Cinematic Industry Navigating the Disruption of Traditional Marketing and Distribution Models Due to COVID-19 Pandemic

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What do people do for entertainment when they cannot leave home to grab a bite to eat and/or see the latest movie at the local multiplex theater? The sequester of societies around the globe has impacted nearly all industries across all segments of commerce. With professional sports, music and live theater venues and cinema outlets being shuttered early on during the COVID-19 pandemic, the film industry has had to pivot quickly to adjust its approaches to distribution and marketing.

Some filmmakers are trying to capitalize on the surge in popularity of streaming services. For those titles already released and running in theaters, the path to sustaining ongoing profits was to expedite the movie’s release to home viewing, mainly through pay-for-view streaming services. It is the entertainment industry’s tactical version of taking the product or service to the customer if the customer cannot come to them. Some studios are skipping the normal 90-day theater run entirely before releasing some titles to digital channels.

Universal Studios released its latest movie “Trolls World Tour” to home viewing without the traditional theater premier and is reported to have successfully garnered the return of its production investment within the first ten days, but net profits will likely be less than if the high-budget film had been released through the normal distribution channel. Not so for mid-tier, lower budget films like “The Hunt” and “Emma”, which may earn more for Universal Studios if released directly to a $20.00, pay-per-view at home movie. Birds of Prey grossed $84 million domestically after it appeared in theaters but is expected to increase its overall domestic revenue when released directly to digital platforms. Warner Brothers and Disney are expected to follow Universal’s lead and produce more mid-tier movies for direct release to home viewing in order to satisfy a growing sequestered audience.

Most major film studios have chosen to delay the release of their latest, higher-budget offerings. Rescheduling the release date was the easiest adjustment to make for movie makers who can financially sustain operations until theaters are permitted to reopen. The National Association of Theater Owners (NATO) said in a recently released statement. “To avoid catastrophic losses to the studios, these titles must have the fullest possible theatrical release around the world. While one or two releases may forgo theatrical release, it is our understanding from discussions with distributors that the vast majority of deferred releases will be rescheduled for theatrical release as life returns to normal.” In a related statement, Paramount Pictures restated its position that it “believes in and supports the theatrical experience”.

In a competitive environment, winners always produce losers. Movie theaters worldwide have been shuttered in the wake of the coronavirus outbreak, and those that remain open operate under strict limitations on the number of seats that can be filled for any showing. Independent theater owners are the most vulnerable and are the least capable segment to survive the limitations and outright closures. Last year was a record-breaking worldwide box office run, one of the five highest-grossing domestic totals of all time; this year is on pace to be the worst year in nearly a quarter-century.

Theater owners are looking optimistically to reopen by July 1 across parts of the United States, but that goal is ultimately out of their control and will be determined by the rate of decline in the number of cases and hospitalizations due to the virus. In addition, theater goers may be unwilling to quickly abandon the convenience and safety of home viewing and hesitate to reenter the free-flowing lifestyle of pre-pandemic times. The financial ramifications for the entire cinema industry may take years to offset.