service as they play in theaters.

The hybrid model was created as a strategic response to the impact of the ongoing global pandemic, particularly in the United States. Following the one-month HBO Max access period domestically, each film will leave the platform and continue theatrically in the U.S. and international territories, with all customary distribution windows applying to the title.

“No one wants films back on the screen more than we do,” said Ann Sarnoff, chair and CEO of the WarnerMedia Studios and Networks Group (of which Warner Bros. is part). “We know new content is the lifeblood of theatrical exhibition, but we have to balance this with the reality that most theaters in the U.S. will likely operate at reduced capacity throughout 2021.”

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Nolan doesn’t care. His belief in big-screen releases, Imax, Blu-ray Disc and 4K UHD Blu-ray packaged media underscore an appreciation of tradition and high-resolution art. WarnerMedia says all films will be available in 4K Ultra HD and HDR on HBO Max.

The director’s clout helped push the Tenet theatrical release over Labor Day in the midst of a pandemic. The movie has made $57.6 million in the U.S., and $360 million worldwide.

Nolan said directors and actors are having their work devalued by streaming.

“Some of our industry’s biggest filmmakers and most important movie stars went to bed the night before [WarnerMedia’s Dec. 3 announcement] thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service,” Nolan told The Hollywood Reporter. “Warner Bros. had an incredible machine for getting a filmmaker’s work out everywhere, both in theaters and in the home, and they are dismantling it as we speak. They don’t even understand what they’re losing.”

Cinemark Studying Landmark Warner/HBO Max Distribution Announcement

Cinemark Cinemas, the nation’s third-largest exhibitor, is studying the impact of Warner Bros.’ landmark decision to release its entire 2021 slate of movies concurrently on SVOD platform HBO Max.

“In light of the current operating environment, we are making near-term booking decisions on a film-by-film basis,” a company rep said in a statement. “At this time, Warner Bros. has not provided any details for the hybrid distribution model of their 2021 films.”

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Cinemark, unlike No. 2 exhibitor Regal Cinemas, is operating screens domestically with limited capacity and strict safety protocols against the spread of the coronavirus. Regal has shuttered most operations indefinitely.

No. 1 exhibitor AMC Theatres and Cinemark earlier this year inked separate abbreviated theatrical window distribution agreements with Universal Pictures — enabling the studio to release any movie with less than $50 million box office to in-home digital distribution after 17 days and three weekends in theaters.

 

AMC Theatres Looking to Sell 200 Million Shares of Common Stock

AMC Entertainment, parent to the world’s largest movie theater chain, AMC Theatres, Dec. 3 announced plans to sell 200 million shares of Class A common stock. While shares were trading at $4.10 in early morning trading, AMC offered the stock at $4.22 per share, which would make the offering worth $844 million — 33% higher than the company’s current market cap of $561 million. Through Oct. 30, AMC had 85.6 million Class A shares and 51.8 million Class B shares outstanding.

With the ongoing coronavirus pandemic causing havoc on operations and its fiscal solvency, AMC has aggressively sought to refinance its debt, market screens to private watch parties, sell transactional VOD movies on its website and partner with Universal Pictures last summer for the groundbreaking 17-day theatrical window on select movie releases.

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That said, AMC reported a $905.8 million loss in its most-recent fiscal period, compared with a loss of $54.8 million during the previous-year period. Revenue plummeted 91% to $119.5 million, from $1.31 billion in 2019.

Kingdom Capital, in a note last month, said AMC has done its best to raise capital in the midst of an unprecedented swoon in the moviegoing industry. That said, the investor reiterated the bottom line: AMC Theatres saw 5.2 million moviegoers through Oct. 9, representing a same-theater attendance decline of about 74% compared to the same period a year ago.

“AMC is a [fiscal] zero,” Kingdom wrote. “It wasn’t profitable before COVID and it won’t be again anytime soon until the debt is addressed. And that will be done through Chapter 11.”

Cinemark Theatres Eyeing Shortened Movie Window

Cinemark Theatres, the nation’s third-largest exhibitor, is looking to emulate AMC Theatres’ landmark decision to screen Universal Pictures movies for a reduced time in exchange for sharing PVOD revenue with the studio.

With a $148 million loss and a 95% drop in ticket sales in the most-recent fiscal third quarter, ended Sept. 30, Cinemark CEO Mark Zoradi admitted the chain was against the wall trying to survive financially in an industry ravaged by extended shutdowns, limited seating capacity due to the ongoing coronavirus pandemic.

As a result, Cinemark is reducing the exclusive 90-day theatrical window to just a few weeks for Vince Vaughn horror comedy Freaky, which debuts on Nov. 13; Kevin Costner starrer Let Him Go, debuting Nov. 6; and The Croods: A New Age, which launches Nov. 25.

The move is temporary and fluid as negotiations with Universal and other studios remain ongoing.

“Since we don’t have a specific agreement [with Universal] set on a go-forward basis … we are taking each movie on an individual film-by-film basis, during this period of time,” Zoradi said on the fiscal call.

The Universal/AMC deal enables the studio to distribute new-release content screening in AMC theaters into homes just 17 days after their big screen debut. Universal has been pushing theaters to rethink the release window after it scored a fiscal home run earlier this year releasing Trolls World Tour directly into homes.

Zoradi said he still believes an exclusive theatrical window is “critically” important to the overall media landscape. How long that window remains open is under review.

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“We’re having active discussions with multiple content providers to evolve windows,” he said. “We’re advocating for more of a dynamic window that varies with the box office generated, which benefits all parties, studios, exhibitors, and most importantly, movie goers.”

The CEO revealed that recent theatrical marketing campaigns enabling small groups to rent out theaters for so-called “watch parties” hasn’t panned out for Cinemark.

“While several of our competitors have since followed with their own version of private watch parties, we’ve not seen them impact our sales to date,” Zoradi said, adding that he doesn’t expect the theater business to return to normal operations until 2022.

 

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.”