Although the theatrical distribution model of new films has been threatened for years by the success of streaming services, the effects of COVID-19 has accelerated studios’ pivot towards streaming. In 2020, many films intended to earn substantial box office receipts ended up serving as gateways to a companion streaming service.

Studios have been forced to weigh their options when it comes to recouping profits spent on large, mass market films. Shortly after WarnerMedia’s announcement that Wonder Woman 1984 would be headed for a simultaneous release in theaters and a 30-day availability on HBO Max this December, it doubled down on the strategy by announcing the same model for its entire 2021 Warner Brothers film slate. With a whopping total of over $1 billion in production costs, WarnerMedia’s 2021 film slate includes highly anticipated projects such as Dune, Matrix 4, Suicide Squad 2, Godzilla vs. Kong, In the Heights, and The Sopranos prequel film The Many Saints of Newark, 17 films in all.

WarnerMedia is making significant shifts regarding distribution of movie content, as the further shuttering of theaters and the associated low profits make exclusive theatrical strategies very challenging. A simultaneous release strategy remains the best option to deliver films to the broadest possible audience while still keeping the window open for future theatrical releases. Consumers now narrowly prefer watching new release on online video services that they already subscribe to rather than theatrically, so WarnerMedia’s strategy likely will supplement the diverging consumer viewing preferences.

WarnerMedia is gambling that audiences will to stick with HBO Max after the 30-day window passes for each film. But given the wide range of their lineup, it should be successful in generating continued interest in HBO Max. The revenue generated from the $14.99/month price tag for HBO Max pales in comparison to what would be made for a blockbuster film in a traditional theatrical window during pre-COVID times. To recoup lost dollars, WarnerMedia needs to grow a large, loyal audience for HBO Max and find out if the service is a place for first-run theatrical titles regardless of when theaters return.

With this announcement WarnerMedia has put pressure on other studios to develop strategies to distribute their 2021 film lineups. Competitors like Netflix, Amazon, Disney, and Paramount will need to decide to either release their 2021 films on their in-house streaming services or on SVOD markets.

Movie theater chains are also being forced to adapt in order to survive. Cinemark said in a statement that the booking of future Warner Brothers films will be determined on a film-by-film basis, and AMC CEO Adam Aron condemned WarnerMedia in a statement that “WarnerMedia intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidize its HBO Max start up.” While Aron stated that AMC would be in negotiations with Warner Media about exclusivity, theaters hold very few cards in the debate, particularly if studios like Disney choose to pursue similar distribution patterns as WarnerMedia.

For a deeper look at the OTT video space, please check out the Parks Associates’ OTT Video Market Tracker.

For more information about Parks Associates research, visit http://www.parksassociates.com or call 972-490-1113.