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How To Release a Film During a Pandemic

Updated: Sep 28, 2020

Early in the pandemic, many studios delayed releases until the autumn. Many decisions have been shaped by a desire to gain breathing space from the backlog of new releases, especially tentpoles such as Christopher Nolan’s Tenet.

Studios and cinemas are having to navigate weak footfall and the uncertain trajectory of coronavirus rules. A slew of underperforming films at the Box Office is to be expected as many cities in the US – still the world’s largest movie market – grapple with tight restrictions. Universal has kept Tenet’s domestic grossing close to its chest. For all its savvy marketing and the mystique expected of a Nolan film, Tenet’s performance was likely half of what was expected on its opening weekend.

In the second-largest market, China, big hitters Tenet and Mulan achieved disappointing opening performances at the Box Office, despite upwards of 90% of cinemas being open. Mulan grossed just $23.2m over its first three days. Even considering controversy from politicised elements of the film, the performance flails in comparison to the $175.9m Avengers: Endgame grossed over its first weekend in China. Mulan is indicative of an assortment of pressure points faced by US studios, including competition in China from studios producing films such as The Eight Hundred, which grossed $88m on its first weekend in China last month.

The pandemic is also forcing studios to grapple with a decade-long decline in ticket sales. Younger audiences are going to cinemas less – one reason for which is consolidating social networks, belying the social experience of traditional cinema. On the other side of the same coin, video on demand (VoD) has shown consistent increase in household penetration.

Ofcom: subscription video-on-demand (SVoD) claims an increasing share of viewing time.

Premium VoD options for new releases hence seem more appealing in comparison to the Box Office release model. The latter involves rolling out films into as many cinemas as possible over a roughly 90-day period and has a slow transfer to VoD. In the context of the Coronavirus, studios will likely increasingly seek to shorten exclusive release windows given to cinemas.

The longer a release is delayed, the more a film’s finances inflate, making a direct to VoD option more tempting. Universal released Trolls: World Tour directly to premium VoD a year earlier than its expected theatrical release, raking in more revenue in the film’s first three weeks than the first five months of its prequel. The charge for Trolls: World Tour is $30, in addition to the $6.99 per month paid by Disney Plus customers.

AMC, the world’s largest network of movie theatres, reached a three-year deal in July with Universal to cut the exclusive release window to 17 days. The unprecedented deal allows Universal to release new films to VoD in a shorter timeframe, without the usual grace period that cushions cinemas’ exclusive hold on new releases. Studios can enjoy the opening three weekends of revenue – typically the strongest period anyway– whilst AMC enjoys an undisclosed share of the streaming revenue.

Cineworld CEO Mooky Greidinger criticised the move for being inappropriately timed, pre-empting cinemagoers’ near-term return to cinemas. The deal places further pressure on cinemas who are typically reliant on long showing periods of blockbusters such as those provided by Universal. Cinemas already face into the uncertainty of government regulation and are highly dependent on favourable timing of upcoming releases. Some even lack the liquidity to re-open, fragile after a long and cash-draining lockdown.

Earlier this year, AMC sharply criticised Universal’s direct VoD release of its the Trolls film, even threatening not to play Universal films in its cinemas. But AMC later reported $2.2 bn of losses in a June SEC filing: the arrangement seems as good an option for cash as any available to a fragile AMC.

Despite criticism, the deal has the potential to fundamentally restructure the film industry. It could lend Netflix greater leverage to negotiate short showing periods in cinemas for its new titles. Netflix has struggled to do this in the past, unwilling to give cinemas neither long enough showing periods nor the exclusive rights required by cinemas to make remain workable under their existing model. But cash-strapped cinemas may be forced to consider a model more favourable to Netflix.

The AMC-Universal deal remains unique and tentpole releases such as Tenet will likely play in cinemas for as long as possible. That said, especially for films without the momentum of Tenet, long-showings in cinemas present are a lessening attraction for studios whose bottom line is increasingly supported by streaming services.

Changing marketing strategies are another sign of the times. Tenet’s trailer was debuted on Fortnite in a special event on the ‘island’. The platform is perfectly positioned for films like Tenet: it boasts an audience of roughly 250m and a demographic of 60% 18-24 year olds who are likely appealed to quick-paced thrillers.

More crucially, players sit on the edge of the streaming ecosystem, likely still using their parents’ subscriptions. Marketing on platforms like Fortnite could help push viewers further into the ecosystem, capitalising on younger viewers’ willingness to pay premiums for new releases on top of subscription charges. According to a July 2020 Deloitte report, 24% of Gen X and 36% of Millennials were willing to pay premiums for new releases on demand.

Fortnite is quickly diversifying to become a platform for the age of changing social experience. Claims of the end of traditional social interaction are often overblown, but the popularity of Travis Scott’s event on the platform – which saw 28 million viewers – highlights a growing opportunity on Fortnite.

Tenet star John David Washington is interviewed on Fortnite before the trailer debuted. Fortnite is a growing opportunity for unique marketing. Credit: Kokatu Australia

The platform allows for nuanced marketing: whilst users play and interact with marketed content, they can contribute to a meta-buzz that encourages those least likely to go to the cinema to do so. The use of marketing in gaming is not new, but the use of virtual communities as a tool is becoming increasingly sophisticated. Universal also released three Nolan films to play for free within Fortnite as promotion for Tenet. The Black Mirror-esque experience could be a harbinger of the ways we will enjoy film in the future.

More to the point, forty-five of the fifty most expensive films ever made were released in the past decade. Tenet is an estimated $400 million film, and Universal will need to take more than double that to make money. As films require more spending to please an innovation-driven audience, will the pandemic bring permanent structural change to the business of filmmaking?