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Flip or flop

Flip or Flop?

WarnerMedia, False Flag on Day-and-Date?

The pain that Hollywood has suffered at the Box Office will be neither easily nor quickly resolved. The unexpected box-office success of Godzilla v. Kong provides one path forward for both theatre and studio owners. Some members of the press were quick to point out that moviegoing is far from dead. On the surface it seems that WarnerMedia is “flipping” on its “flopped” day-and-date strategy comparing 2021 and 2022.

Is this optimism warranted for a return to theatrical windows? Will the market boomerang back to pre-pandemic levels, or will a “new normal” emerge?

Digging below the surface leaves us with two thoughts

Flip or Flop?

Talent Management as a Point of Differentiation

Southern California is no stranger to drama. The Great Recession of 2008, for example, inspired the reality series “Flip or Flop”, a story of fabulously good-looking couple trying to make their fortune fixing up tired, old homes. Fast forward 13 years and there is a reboot playing out on our screens, only this time the reality is Hollywood itself.

The eternally-young Jason Kilar provided Hollywood with its own homegrown shocker of a cliffhanger, when at the end of 2020, WarnerMedia announced that all of its 2021 movie releases would debut the same day on HBOMax and the theaters (i.e. “day-and-date”). This was the “flip” if you will.

Creatives were particularly aghast. Christopher Nolan commented, “We went to bed thinking we worked for the best studio in the world and woke up to the worst streaming service in the world.” Others such as media pundit Scott Galloway, however, praised Kilar for the “gangster” move that propelled WarnerMedia into the presently attractive world of the subscription revenue. Many felt this move would be permanent (source).

Fast forward to season 2, and the “flop” occurs. On March 22, Kilar announced during an analyst call that WarnerMedia would bring back the (previously very profitable) window strategy in 2022 (source). Why the flip-flop?

Behind the harsh comments from creatives was the well-known fact that Warner Bros. was regarded as the “talent friendly studio”, as opposed to Disney who would make filmmakers money, at the expense of artistic freedom (source).

WB’s surprise blockbuster hit “Joker” (with a very Marvel-like $1B+ Global Box Office), didn’t even have a specific consumer products offer, something that would be unheard of at Disney. Differentiating itself through creative freedom, Warner was practicing the “hit it where they ain’t” (source) strategy and it was widely appreciated in Hollywood.

Flip or Flop

Ultimately it is about dollars and cents

In the digital era, WarnerMedia’s HBO Max has been playing catch-up to its older siblings—Netflix, Amazon Prime, Hulu (Kilar’s former home), and now the mouse across the street, Disney.

Many of the comments revolve around the question of whether streaming and theatrical can coexist (source). The relative success of Godzilla vs. Kong has been determined the biggest hit of the pandemic era (little mention is what the expectation was when the film was greenlit a lifetime ago). Comps rule the theatrical world, and a decent comp for a sequel is, of course, the any of the prequels, in this case Godzilla: King of the Monsters, which garnered $50M in its opening weekend in 2019. Godzilla vs. Kong made $35M in its 5-day weekend, roughly the same percentage per screen as its predecessor. A good start, for sure.

Streaming success has also been claimed with sources such as discovery platform Reelgood, gave among the varied sources striving to be source of truth for the industry. Reelgood states that GvK gained its biggest audience to date with an “8.1% of Weekend Streams” (source). One further elusive new normal however is widespread acceptance of “one source of truth” of streaming success. Until this is settled, old-fashioned Box Office dollars will rule the day.

Flip or Flop

New Normal remains elusive

Reviving the engine. To be fair Kilar did state after the December 2020 bombshell that WM would watch the market for the “next six, eight, ten months” and “then check back in” (source). If the March 2021 deal with Cineworld (45-day window in the US) and the success of GvK are “check-ins”, it seems that theatrical is here to stay, at least in the short-term. HBOMax and other streaming services are clearly not going anywhere. We are best advised to hold off in determining a new normal and keep a close eye on the market as other stakeholders make their move.

As of writing, California is planning on going to fully open on June 15th, whereas other states, notably New York, have refused to open theaters from 25% to 50%. The new normal seems to still need time to settle, perhaps we will see further flips from WM and even the other studios on this issue.

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