Streaming Was Already Up 13% Last Weekend. Can Movie Theaters Survive COVID-19?

Hollywood was already bracing for a bad box office year before the novel coronavirus hit. Netflix and other streaming services have slowly begun to supplant the moviegoing experience for millions of people. And after studios, specifically Disney, packed their 2019 schedules with epic conclusions to major franchises that drew a broad group of both loyalists and casual fans — Avengers: Endgame, Star Wars: The Rise of Skywalker, Toy Story 4 — industry prognosticators expected to see last year’s global box office record followed by a significant drop in ticket sales in 2020.

“This was going to be the worst year in movie theater history before the coronavirus hit,” says Richard Greenfield, a media analyst at LightShed partners. “This is like pouring lighter fluid on the fire.”

The global box office took its first hit when the Chinese government shut down movie theaters on January 23, dashing the hopes for major international plays like Mulan and Fast and Furious 9 that rely heavily on China’s box office. As COVID-19 spread, other countries followed suit. Two weeks ago, producer Barbara Broccoli made what, in retrospect, was the portentous decision to move the next James Bond film, No Time To Die, from its April release date to November in hopes that the virus will be under control by the holiday season. In the following weeks, as movie theaters in major American cities like New York, Washington, D.C. and Los Angeles have begun to reduce admittance or close outright, studios have begun to scramble.

Most of the major movies set to premiere in the next few months — Mulan, Fast and Furious 9, A Quiet Place 2 and Black Widow, to name a few — have been delayed. Fast 9 pushed its release date an entire year ahead, while other postponed release dates remain unannounced. The city of Austin, Texas, cancelled SXSW, a major blow to independent filmmakers hoping to launch their careers on the festival circuit and to dozens of SXSW employees who were subsequently laid off. Other festivals, like Tribeca, have already followed suit, while the fate of Cannes, scheduled to take place in May, hangs in the balance.

COVID-19 throws movie theaters and studios into crisis mode

The coronavirus has wreaked havoc on the industry in ways that are visible to us — stars like Tom Hanks and Idris Elba have tested positive for the virus — and in ways that affect the livelihoods of many other people whose names we will never know as filming and production are delayed or suspended industry-wide.

This past weekend, the box office hit a 20-year low, down 60% from a year ago. Movie theaters fared better the weekend after September 11 than they are faring now. The National Association of Theater Owners (NATO) has asked the federal government for a bailout to support the 150,000 people who work at and for movie theaters during the pandemic.

Meanwhile, Nielsen found a 6% increase in television viewing across America over the weekend and a 13% increase in the use of streaming devices (including streaming sticks and smart TV apps). That firm’s research has found that during times when people are forced to stay in their homes — say, waiting for a hurricane to pass — they increase the amount of content they watch on TV or streaming by as much as 60%. TV-watching has increased in countries that were hit early and hard by coronavirus: South Korea saw a 17% increase in TV viewing, according to Nielsen, and Italy has seen a 12% increase in TV watching in the Lombardy region, the center of the Coronavirus outbreak, according to the Italian Joint Industry Committee, Auditel.

“As more Americans shift to a strategy of social distancing, we might continue to see increases in how they are connecting to all media,” says Peter Katsingris, SVP Audience Insights at Nielsen.

At this point, the future of the movie industry remains uncertain. The marketing machine took time to come to a stop. Servers in Hollywood’s Dolby Theater donned protective gloves to hand out hors d’oeuvres at the the American Mulan premiere just days before its release was delayed indefinitely. And on Saturday, Daniel Craig fulfilled his Saturday Night Live hosting gig even after the James Bond film was pushed back to the fall.

With the ground constantly shifting under everyone’s feet, studios are trying to rapidly calculate how to cut their losses. Greenfield swore in an interview on Monday afternoon that it simply did not make economic sense for big studios to ship films straight to streaming in an effort to recoup some profits. Later that day, Universal broke its theatrical windows and announced that it would soon offer Emma, The Hunt and The Invisible Man to stream for $19.99. These are unprecedented times. And while these aren’t Universal’s biggest franchises, they also aren’t little indies. Studios have struggled for years to lure moviegoers to theaters to see mid-budget movies. If other studios follow suit, this could certainly help cement their place on streaming services, where many have long suspected anything that doesn’t require surround sound and a giant screen for special effects is ultimately headed.

“To the extent that this lasts for months, do people get so in the habit of watching Netflix that they don’t want to go back to movie theaters?” asks Greenfield. “I think that’s a real risk that theater attendance never bounces back to the levels it once was.”

A history of ups, downs and existential uncertainty

This is not the first time the movie theater industry has faced what looked like end times. Historians and healthcare workers have been comparing the spread of COVID-19 to the Spanish Influenza that infected some 500 million people across the world in 1918, including 675,000 Americans. (It was far deadlier than COVID-19, but similar in that it was a respiratory illness that countries across the world struggled to contain.) Karina Longworth — host of You Must Remember This, an excellent podcast on Hollywood history — recently released an episode on how Hollywood responded to that pandemic in hopes of better understanding the state of the industry right now.

Then, as now, cities mandated the closing of movie theaters and other public places. Studios in Hollywood voluntarily shut down film production for three weeks as a result. When the pandemic passed, few movie theaters were able to reopen. The head of Paramount Pictures, Adolph Zukor, began to buy up movie theaters that had closed or were struggling to rebuild their businesses. His flunkies even threatened to build competing movie theaters across the street from picture houses that wouldn’t sell their businesses.

Paramount built a cadre of movie theaters, and other studios followed suit, playing exclusively their own content in each theater. The studios upped their profits by forcing the theaters they owned to show unpopular movies in exchange for the privilege to show more popular films. This lasted until 1948, when the Supreme Court broke up these monopolies and forced the studios to sell their movie theaters — pushing the industry into another depression. It wasn’t until the rise of the blockbuster movie in the 1970s that the industry became viable again.

But the era of studio-owned theaters may see another chapter. Late last year, the Trump administration announced that it wants to terminate those longstanding regulations for movie distribution and make it possible for studios to buy a major theater company. It’s likely that big Hollywood studios — and even streamers like Netflix, which acquired New York’s iconic Paris theater last year for “events” and showed its Oscar contender Marriage Story there — are eager for such a change, and even more so now that studios face an inevitable hit to their profits during social isolation. That would be bad news for smaller companies that consistently produce great, Oscar-worthy fare, like A24 (Moonlight) and Neon (Parasite). Under the proposed rule changes, their films could get increasingly elbowed out of movie theaters and onto streaming services.

Even if audiences do return to the theater after the coronavirus is contained, eager just to get out of the house and be among friends and strangers again, we may see a misleading initial surge in ticket sales. After months of being cooped up, people might show up in droves for the opening weekends of No Time to Die or Black Widow. But after studios run through the films they’ve already wrapped, it’s unclear what they’ll put on the screens.

“There is a pipeline of content in the can that is going to get released, but obviously that isn’t forever,” says Greenfield. Many shows and movies that were set to release this fall or early next year have seen their productions suspended as a social distancing measure. If the virus lingers for long enough, studios and networks will eventually run out of new shows to put on streaming services. “But when you look at Netflix’s and Amazon’s libraries, there’s a near-unlimited amount of content for people to burn through there in the coming months.”

Still, it’s smaller indie films that stand to suffer the most: They might not be able to continue to afford filming after a long suspension. Actors or directors who are committed to film both a superhero movie and a gritty indie in the next year — a typical combination these days — will likely be forced to prioritize and choose between the projects, and given the money at stake with the big studio fare, the indies may be sacrificed.

The answers may lie in how long we stay indoors — and the blow to personal finances

There is, alternatively, a universe in which the audiences don’t return to the movie theaters in droves the day they reopen. The reality is that we are going to stream more in the months to come. Streaming numbers are harder to come by: Netflix, Hulu and Apple all declined to comment for this story and don’t regularly release viewership numbers. But the 13% increase in streaming recorded by Nielsen may be the beginning of a new era: As more cities mandate that theaters and other public spaces close or even enforce lockdowns, those numbers are likely to go up.

Today, Netflix Party, a Google Chrome extension that allows groups of friends to enjoy movie night together without risking the spread of coronavirus, became available. If people get into the habit of watching movies this way, they may opt to use Netflix Party with friends rather than planning a trip to the movies. Teens are already ahead of the curve on this trend: they hang out together but apart on social media apps like TikTok and Instagram. Now, parents may start mirroring their Gen Z children’s behavior.

And it’s possible we will become accustomed to the convenience and lower cost of streaming content. Many workers will have taken an economic hit during the coronavirus outbreak, and spending $100 on tickets, popcorn and soda for the whole family to go to the movies is just less feasible than spending $119 on Amazon Prime for the entire year — with the added bonus of instant deliveries to boot.

Studios are eager to avoid that fate, which is why industry analysts believe that companies like Disney will resist putting their biggest budget films directly onto streaming platforms. “At movie theaters people pay per-head,” says Greenfield. “Trying to replicate that on an in-home basis is very challenging.” And if Mulan, for example, were to land on Disney+ instead of in movie theaters, audiences might come to expect sprawling action flicks at home instead of feeling compelled to watch battle scenes on the big screen.

But that calculus may change the longer we stay indoors. New York Governor Andrew Cuomo said Tuesday that the virus will likely reach its peak in that state on May 1. It will take even longer to peak in other states that saw the virus arrive later. Every industry, including Hollywood, is in a state of uncertainty, and nobody knows what comes next — not even the analysts like Katsingris at Nielsen, who are experts at recording and predicting trends but have little precedent to turn to in this moment of confusion. In Katsingris’ words: “It has upended the media industry.”

Correction, March 19

The original version of this story misstated Netflix Party’s origin. It was created by independent developers, not Netflix.