By Erich Schwartzel
The nation's movie theaters are running out of movies. Some are
turning to an unlikely source for more: Netflix Inc.
With major Hollywood studios paring back their release calendars
-- or shipping movies to their own streaming services -- theater
chains are expecting to be short of programming for at least three
years. That's one reason several chains premiered the Netflix
zombie-heist movie "Army of the Dead" Friday, one week before it
becomes available on the service.
The unlikely alliance between movie houses and the streaming
giant is another sign of the ways Covid-19 has upended the
decades-old dynamic between Hollywood entertainers and the theaters
that show their movies. Pandemic-related production shutdowns and a
strategic shift away from the big screen have resulted in a
programming crunch likely to last years, leaving theaters with no
choice but to make deals with Netflix and other streaming services
that allow them to play movies at home soon after their big-screen
premieres.
Theaters are now compromising on terms they once considered
sacrosanct, especially the length of time studios must wait before
making movies available to watch at home.
"Pre-Covid there were these rules," said one theater executive.
"Post-Covid there's a whole new ballgame. We can negotiate anything
now."
Most in the theatrical industry have viewed Netflix as a mortal
threat, not a business partner. Before the pandemic, major cinema
chains refused to budge on an exclusive theatrical "window" of
about 90 days, designed to avoid giving viewers a reason to stay
home and wait to watch a movie online. When Netflix insisted on a
drastically reduced window for its original productions, something
it says caters to consumer demand to watch movies anywhere, the big
chains balked. As a result, the movies Netflix wanted to release in
theaters -- often so they would be eligible for awards such as the
Oscars -- played in only a handful of circuits willing to
accommodate its terms.
But theater executives and Hollywood agents now say they expect
more deals with the streaming giant as U.S. cinemas emerge from
pandemic shutdowns that decimated business and shifted the focus of
studios and audiences alike to at-home services. One theater
executive projected his chain would have 25% fewer titles in 2022,
2023 and 2024 than in pre-pandemic years -- a forecast that drove
his decision to book "Army of the Dead."
A pileup of delayed 2020 releases like "Black Widow" and "Top
Gun: Maverick" fill the calendar for the next year, but after that,
studios are expected to opt for more of their films to skip the
theater and go to streaming. Now every major studio but Sony
Pictures is attached to a streamer.
The nation's No. 3 exhibitor, Cinemark Holdings Inc., along with
a handful of small and midsize operators, will show "Army of the
Dead" on a total of 600 screens before it premieres on Netflix. The
chain's chief rivals, AMC Entertainment Holdings Inc. and Regal
Entertainment Group, are not showing the film. Netflix and Cinemark
said it would be the first of many similar deals.
For Netflix, the theatrical runs use some of its biggest movies
as a marketing tool that burnishes the service's claim that its
films are on par with traditional studio offerings. And if the
service keeps the strategy going, it could help it secure deals
with directors who have avoided working with the streamer because
they want a guaranteed theatrical release.
The changing relations between Netflix and theater chains come
as other Hollywood studios incorporate streaming into their release
strategies.
For the rest of this year, AT&T Inc.'s Warner Bros. will
release its movies on sister streaming service HBO Max on the same
day they hit theaters. Disney+ carries certain movies also released
in theaters for $30, on top of a monthly subscription fee.
Paramount+ is putting some of the namesake studio's movies on the
service 30 to 45 days after they open in theaters. Comcast Corp.'s
Universal Pictures and AMC cut a deal that shortens the theater
chain's exclusivity to 17 days.
When theaters closed due to the pandemic, studios' streaming
services became ready homes for some releases, from Warner Bros.'
"Wonder Woman 1984" to Walt Disney Co.'s "Soul." During the
pandemic, ViacomCBS Inc.'s Paramount Pictures sold more than half a
dozen movies on its 2020 and 2021 release calendar to Hulu, Netflix
and Amazon.com Inc.
The plethora of at-home options could mean some moviegoers never
return.
"Less supply from the studios will make it more challenging for
box office to return to prior peak levels," said an analyst report
from MoffettNathanson earlier this month. The Netflix-Cinemark deal
"should be able to at least partially offset the decline of
product."
Netflix theatrical releases have come in fits and starts, and
usually with plenty of charged emotions. When it released its
Oscar-nominated drama "The Irishman" in some theaters in the fall
of 2019, no major chain would show the film, despite protracted
negotiations. The head of the theaters' lobbying group called
Netflix's decision to distribute the movie on a fraction of the
nation's screens with a 26-day theatrical window a "disgrace."
As recently as September of 2019, Cinemark Chief Executive Mark
Zoradi said his chain wouldn't give Netflix any special
treatment.
"We can't have a different deal for Netflix than we have for all
the other major studios," he said at an investor conference.
Flash forward to a conference call Cinemark held with Wall
Street analysts earlier this month, on which Mr. Zoradi touted the
one-week theatrical window he had secured for Netflix's "Army of
the Dead." The company, the CEO boasted, was "thrilled to provide
our moviegoers the chance to see this movie in our theaters before
it's available to stream."
To get "Army of the Dead" into theaters on such an unusual
timeline, Netflix agreed to take a smaller cut of ticket sales than
major studios typically receive, according to an exhibition
executive whose company is showing the film. Before the pandemic, a
studio like Disney could secure up to 65% of ticket sales on its
biggest releases.
The movie is one of Netflix's marquee releases this year -- a
gory zombie thriller directed by Zack Snyder, best known for his DC
Comics adaptations "Justice League" and "Batman v Superman." "Army
of the Dead" follows a ragtag crew of mercenaries who brave a
zombie-filled Las Vegas to pull off a casino heist.
Netflix, however, hasn't been spending as much to market "Army
of the Dead" as a major studio might on a big-budget film, and
exhibition insiders don't expect it to gross more than a few
million dollars in the week before it appears on the service. As it
has with past releases, Netflix has asked exhibitors not to release
box-office figures.
Yet the film comes as die-hard moviegoers face a dearth of
options. That's what led Anthony Papetti to buy a $13 ticket to see
"Army of the Dead" on Thursday at his local Cinemark multiplex in
Hazlet, N.J.
"I need that two hours of escapism," said the 27-year-old, who
works for an auto-transportation company. "Just being able to sit
down with my overpriced popcorn and feel that normalcy."
Before the pandemic, he said, he saw about two movies a week, a
habit he has maintained at home thanks to three streaming-service
subscriptions, including Netflix. But he's grown tired of watching
a movie while his dog barks and the dishwasher runs -- and finds he
enjoys even a mediocre film more when he has the darkened theater
and big screen to sweep him away.
"I'm getting a little exhausted of my attitude toward a movie
being dictated by the environment," he said.
Write to Erich Schwartzel at erich.schwartzel@wsj.com
(END) Dow Jones Newswires
May 15, 2021 00:15 ET (04:15 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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