Flip or Flop?
Talent Management as a Point of Differentiation
Southern California is no stranger to drama. The Great Recession of 2008, for example, inspired the reality series Flip or Flop, a story of a fabulously good-looking couple trying to make their fortune fixing up tired, old homes. Fast forward 13 years, and there is a similar reboot playing out, only this time the reality portrayed is Hollywood itself.
The Flip and the Flop
The eternally-young Jason Kilar provided Hollywood with its own homegrown shocker of a cliffhanger when, at the end of 2020, WarnerMedia announced that all of its 2021 movie releases would debut the same day on HBO Max and in theaters (i.e., “day-and-date”). This was the “flip” if you will.
Creatives were particularly aghast. Christopher Nolan commented, “We went to bed thinking we worked for the best studio in the world and woke up to the worst streaming service in the world.” Others such as pundit Scott Galloway, however, praised Kilar for the “gangster” move that propelled WarnerMedia into the presently attractive world of subscription revenue. Many felt this move would be permanent.
Behind the harsh comments from creatives was the well-known fact that Warner had long been regarded as a “talent friendly studio,” as opposed to Disney which would make filmmakers money at the expense of artistic freedom.
For example, Warner’s Joker (with a very Marvel-like $1B+ global box office) didn’t even have a specific consumer product offer, something that would be unheard of at Disney. Differentiating itself through creative freedom, Warner was practicing the “hit it where they ain’t” strategy and it was widely appreciated in Hollywood.
Ultimately It Is about Dollars and Cents
In the digital era, WarnerMedia’s HBO Max has been playing catch-up to its older siblings—Netflix, Amazon Prime, Hulu (Kilar’s former home), and now the mouse across the street, Disney.
Many of the comments revolve around the question of whether streaming and theatrical can coexist. The relative success of Godzilla vs. Kong has been heralded as the biggest hit of the pandemic era, though there is little mention of what was the expectation when the film was greenlit a lifetime ago.
Comps rule the theatrical world, and a decent comp for a sequel is, of course, any of its prequels, in this case Godzilla: King of the Monsters, which garnered $50M in its opening weekend in 2019. Godzilla vs. Kong made $49M in its 5-day opening weekend, a great first step toward industry recovery.
In addition to box office receipts, Godzilla vs. Kong did well on streaming via HBO Max. Discovery platform Reelgood, just one among many sources striving to be a source of truth for the streaming industry, states that the movie gained its biggest audience to date with an “8.1% of Weekend Streams.”
Unfortunately, measuring streaming’s role in post-pandemic movie distribution is problematic, as there is no consensus on which company’s metrics are indeed the “one source of truth.” Until this is settled, old-fashioned box office dollars will rule the day.
“New Normal” Remains Elusive
To be fair, Kilar did state after the December 2020 bombshell that WarnerMedia would watch the market for the next 6-10 months and “then check back in.” If the March 2021 deal with Cineworld (with a 45-day U.S. theatrical window versus 70-90 days) and the success of Godzilla vs. Kong constitute “check-ins,” it seems that theatrical is here to stay, even as HBO Max and other streaming services continue to ascend.
As of this writing, California plans to fully open theaters on June 15, whereas other states, notably New York, have refused to expand theater openings from 25% to 50% capacity. The dust has yet to settle on what the “new normal” looks like, so we anticipate further flips and flops as WarnerMedia and other studios grapple with theatrical vs. streaming issues. Thus, we are best advised to hold off in determining a “new normal” and, instead, to keep a close eye on the market as other stakeholders make their move.
Post-script: As if on cue, it was announced yesterday that the ArcLight and Pacific Theatre cinemas in California will not reopen, including the Cinerama Dome on Sunset Boulevard—an important historical landmark and “critical touchpoint” for the Los Angeles community. There will be many such announcements in the year to come, demonstrating how far we have to go before we know what the “new normal” will actually look like.
Stick with TDG to Stay in front of the Curve.