THE POINT OF NO RETURN (FOR CINEMA) AFTER THE WARNER MGM ANNOUCEMENTS?
By Sten Saluveer
Partner @ Oree Films, Ecosystem builder, strategist between creativity x innovation and technology
THE POINT OF NO RETURN (FOR CINEMA) AFTER THE WARNER MGM ANNOUCEMENTS?
and some of my recent thoughts to the European Film Awards EFTA CLOSE UP
I argue that the fact that Warner has decided for the simultaneous release of its releases both in digital (HBO Max) and theatrical will yield an impact to the global industry not uncomparable to the seismic shifts of going from silents to talkies and 35mm to DCP. Combined with an equal bombshell (yet under radar news) that MGM had teamed up with Amazon (sic!) to deploy unprecedented digital infrastructure makes it clear that good old times of theatrical blockbusting have been decided with a point of no return. Here are a few potential implications.
1) A significant studio will pivot (once) in a decade. The point to observe in the case of Warner / MGM's commitment to digital releases is that a pivot has been made (and so fast). A significant industry player (in any industry) can afford this in a decade, and clearly, there is no easy way back now. Yet the lost profits and mounting costs (ballpark millions for MGM due to the delays in the Bond release daily as reported frequently) will leave majors no choice. Thus the fate of the (real estate driven premium) theatre industry is also decided. I agree with Todd Brown that it will take a lot of steam out of the real estate theatrical and (substantiated) bankruptcies will follow, especially as the real estate theatrical does not contribute back nor has been generally interested in giving back to the producer end of the chain.
2) Other studios will follow with their own digital platforms (aka what Disney has already achieved and believe me this is just the beginning considering their back catalog, IP and the potential of NatGeo and the Touchstone catalog!), or a common PVOD standard/platform will emerge. Indeed, pricing points will be standardized (if not agreed already) where all majors, despite the platforms, will charge a similar premium to enable cross releasing. We will pay more on top, on the already mounting subscription costs, and that will diminish spend on other forms of culture. Many will also flock to AVOD or freemium offerings (think of Youtube, or so far free Apple TV which could remain free forever thinking of Apples cash reserves and significantly better recent acquisitions - such as the new Herzog doc)
3) There will be new monopolies along "you can watch the film if you are on internet connection in the same conglomerate". That means no AT&T internet, no HBO Max and no same day release enjoyment. Indifference to the antitrust case in 1940, there is no adequate legal framework to prevent new hybrid monopolies around the content value chain (think ongoing antitrust cases on both sides of the Atlantic with no major outcomes). Potentially same attempts will follow in Europe, through regulatory hurdles are more complex.
4) The (European) customers will certainly suffer (question - how long but long enough thinking of Netflix long road to Europe) - as major platform rollout it is very uneven because of legal complexity, pricing, licensing, and so forth. A major case will roll out in France vis a vis its digital laws where some of the battles - or conglomeration with existing power players will happen (think Canal+ or any of the big European ones -thinking of Babelsberg, Konstantin or any of the scale will team up with the majors to bypass some issues). VPN's will help less and less as platforms are becoming more clever, and piracy will certainly increase (even more) in the short term due to lack of service availability and impact of COVID of household and personal incomes (affording 2-3 premium subscriptions will be luxury for many very soon). Also add the looming content crash (aka there will be so much premium content for mid-late 21/22 that we feasibly dont have time to subscribe to everything) put forward eloquently in the excellent recent blog series on Medium by Ezra Eeman of European Broadcasting Union - EBU, and we will see drastically reduced subscription capacity in audiences and focus on a fewer cleverly made purchase decisions.
5) In a nutshell, the (European) indie sector will go through a tsunami which will start peak around late spring around primary markets -> no blockbusters in cinema -> closed or reduced theatre capacity -> less venues for European arthouse or Indies -> fewer exhibitors and distributors -> and sales agents as well.
So what's next?
What we need now is a new consensus and action plan around the (European) indie sector to:
a) foster digital business competences to understand the change, especially around the indie value chain (producers and sales agents as the central player in the chain). If you are a policymaker and have not thought of it now, its the last moment to get the tickets to the train prior it takes off forever.
b) address legal hurdles to rapidly amplify product quality and quantity of European premium VOD offerings (that means subsidies and significantly boosting merging between bigger european VOD offerings). Local OTTs - likes of BBC Iplayer, Jupiter, Telia / Elisa etc will start to flourish as they have loyalties of the audiences.
c) adopt audience and digital driven release strategies from the other side of the Atlantic such as PVOD and tailored / niche audience releasing of some such as Tine Klintand Level K are utilizing already
d) boost up digital marketing and data-driven audience targeting and promo skills (to get the content through the noise)
e) provide producers with a financial boost to level for in-between production cash flowissues as discussed by @Ewa Puszczynska at the latest @European FIlm Forum Tallinn 2020
It will be fascinating to see how the new and very ambitious European Media Action plan will contribute unprecedented funding. Yet, some of the lifeboats and opportunities seem to be open.
More on these thoughts and impacts to Markets on the excellent piece for the European Film Academy together with some dear industry colleagues Marit Van Den Elshout (IFFRPRO) and Dennis Ruh (European Film Market)
Many, many thanks, @Kaleeb Aftab and Wendy Mitchell for the interview opportunity!