It used to be that movies were released to theaters, followed by a 'hospitality' release (think airlines & hotel pay-per-view), then disc (DVD, Blu-Ray) and digital (VOD), followed by Pay-TV (i.e. HBO) and then broadcast TV (FX, CBS, etc). Most interestingly, the time from theatrical to disc/digital used to by as long as a year, although in recent times the wait is usually more on the order of 3-5 months, with digital usually enjoying a slight advantage of 2 weeks or so.

While movie theaters have been out of the picture since mid-March, several studios have rushed their theatrical releases that had just opened before the shutdown, or were scheduled to open during the shutdown, to video services like Amazon, Vudu, AppleTV and other services. Along with this short (or no) theatrical window strategy has served as an interesting experiment for the studios, and the shut-down has created potential bankruptcy inducing financial circumstances for the largest chains, including AMC, Cineworld (parent of Regal in the U.S.) and Cinemark, these extraordinary circumstances brought on by the economic shut-down of the global economy does not signal a tectonic shift in the way movies are released.

The National Association of Theater Owners (NATO), today released the results of a recent study that they commissioned, completed by Ernst & Young, that shows that, should studios elect to shorten or bypass altogether the theatrical release window for their movies, they will lose $56,000 per day on the average film (for every day they do not have an exclusive theatrical release window). With this data in their corner, studios will undoubtedly continue their strategy of pushing larger releases later into 2020 or back to 2021, as they have done with Mulan, Wonder Woman 1984, No Time to Die, Fast 9, Morbius, Top Gun: Maverick, Pixar's Soul, Ghostbusters: Afterlife, and others.

The key findings of the study indicate that shorter release windows not only damage theatrical revenues (for the studios and for the theaters), but the shorter releases also damage overall home revenues - impacting the total revenue picture for each film that gets a shorter trip from theater to home. They also found that the length of the theatrical run is even "more highly correlated to home sales than to box office sales."

This important study evaluated several factors including the revenue generated at the box office, length of the theatrical run of the film, film quality - through such factors as Rotten Tomatoes scores, sequels, seasonal release (what part of the year the film released in) and the strength of the full theatrical run in terms of box office revenues in later weeks.

Coupled with other recent findings from Ernst & Young studies showing that people who stream are also the most frequent moviegoers and were more likely to stream the film once they knew it had been released in a movie theater, these new findings pose a powerful incentive for studios to ensure a strong theatrical release window. Additionally, a recent study from Barklays, Netflix Films Need an Offline Strategy, demonstrated that a broader theatrical release strategy would allow Netflix to spend even more on their content while driving better returns.

The findings of studies like these are important to theaters, of course, but also increasingly to studios - who are increasingly having their 'streaming revolution', much like the shifts long ago experienced by their music producing brethren. Home video has, generally been on the decline, with a 30% drop from 2012 to 2017. During that period, transactional (video) revenue declined even more, from 40% to 27% (of the total).

The data in this study will not stop the studio experiments in these unique times, however, as studios must monetize their content. Universal released Trolls World Tour last weekend, claiming to break records in home release (duh). Disney has already committed to send its upcoming Artemis Fowl directly to its new Disney+ streaming platform and Dave Bautista's My Spy has already been sold to Amazon for an exclusive release on its Amazon Prime platform. The key question will likely be if, as was in the case with China, cinemas reopen, only to be quickly shut down again - or if shutdowns rage on deep into summer - will studios truly seek to 'pivot' from the traditional and proven strategies, ramping up digital promotion dollars to ensure that direct home releases can be supported on a global scale and drive tens of millions of opening-day or opening week purchases? Like so much else these days, only time will tell.

Justin Case