HBO Max vs. Hollywood: Breaking down an industry on the cusp of change

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The COVID-19 pandemic has not been kind to Hollywood. What started as a weeks-long shutdown of movie theaters has turned into an increasingly precarious situation for the future of movie-going. WarnerMedia and AT&T’s recent decision to create a simultaneous streaming and theatrical release strategy has turned the industry on its head, and the ramifications of such a move will be felt for years to come.  

The current streaming boom has caused every major studio to begin establishing their own presence in the market. Disney now has the incredibly successful Disney+, Paramount has their up and coming Paramount+ (previously CBS All-Access), and Warner Bros. has its very own HBO Max. These streaming services have been taking over Hollywood for nearly a decade, and the pandemic has only sped up its inevitable takeover of movie theaters.

Recently, WarnerMedia, the parent company of legendary movie studio Warner Bros., announced that every movie in its theatrical schedule for 2021 would have a simultaneous release on HBO Max and theaters. A move this aggressive has drawn lines in the sand between fans, filmmakers, and production companies regarding the long-term implications of the announcement.

The first major party in this developing situation is Warner Bros. and WarnerMedia executives. Months after its launch, HBO Max had not experienced the level of growth as some of the top streaming services in the game. According to a report by Deadline, HBO Max is far behind in subscriber numbers, with only 30% of eligible regular HBO subscribers activating their free account.

HBO Max is a division under WarnerMedia, not Warner Bros., which means that this decision was made at a higher level than the studio executives at Warner Bros. This move is purely to boost subscriber growth in the short-term and launch a brighter future for the streaming service. Rumor has it that WarnerMedia has more interest in building its streaming base than preserving the theatrical business model.

One of the strongest oppositions to WarnerMedia’s decision is filmmakers, specifically those whose films were affected by the shift. A-list directors like Christopher Nolan (Tenet) and Denis Villeneuve (Dune) have voiced their strong opposition to the move because of the danger it presents to movie-going in the long-term. In an exclusive op-ed on Variety, Villeneuve argues that the action is only in the interest of AT&T and not the integrity of the legendary movie studio that the company recently acquired.

“There is absolutely no love for cinema, nor for the audience here,” Villeneuve writes. “With HBO Max’s launch a failure thus far, AT&T decided to sacrifice Warner Bros.’ entire 2021 slate in a desperate attempt to grab the audience’s attention.”

The move has also prompted a response from the Directors Guild of America (DGA). According to Variety, the DGA wrote a letter to Warner Bros. CEO Anne Sarnoff to demand a meeting to discuss the valuation of films on streaming to make up for canceled backend deals for the affected talent. A typical theatrical release, especially for blockbusters, contains backend deals for the talent involved to receive bonuses for high box office performance. The current agreement does not include any bonuses for talent, which unions like DGA are expected to fight in court.

Finally, what does this move mean for audiences? Well, some audience members praise the decision, which has caused HBO Max subscription numbers to jump in response. Some fans, however, are not happy with the decision because movie theaters are their preferred medium to watch movies. As per usual, audiences are divided about the studio’s decision, but what is most important is the practical implications this will have on the industry moving forward.

Moving all of these blockbuster features will drive traffic to HBO Max without a doubt. Still, once an audience has a taste of streaming blockbusters day-and-date with movie theaters, will they ever want to return to the multiplex?

This should be a serious concern for AT&T and WarnerMedia moving forward. Such an aggressive move could harm the industry from the top down. Movie theaters can see a sharp drop in revenue after a full year of struggling to survive in the first place. Additionally, revenue for streaming services is nowhere near what an individual blockbuster can make in a theater because streaming is a bulk business.

Streaming services rely on keeping users subscribed. To accomplish this, the service needs a constant flow of content. This means that streaming services must stretch out their budgets to create content instead of spending hundreds of millions of dollars on a single film. Modern blockbusters cannot afford to skip theaters because there is no justification for spending that much money on a single streaming project.

Will WarnerMedia’s decision change the face of movie-going forever? Only time will tell. But a move this aggressive for such short-term benefits should not have been made so swiftly and ultimately, especially with the end of the pandemic (optimistically) insight.

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