The future is already here – it’s just not evenly distributed.
The Good, The Bad and The Ugly
The cinema, the theatre, the video on demand. To the more sensitive exhibitors: don’t take it bad if writing the headline for this post “The Good, The Bad and The Ugly” came to mind. My attention was mainly focused on The Good, the cinema we all love and the “The Bad” role that the video on demand plays in all of this, especially the PremiumVOD as in the last few days there was a feud between NBCUniversal and AMC, and some other international circuit.
Another title for the post could have been The Cinema, The Movie Theater and The Living Room but then Michele would have asked, rightfully, the rights on a suggestion that comes from a spot on title of a research that is 10 years old now and that from the very beginning it questions, or better it questions the audience, not only on the dynamics of the different sectors it refers to, but it gives its best when it analyzes the fruition of audiovisual content that today is more contiguous than ever.
I write this article with the goal to sum up what’s happening and to try to understand what’s going to happen in the future. Something that some days ago on social media, Robert, a contributor who used to write the Box Office analysis on CineGuru, invited not to do.
Still I think that we need some speculation about the future. Because on the eve of the indications about the rules for the re-opening, that based on the words of Francesco Rutelli, should come with the David di Donatello ceremony and with the start of the so called Phase 2 for our country, that don’t mention Cinemas in the anticipations of the upcoming phases, from which Bars and Hairdressers take a little comfort.
The production – distribution – financial exercise chain has been stationary for the last two months and if it’s true that this chain is connected and dependent on its natural outlet, the movie theaters, it’s also true that it’s integrated in a much bigger global chain, that it can’t remain stationary for much too long and that already experimented the PremiumVOD outlet (or TransactionalVOD) with an outcome that we all know and that we purposely ignore.
When confronting the results of Trolls 2 PVOD three week release in the US with the results of its predecessor we know we’re analyzing datas that are not consistent. And in evaluating these results let’s not forget that being released in that format, the movie burned, even if only partially because EST and VOD will be used and also the television and S/AVOD rights, its use for other outlets.
I also think that highlighting the fact that a result is not comparable with another, we’re forgetting too quickly that we have 100 years of habits, marketing and event planning and on the other part a global launch of a content with a premium price through a new outlet that wasn’t exactly comparable to the traditional theatrical launch.
A technology that is living a forced acceleration because in the next few months it will be necessary and not a choice in order to work, study, shopping, eating pizza in our favorite restaurant and satisfying a lot of our needs.
The datas are not comparable but they give us a starting point and I’m not so sure that after a year and after hundreds millions spent on promotion globally the numbers will not change, also because we must not forget that from cinemas the distributions take the 50% (a price they’ve been fighting for for some time) and 80% from digital and the results, at the end, are on the net and not on the gross amount.
At the beginning of this crisis I wrote that nothing will be the same. That Trolls 2 release was a singularity. That we are experiencing the acceleration of an evolution that would have produced something I expected in 10 years time, sadly without that slow process that would make possibile to adjust without too much trauma for those who work and live in this industry.
Going from the starting to the finish point directly is costly and it’s going to cost a lot to those who’ll be affected by this transformation.
I wrote it, but just like when we were watching the virus taking over China and feeling stupidly safe, I didn’t metabolize it, I didn’t think through the potential effects. I just said, a quote that a lot reported:
“The granted consideration is that the more this period lasts, the more it could be difficult to go back to normal, it should make us use the time we have to think about a new trajectory to a new balance. The great crisis have a unique silver lining, they force us to concentrate on the essential, to preserve the sparks that could reignite the machines that are stopping everywhere”.
But I stopped there. I didn’t take this consideration to its extreme consequences, making those speculations that its time to make, because we need to face reality and in doing so we should be more pessimistic than necessary, to make a plan of action.
Let’s start by saying that it’s a simulation in which we all lose. Everyone working in the industry, just like the others industries, they lose. Probably more than that 10% that the latest issue of The Economist reported as catastrophic. I say this because in the last few days I heard a lot of people thinking with the goal to maximize the results without realizing that the maximizing part is bound to unlikely scenarios.
We must accept the fact that we need to start from the most realistic scenario and minimize the losses, as an entire industry (inserted in a much bigger collectivity that sadly has bigger issues), and also as single corporates and individuals.
The most likely scenario
All the analysis and the things written until now are based on dialogues and confrontations with people who work in the industry and tons of articles, mostly international articles.
Among those I found the ones published on Medium by Tomas Pueyo extremely meaningful.
He’s an engineer/entrepreneur of the Silicon Valley, who has worked on various apps, initiatives and an e-learning platform that seems to do well for him, a person who has not a specific formation, but who’s good with datas.
His articles had millions of views, have been translated in all the languages (I’ll link the English version, but you can also find the Italian version) and he was one for the first to claim that all of the countries should have imposed a lockdown to prevent an unsustainable spread of the virus and contagions.
His second article is even more important than the first one because it anticipates the situation in which Italy, Europe and the eastern world is now: the slackening on the lockdown and the passage to a situation of a different emergency. From this article, called The Hammer and the Dance, I took the image below that I already published and that should make you understand that phase 2 is going to be a succession of “open and close”, in which we’ll alternate – country by country and region by region, municipality by municipality – slackening phases of restrictions necessary to other lockdown phases to contain a contagion of which, sadly, we see the effects 10-15 days later.
The problem with this graphic, at least for those who don’t read it carefully, is that there’s a risk of underestimating the “lenght” of the dance phase. It could be considered like two months of quarantine while the dance phase, that could lead to the necessity of much more consistent hammering, maybe just locally for the countries able to handle it, in case of a risk of a new explosion of contagions.
The Phase 2, the dancing one, based on what we know now and what we can safely hope, will last not less than 12-18 months, more probably 24. It’s true that maybe we could have a vaccine before, someone thinks it could be ready in September and circulating this fall, but just like I said earlier we need to be pessimistic, ready for the most likely scenario and not for what we hope will happen. And the most likely scenario is that it will take longer.
Like I said in another article, phase 2 is not the new normal, but a constant and stable different emergency.
If we take a look at what’s happening around the world, were there are countries ahead of us in the handling of the dance (and this other article from Thomas explains very well the differences from country to country and on the graphic you can see our position 15 days ago or so), we’ll see that what was predicted is happening.
After the slackening of the lockdown, with precautionary measures that are similar but with a different capacity to give tampons and tests and the tracking methods in different countries, follow up new and necessary containment measures.
We all read that China opens and closes its cinemas, but also the gyms and the swimming pools. Just when France and Germany (countries in which the exhibitors association announced protocols for the reopening) announced that they have to make steps back regarding the partial openings, Spain announces in which phase they’ll reopen cinemas (at least they talk about it), with the setting of an important quota decreasing but being evaluated in a situation of evolution that, meanwhile, has already worsened.
This dance, that will be more shrinking in the countries, as Italy, in which we could have problems with the numbers of tests and the use of the tracking as we think about the controversy raised by the app, is the scenario in which the reopening of the various activities, including movie theaters will have to take place.
But the movie theaters, when they will be able to open, will have to face another difficult issue: not being a first necessity for people. The audience will be inevitably more cautious in evaluating the alternatives costs/benefits of anything and in this, we must not be delusional, cinema could star in disadvantage, paying an even higher cost compared to other free time hobbies just as risky.
Sadly for this industry, it’s more likely that people will take risks meeting others for dinner or things like that, rather than planning to go to the movies. Even though there will be a much higher control on the numbers of people in the movie theater and on in managing the social distance.
The datas on countries in which cinemas have reopened just say this. In South Korea, a country that proved to be one of the most efficient when it came to containment measures thanks to tests and tracking, and a country that reached 0 new cases, cinemas are empty. In Sweden, when there wasn’t a lockdown, the consumption of travels and entertainment decreased just as much as in Denmark, which imposed stricter rules, by 80%.
Closing this paragraph on a positive note we can not only use the positive and enthusiastic messages that we share with Christopher Nolan about the movie theater experience, but also we can think about a research which datas have been recently revealed in the United States, a research that indicates that 50% of Americans are willing to go back to movie theaters after a month since the reopening in their State and respecting the rules imposed by the government.
As there are people who can’t give up their hairdressers, those who can’t give up a meeting with friends, the restaurant, there are also people who love the cinematic experience, watching a movie in the theater, people who can’t wait to go back there and that, when they will be reassured, will certainly will.
Let’s just not talk about the movie theaters reopening, but also about the cinema starting again.
Dancing With Myself
If you came here reading everything or if you just jumped to the last paragraph, I think it will be useful to do a quick recap.
The first point is that no matter the results of these first titles released, the PremiumVOD exists and it proved to be, with the right conditions, a valid alternative to the theatrical release.
The second point is that the next months, maybe 24 months, will be “dance months” and they will be globally, nationally and locally. The activities could open and close and the containment measures will be lessened or worsened suddenly.
This dance will be effective based on how we’ll behave individually and on how the authorities will be able to make tests and tracking available, but it’s something that the cinema industry will just have to accept. We are not certain if movie theaters will reopen in the next few months, even partially, or if they’ll stay closed.
The industry can do something about its effectiveness and this point is important, other than the economic interests of this or that category, but in the research of the best result for the industry, reminding us that the release of a movie is the final passage of a long launch process that lasts months and that through the communication it elevates the product.
Daily, from the point of view of those who work at the launch and use of a movie, but also the creation of the value of the life of a movie (and in the last few years also of tv series) goes through four and important phases: the one before the release, in which you create the value for a potential economic return. The one in which you release the movie in the main window. The third in which the movie is released on other outlets and the final one when a movie ends up in a library of content.
Regardless of cinema, as television was the same thing for decades, the value of an audiovisual content returns to those that produced it from the first screening or the first tv passage, that has a higher value compared to the release on other outlets later.
But other than a few exceptions, the first passage is pivotal and has influence in creating a value for the following passages.
From this point of view, cinema, but also the new television represented by SVOD platform, lives by a calendar, which is called (as in other industries) “competitive” by the people who work in the industry, that indicates the release dates in which the product will be released on the market for the first time and then on the other outlets.
The communication, the promotional activities, the events, the media campaign are based on this calendar, all activities that create value and create expectation, the hype, the critical mass of attention needed to capture the attention of an always distracted audience, that, like never before, has a lot of library of contents to choose from.
Those are the rules of the famous attention economy – even more so for the generation that is used to go through timelines on social media, where few contents are good enough to become viral, in which content becomes old and obsolete in a few hours and that made a boomerang effect out of Netflix battle horse: the binge watching.
The last few years taught us that even those streaming platforms and broadcast networks that work for decades on promoting themselves, need to get out of their comfort zone, to preserve their audience and reach people.
First Netflix and then Amazon started to launch productions with campaigns that are comparable, with even higher budgets than the main theatrical releases.
Some movies, like Roma and The Irishman, are evidently communication moves to demonstrate that Netflix plays the same game as cinema and that “blockbuster” also refers to the numbers and success on platforms.
The recent launch of Trolls 2, the only title which results on PremiumVOD created a confrontation within the industry, was handled as a real theatrical launch (the campaign was in its main phase and the destination was changed midway through, from cinemas to platforms), in contrast to other movies that went directly to streaming platforms with a lack of the necessary attention.
We need to launch movies and we need to pay attention to the phases that help develop their value. Because before thinking about this or that window, we need to pay attention to the preservation of that value that in those windows gets monetized.
It should be clear to everyone that there is a great difference between the value of a content that you buy because you desire it and you invest in it and the value of a content that you have for free (or almost free) on a SVOD platform or completely free on AVOD or on TV.
It’s the same difference between a dinner in a fancy and luxury restaurant and a dinner in an all you can eat. Not only the value of the experience is lower, but also how much is relegated to the suppliers.
What the industry can’t lose is the value of that first viewing, at least for the titles that deserve it and that, launched in the right way, can attract the interest of the audience and make them bet on the price of a ticket for a viewing based on expectations, desire and dreams.
The existence of a window reserved to cinema or platforms is not fundamental when the event, the bet, the value of the expectation is higher as the audience starts to enjoy that content.
In the economy of attention and of the overabundance of contents, movies and tv shows must be launched with great energy and investments or they’ll be forgotten as soon as they’re released in cinemas or on platforms.
Because, just as cinemas are few compared to the titles being released, also the relevant positions on platforms are fewer than needed to value a product being released.
It’s worse for the platforms, like YouTube, where an algorithm defines what will be highlighted and what will be forgotten before it’s even released.
Thinking about the cinema starting again, it’s important that distributions start to define release dates. All of this must start again, even thought in the next months we’ll have fewer contents because productions were shut down, the movies must be released, in part because the investments of those who produced need to start make profit and in part because we can’t wait months or years to release stories that will not be interesting or obsolete or relevant for the time they’re being released.
Deciding a releasing date means being aware that when that date arrives, movie theaters could still be closed in some regions or territories, and that’s why I think that those fights and discussions by theater chains are useless and only a way to take a position for future negotiations.
During the dance phase the complementarity between movie theaters and PremiumVOD is necessary and refusing it or closing cinemas and not being prepared for the return of the audience (that at the beginning it will be a small amount) is a way to let the distributors have the only option to dance by themselves (for those that already have their platforms or are about to) or with platforms that right now are way easier.
The risk, as already happened and how it’s normal that it will happen, is that more and more movies go straight to platforms without even considering the opportunity, even if it’s small, to be released in cinemas or without even being launched, simply because not releasing them already was too expensive.
There’s a huge difference between letting the movies being released, without care and attention, letting the distracted platforms take care of their value and starting to launch them again to maximize the result on any outlet available at the moment. We need to give cinema a sure and defined calendar, on which distributors can plan and invest. Without the certainty of the release the industry could never start again and it could lead itself to a vicious circle.
In this way all the distributors and the chain could develop the marketing and commercial skills necessary to manage not only the release in theaters, but also to optimize the use of platforms, that as we already said, are not automatic as it’s not automatic to have a successful app on a digital store.
I don’t wanna get into the economics of the various operators and it could be that the differences in the costs structure from the higher part of the chain, that still can make a profit from a simple ticket sold, while the exhibitor reopens and has fixed costs and has to sell a certain number of tickets to repay that, makes it impossible to talk about this, but I started with the premise that we’d all have losses. But if the routine of the theatrical release disappears… it won’t come back ever again.
The issue is that not giving ourselves reopening goals will make the situation unbearable and more and more movies will be simply gone, without being used as an opportunity to set an example and to know how to release new movies.
Initiatives with arenas and drive ins can help people get closer to the idea of going back to cinemas and could help the economics of it, but they don’t solve the problem and they don’t reach the goal: making the chain start again.
I think that exhibitors should ask loudly for the chance to reopen cinemas, with safe rules that will be decided by authorities and being free to open when they’ll want to, and to have a clear release calendar, with the distributors willing to guarantee the releases, having also the opportunity to simultaneously release the movies on platforms.
Because even with those opportunities, regardless of the performance of a single title, it is not certain that we maximized the result, but the thing becomes unbearable with the risk of launching a movie and not being released.
All of this could be possible in all of this dance period, during which the industry will have to face a period with less content (the titles intended for 2020 are already released or will be released between 2020 and 2021), that a this point could find the space it will need in theaters that during these months will be able to contain fewer people, but without seeing a significant decrease in the average capability.
The return of cinema should star from the respect and the communication to the audience of all the rules declared to reassure people (here a list of di AGIS for what’s proposed for example by the German exhibitors association), but mostly it should provide a trial period – better with library movies today that with the discount on new releases tomorrow, because those who value cinema will go back to cinemas – in which correct rules should be made for the return of people in theaters.
In this period the opening of virtual theaters should find a sense and should give the basis for the future, virtual theaters destined to handle the releases simultaneously in cinemas and on platforms. About this though, I don’t think that some of the models proposed these days will work, ideas that seem not to understand that you need to follow the rules of a certain outlet when it comes to selling a product and not giving new ones. I’ll talk about this subject later, as it’s not a secret I’m working on a project that goes in this direction.
The complementarity between cinema and digital distribution is something that has been discussed over the last decade and clearly the industry sees it as a potential menace to its existence and the rest of the chain as a sword hanging on the potential return of money that, until today, seemed granted only by the theatrical release.
But today is not a question of preferring the old way to the new, unsure of the effect the new school will have on the return, but it’s a question of being aware that the new way, at the moment, could be the only way to guarantee a life to the traditional outlets for the content.
I think that we’ll have only two moments to use the audiovisual product and that the granted valorizing of the current windows will be obtained by different prices applied to different services available at the moment.
For example, during the launch of Trolls 2, a lot of users commented on the fact that the price was too high to have it only for 48 hours, but it wasn’t too high to own it forever.
Here are the two ways to use the movie as of today: the window “cinema/premium VOD” and the following “EST/Physic release”, it all could be recapped in the same way simply providing a different price for the different use of rights, PremiumVOD and PremiumEST.
Then we could have VOD/EST formulas as we have now (where the physical product could have a value to a collector and could find its market) even though I believe we could go easily towards the house of a library with SVOD/AVOD options.
I believe in this evolution so much that a long time ago I wrote that SVOD platforms could use a Premium Price option, the only option to guarantee a return on the investment necessary to make big productions, for example for the release of much anticipated titles. The movie theaters could for example be a part of this premium experience, so much that I believe that sooner or later platforms like Netflix will have the goal to have their flagship cinemas, just like Amazon is opening book stores and shops.
In this scenario the movie theaters that could meet the audience needs and that found the resources to handle this transformation (something in which a contribution from the State could make sense) will find the way to future profitability.
The movie theater is another screen connected online. It has to be the most beautiful, the most comfortable, the biggest, the loudest and it has to offer an engaging alternative to a simple night out. Its future is based on the capacity to create a unique and unrepeatable experience that cannot be created at home and a collective one, a viewing of an audiovisual product that could not only be a movie, but also an episode of a tv show or a live event. The movie theaters that thought that windows were there to defend them… lost the war at the beginning, not only the great campaign against covid-19. It was an unstoppable trend, now it became urgent and also necessary.