Long-Term COVID-19 Impact on Theaters Unknown, as Studios Turn to Streaming

COVID-19’s closure of theaters in 2020 disrupted Hollywood’s movie release schedule, and with many theater release windows gone for now due to the pandemic, “content producers have the opportunity to go try things in a new way without crashing the system,” said Interpret Vice President Brett Sappington on a Tuesday Brightcove webinar.

With Universal, Warner and Disney capable of monetizing movies through company-owned streaming services, that leaves the question, “What do theaters look like?” post-COVID-19, said Sappington: “Do they come back and at what scale?” He offered the possibility of a distributor buying a movie chain to control distribution, saying, “There will be a lot of movie theaters for sale.” The market for theaters will “erode significantly, more than we want to talk about,” said Brightcove analyst Jim O’Neill.

Studios have been trying to control theatrical outlets for some time, said Allan McLennan, CEO, Padem Media Group. “Now, being able to get in and actually have a little bit of leverage to keep themselves alive is very key.” A topic that hasn’t gotten much coverage is how talent will be paid under a new business model when the old one was based on filling theater seats, he said. Actors are paid upfront and share in theater receipts, he noted. “That’s changing,” which puts pressure on studios to keep productions in the pipeline, he said.

AT&T is putting its completed 2021 film slate out through its HBO Max service in a one-month streaming exclusive that’s simultaneous with theater releases, it said last week (see 2012030053). “It’s what’s being produced right now that’s going to be a gating factor,” said McLennan. “How that string of content is going to be playing out in the next nine-12 months” will reveal the impact on theaters, he said.

On how the live sports world is navigating the accelerated shift to streaming, Brian Carroll, Ladies Professional Golf Association senior vice president-global media distribution, said streamers are “nibbling” into live sports content under different approaches including nonexclusive deals, documentaries, previews and highlights. Several major sports rights deals are coming up for negotiation in the next few years, he noted, which is likely to change models. The LPGA hopes to make more content available over streaming in the next year or two, he said.

The over-the-top video space is getting crowded, especially with legacy media companies pushing out products, noted Carroll. Content is a big part of what services offer, but a “unique value proposition is just as important,” he said. He credited NBCUniversal with offering different tiers of Peacock to give viewers choice from ad-supported through premium. Live sports differentiates Peacock from some other streaming services, he said, but consumers are likely confused with the onslaught of offerings presented to them and knowing exactly what they need. The more services can market their value, “the better off they’re going to be.”

The proliferation of OTT services could lead to availability of a la carte offerings, said Sappington, though it’s not clear how they would be packaged. Whether customers would be able to pick and choose their own packages “is a matter of who’s the bundler,” whether services or channels are bundled and whether that happens outside of pay TV. Bundling could be about partnerships, he said. “All of these partnerships are going to be rethought over the next few years.”

Live sports suffered as schedules were disrupted by the pandemic. Sports views averaged 41% less than a year ago in the streaming world, said O’Neill, saying it was the only streaming category down over the past seven months. On broadcast TV, NBA Finals viewership was down 61% from 2019 and PGA golf events were down 50%. The LPGA had a 20% rise over “relatively low” 2019 numbers, and Carroll believes live sports ratings are going to “bounce back” in 2021.

There will always be a preference for broadcast networks and cable in the live sports world, said Carroll. The popularity of live events can’t be replaced, but he thinks it's “a matter of when” streamers jump in and buy exclusive rights. He expects more consolidation among streamers and networks: "I don’t think all these OTT platforms can survive for a long time without some of that.” The pandemic forced a lot more remote production of live sporting events, a trend Carroll believes will continue beyond the pandemic, except for tentpole events. “Everybody’s experimenting and looking at what can be done in the future.”