Streaming services came and broke quickly in Hollywood. Based on that, the industry is rushing to find a new way of doing business, rethinking who’s in charge, how contracts are established, and how stars are paid.
The studios are shifting their managerial ranks, training executives with experience in business development, technology, and strategy. Producers, filmmakers and actors like Will Smith and Tom Hanks are trying to protect their interests in new contracts that are not based on ticket sales in theaters.
With most theaters in the United States closed and studios with billions of dollars worth of unreleased movies, corporate parents see streaming as their best growth opportunity. Last year’s domestic box office revenue was just $ 2.28 billion, down from $ 11.4 billion in 2019, according to Comscore.
Now the conversation in the industry centers on how many subscriptions Disney +, HBO Max and Peacock have versus Netflix. Executives ask how much tech companies like Apple Inc. and Amazon.com Inc. in movies and shows, and how long movies should appear exclusively in theaters, if at all.
In a sign of how dramatically this change is remaking Hollywood; Warner Bros., owned by AT&T Inc.’s WarnerMedia, for the first time in its nearly 100-year history, does not have an executive charged solely with overseeing the production and distribution of motion pictures for the big screen.
In December, the company announced that it would release all 17 Warner Bros movies by 2021, including Matrix 4 and Dune, in theaters across the United States and on its HBO Max service at the same time.
That left a difficult job for Toby Emmerich, director of the Warner Bros. and HBO Max motion picture division, who had built his career on strong relationships with people, a hallmark of Hollywood. On the morning of Dec. 3, he called leaders of powerful talent agencies to cancel deals he had made with them for films originally intended for exclusive theatrical release, according to people familiar with the matter.
Big-name stars and top producers often bargain for a percentage of ticket sales, but the news from Emmerich swayed hopes for windfall cash. Despite how unpleasant the news was, some sympathized with his situation. “Everybody knows … Toby is not driving this boat at all,” said a person consulted by phone.
WarnerMedia has said that it plans to use its hybrid approach only until 2021 and remains committed to theatrical distribution. The studio said it has also negotiated new deals with actors and filmmakers, including guaranteed pay previews, to make up for the expected drop in box office revenue.
Worldwide, the revenue generated by theatrical releases was around $ 40 billion annually in the years leading up to the pandemic, according to the Motion Picture Association.
That’s little compared to projections for the financial value of streaming. By the end of 2020, subscription-based online streaming services should exceed $ 50 billion in global revenue with 880 million users, according to Statista, a media research firm. By 2025, he expects services like Disney +, Netflix and HBO Max to have 1.34 billion users and generate $ 85 billion in global revenue.
While studios generally split half of ticket revenue with cinemas, they keep most of the money generated by streaming services.
“Online streaming platforms are at the center of initiatives by big media companies,” says Josh Grode, CEO of Legendary Entertainment, which financed and produced two big-budget films for Warner Bros. that are scheduled to debut. In theaters and on HBO Max simultaneously this year: A remake of Dune and the monster movie Godzilla vs. Kong.
Warner Bros. tested the hybrid distribution strategy with Wonder Woman 1984 on Christmas Day. After four weeks, the film made a meager $ 35.8 million domestically, with nearly two-thirds of US theaters closed. The company said that about half of the service’s subscribers watched the film on its first day. Warner declined to say how many subscribers saw the film or how many new it attracted.
In October, Emmerich – a credited producer and writer – was put in charge of making movies for both HBO Max and theaters. Their superiors have taken a more active role in overseeing the production and distribution of content, according to their current and former colleagues.
They include Jason Kilar, a former Amazon tech executive who co-founded streaming service Hulu, hired by AT&T CEO John Stankey in April to be CEO of WarnerMedia. Below him, Ann Sarnoff, a Hollywood newcomer who had been president of BBC Studios-Americas, runs WarnerMedia Studios, which is responsible for HBO Max, several cable television networks, and the Warner Bros. television and film studio.
On Walt Disney Co.’s Investor Day, December 10, CEO Bob Chapek addressed the camera as a computer graphic appeared next to him, displaying a handwritten copy of the vision of Walt Disney in 1957 for the company he founded. At the center of all the divisions of the company were theatrical films. Chapek went on to describe a modern era, with Disney + direct-to-consumer at the center of it all.
Disney has also changed position. After a recent shakeup, Hollywood veteran with four decades in the industry, Alan Horn, who guided the film studio to unprecedented box office success in the 2010s, no longer bears profit and loss responsibility. nor does it decide how the films will be distributed. That job now belongs to Kareem Daniel, who holds an MBA from Stanford University and spent a stint at Goldman Sachs before joining Disney in 2007. He left his position as president of Disney’s consumer products division and is now reporting directly. of the Chapek.
Not all studios are coming out of theatrical releases. One risk: Putting movies on streaming services makes them vulnerable to digital piracy, which is likely to hurt international box office revenues.
Universal Pictures’ Comcast Corp. decision last year to skip theaters and launch Trolls World Tour online sparked a public dispute with the theater chain AMC Entertainment Holdings Inc. as there were home videos of the film. in just two and a half weeks after hitting theaters.
Netflix and Apple asked if Paramount Pictures would be willing to sell the long-awaited sequel Top Gun: Maverick, starring Tom Cruise, which was due to be released in theaters last summer. Based on the strength of perceived box office expectations for the film, the studio declined to consider offers, according to people familiar with the matter. So far, Top Gun: Maverick will debut in theaters this July.
Stars, filmmakers and directors are pushing studios to pay additional fees or other compensation to make up for what could have been earned at the box office. According to several talent agents, discussions are under way with streaming services to formulate a new performance-based compensation model, which would include a bonus when a movie is a hit on the platform.
Actor Will Smith was in the middle of filming King Richard in Los Angeles, a biopic about the father of tennis stars Serena and Venus Williams, when he received a call from his talent agency, according to a person familiar with the matter. . The distribution deal it had with Warner Bros. for that movie fell apart after the HBO Max plan came along.
Smith had agreed to a $ 60 million deal with Warner Bros. on the condition that the film be available online only after a traditional theatrical release, the person said, after turning down a lucrative offer from Netflix. Its production company entered into a deal to pay $ 1 million for the rights to the story on which the film is based. Smith and his agents are working to renegotiate, the person said.
After spending years as one of Warner Bros. ‘top directors, Christopher Nolan, who wrote and directed Tenet last year, is unlikely to return to the studio with his next project, in part because he ended up disappointed with the hybrid distribution strategy. of the study for 2021, according to people familiar with the matter.
In the case of Wonder Woman 1984, Warner Bros. struck a deal with star Gal Gadot and director Patty Jenkins before announcing in November that the film would open in theaters and HBO Max on Christmas Day. He agreed to pay Gadot and Jenkins US $ 15 million and US $ 13 million, respectively, in addition to their regular rate, according to sources close to them.
Disney has yet to renegotiate new terms with actor Tom Hanks after he changed Pinocchio’s distribution plans, according to a person familiar with the matter. Hanks had signed up to play Gepetto in the remake, originally intended for a traditional premiere. The movie has yet to begin filming. On December 10, Disney said that Pinocchio would debut on its streaming service.
The same goes for actor Jude Law, who agreed to play Captain Hook in Peter Pan & Wendy, which will now also premiere on Disney + rather than in theaters.
“Any company that ignores the artist and the art of entertainment ends up failing,” said ICM president, talent agent, Chris Silbermann. “You have to build these companies around artistic endeavors and artistic relationships.”
Other filmmakers and actors are embracing projects for streaming companies.
After recently directing Disney’s highest-grossing film of all time, Avengers: Endgame, filmmakers Anthony and Joe Russo struggled to find a traditional studio seriously interested in distributing their next film, a gripping project about a veteran of the game. Iraq war, according to sources. The Russo brothers gave up waiting and instead sold the project, titled Cherry, to Apple for around $ 40 million, according to the person, in part because they felt it would be the fastest way to reach a large audience.
“It’s not our job to sell subscriptions or popcorn,” said Chris Slager, an executive at Endeavor Content, the content production division of Endeavor Group Holdings Inc., which was involved in the Cherry deal. “Our job is to empower artists by finding the best distribution to bring their stories to the public.”
Director Sofia Coppola also recently signed with Apple to make her first series with episodes, according to a person familiar with the matter. To make the project, an adaptation of Edith Wharton’s novel Country Custom, Coppola had one of the most lucrative paydays of her career, that person said.
Vine Alternative Investment CEO Jim Moore, who runs a fund that has invested more than $ 1 billion in film and television since 2007, says he won’t miss the days when catering to actors and filmmakers was sometimes over the top. the interests of investors. “At the end of the day, Hollywood is a business,” he says.