Late last year, WarnerMedia announced that, in view of the majority of theaters still keeping shut the world over, they will be releasing all their upcoming movies on HBO Max at the same time as in theaters. This led to an intense backlash from the directors and producers who provide Warner with their content. Now, a report by Bloomberg indicates Warner will be paying out heavy amounts of cash upfront to its creative partners in lieu of box-office profits to allow their movies to play on HBO Max.
"Warner Bros. has come up with a new plan to compensate filmmakers during the [global health emergency]: treat every movie like a box-office smash. After shocking Hollywood with its decision to release all its new movies this year on HBO Max, the studio has adjusted terms of its deals with partners to guarantee payment regardless of box-office sales and to increase the odds of performance-based bonuses. Warner Bros will also pay a larger group of cast and crew money based on fees it collects from HBO Max, according to people with knowledge of the studio's plans. The company is close to resolving disputes with many parties, said the people, who asked not to be identified because the discussions are private."
Needless to say, this new streaming strategy is going to be an extremely expensive one. Releasing new movies on HBO Max for free viewing at the same time as the movies are running in theaters means Warner has willingly gutted their own box-office shares. So not only will the company not be making any profits off the films, but they will still be handing out money to their creative partners in line with what the payout would have been if the movies had been giant box-office hits. The Bloomberg report shed further light on how additional payouts will be calculated.
"When movies come out this year, anyone entitled to a bonus will receive one at half the box office revenue that would normally be needed to trigger a payout. And if more theaters close down, the threshold will fall further -- a stipulation called the "Covid-19 multiplier." Those who would normally participate in profits from box-office receipts will continue to do so, as well as benefit from on-demand and online sales. HBO Max will pay Warner Bros. a fee for its 31-day window, and the money from that will be shared with not just profit participants, but cast and crew."
In any other year, such a strategy would have been viewed as business suicide. But with the current tattered state of theaters, which does not appear set to improve any time soon, online releases seem like the only way to go. Warner will lose a lot of money, but it will make massive gains in terms of new subscribers to HBO Max. And as the dominance of Netflix and Amazon Prime in 2020 has demonstrated, subscriber numbers are the new gold standard by which to judge profitability in the entertainment media landscape, not box-office figures. This news comes from Bloomberg.