AMC Entertainment Holdings (NYSE:AMC), Cinemark Holdings (NYSE:CNK), and Regal Theater owner Cineworld Group (OTC:CNNW.F) are already sitting on the knife's blade of bankruptcy waiting for the return of new films to theaters, and this maneuver could push them over the edge if other studios follow suit.
Walt Disney (NYSE:DIS) already announced that there would be 100 new titles released to its Disney+ streaming service, 80% of which will bypass theaters, but this could be a decision movie studios come to regret.
Bringing down the curtain
On the one hand, you can't blame them. The entire movie industry was confronted with an environment this year unlike anything it experienced before the coronavirus pandemic. The entire domestic box office this year is just over $2 billion, or almost exactly what Star Wars: The Force Awakens enjoyed in total worldwide receipts in 2015.
At the same time, moviegoers have been embracing streaming video at ever-increasing rates, helped along by an explosion of new streaming services, most notably Disney+, which has many believing it will soon surpass Netflix in number of subscribers.
It also helps explain why AT&T made the decision to dump all of its movies onto its new on-demand service at the same time they'll appear in theaters.
A helping hand
WarnerMedia launched HBO Max earlier this year after delaying its introduction last year, and by the time it hit the market, Disney+ was already a massive success, far surpassing its own estimates on the number of subscribers it would attract.
Even though AT&T ported in over 36 million subscribers from HBO, just 3 million downloaded the app by the end of the second quarter and only a million or so non-HBO subscribers signed up on their own.
In the third quarter, though, the number of HBO subscribers activating their HBO Max subscriptions more than doubled, to 8.6 million. The decision to debut the potential blockbuster hit Wonder Woman: 1984 on HBO Max days after its Christmas Day theater premier could catapult subscribers to the streamer even higher, and may have been a factor in its negotiations with Roku to get HBO Max placed on the streaming platform.
Yet it's also quite possible abandoning movie theaters as the exclusive venue for debuting their movie titles will blow up in the face of Warner Bros. and other studios that choose to follow its lead.
Facing internal backlash
First, studios need theaters as much as the theaters need studios. Streaming subscriptions can't generate the same sort of financial returns that cinema box office does. Even going the route that Disney+ did of adding an extra fee to view Mulan, even for subscribers, won't generate sufficient numbers to offset the production and advertising costs.
It's possible smaller films can make that leap, but for potential high-budget blockbusters, pay-per-view is chump change that can't make up the hundreds of millions of dollars these feature films cost.
And as The Hollywood Reporter notes, the movie industry itself isn't on board with the decision. It quotes top Warner Bros. director Christopher Nolan saying, "some of our industry's biggest filmmakers and most important movie stars went to bed the night before thinking they were working for the greatest movie studio and woke up to find out they were working for the worst streaming service."
There is status in being a cinema star; not nearly as much for being a small-screen actor.
A disaster waiting to happen
AT&T, Disney, and to a certain extent Comcast, whose Universal Pictures negotiated with AMC Entertainment to narrow the window of exclusivity down to just a few weeks, are risking bankrupting the theater industry for short-term gain.
Rather than working together, which is more of what Paramount sought to do than either AT&T or Disney, their go-it-alone approach could crush their own finances if theaters are driven under because there are no movies to show. It reinforces the notion that just because you can do something doesn't mean you should.