The following article is part of a series examining how the film industry is responding to the coronavirus outbreak. An article on theater closures and production delays is available here, while an article on debt and liquidity concerns can be read here.
The breakdown of traditional theatrical distribution amid the coronavirus pandemic is eroding the typical box office release window, though most industry analysts expect it to come back.
All the major U.S. movie theater chains have shut down, leading studios to make some films available for rent through home entertainment channels when they were scheduled to hit theaters. Analysts do not expect this to a be long-term trend, however, since studios are still afraid of forfeiting primary theatrical exhibition revenues.
Among major fast-tracked releases, Universal Pictures is making DreamWorks Animation's "Trolls World Tour" available for rent on-demand on its original theatrical release date. The Walt Disney Co. is making its animated feature "Onward," which hit theaters on March 6, available for digital sale on March 20. Warner Bros. and Lions Gate are also speeding up the digital release of certain films.
In general, analysts do not anticipate most marquee movies going on-demand first even if there is a protracted theatrical hiatus due to the threat of COVID-19. However, if additional pressure is placed on studios to create some revenue in the interim, things could change.
Jeff Bock, a box office analyst at Exhibitor Relations Co., said "Trolls" "might be the perfect film" to test the on-demand market, considering its audience is children.
"Trolls World Tour” is releasing early through home entertainment
Bock expects "Trolls" to perform well, though he thinks Universal might be guarded when it comes to sharing numbers, as theater chains might not want to see that rental grosses could rival theater expectations.
Opening weekend projections were in the $17 million to $27 million range in the U.S., according to boxofficepro.com.
Shawn Robbins, an analyst at boxofficepro.com, agreed, noting a title like "Trolls" offers baby-sitting benefits to parents who are isolated and working from home as a result of the government’s social-distancing recommendations. Robbins noted that Universal made a different decision with its tentpole film "F9," the latest installment in the "Fast & Furious" franchise, moving its scheduled May 23 U.S. debut to April 2, 2021.
Universal has also made films that had been in their theatrical run available for rent via home entertainment platforms. For instance, thriller "The Hunt," science-fiction entry "The Invisible Man" and period piece "Emma" are available for a 48-hour rental period at a suggested retail price of $19.99 in the U.S. and for roughly the same price in international markets.
Wedbush analyst Michael Pachter said those films, in particular, have a certain appeal for people stuck inside at present.
"'Trolls,' you have five kids, sure. 'Emma,' at home with the wife, sure," he said. However, he added that generally "very few people are going to rent a movie for $20."
Wade Holden, an analyst at Kagan, a research unit of S&P Global Market Intelligence, noted studios really depend on theatrical release revenue, "especially now that everything is global." For that reason, he does not believe studios will veer too far from their traditional theatrical course.
Studios generate about 50% of their revenues from theatrical exhibition and "they aren’t going to let that go away," Pachter agreed, adding it is not likely that pay-per-view could make up for theatrical-window revenue.
The original 2016 "Trolls" film ended up with $153.7 million in domestic box office receipts, according to Kagan data, with Universal taking about half of that total. At $20 per home screening, which may include several household members watching, Universal would have to sell about 3.8 million video streams, then continue to keep pace in subsequent windows to generate the same amount of revenue through the life of the film.
Robbins said big films like Disney's "Mulan" and "A Quiet Place 2" from ViacomCBS Inc.'s Paramount Pictures, whose releases have been delayed indefinitely, are "budgeted, produced and marketed as theatricals" and need to garner box office receipts to support such outlays.
For his part, Tom Rothman, chairman of Sony Pictures Entertainment’s Motion Picture Group, said the company remains firmly committed to theatrical exhibition and supports windowing. Notably, Sony Entertainment Inc.'s Columbia Pictures is putting Vin Diesel's "Bloodshot," which bowed in theaters on March 13, up for digital sale in the U.S. on March 24 for $19.99. International dates will follow shortly.
"This is a unique and exceedingly rare circumstance where theaters have been required to close nationwide for the greater good and 'Bloodshot' is abruptly unavailable in any medium. Audiences will now have the chance to own ‘Bloodshot’ right away and see it at home, where we are all spending more time,” Rothman said in a release. "We are confident that — like other businesses hit hard by the virus — movie theaters will bounce back strongly, and we will be there to support them."
The National Association of Theater Owners, the trade group that represents exhibitors, said there has been speculation that the temporary theater closures would lead to the acceleration of home releases. But this move would defy financial logic for studios, it said.
"To avoid catastrophic losses to the studios, these titles must have the fullest possible theatrical release around the world," NATO said in a March 17 statement. "While one or two releases may forgo theatrical release, it is our understanding from discussions with distributors that the vast majority of deferred releases will be rescheduled for theatrical release as life returns to normal."
Bock, however, is not so sure, saying the studios, who are trying to pay employees now, "need to generate some revenue.”
Certain funds have been established to help Hollywood respond to the crisis, such as Netflix Inc.'s $100 million relief fund to help members of the creative community affected. Members of the U.S. Congress are also working to make sure the next coronavirus relief package includes aid to freelance workers, such as those involved in the production of filmed entertainment.