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The Evolution of the Movie Theater is at Hand

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In late 2020, WarnerMedia made a rather startling, and some would say controversial, decision: It would stream its blockbuster titles, such as Wonder Woman 1984, at the same time they were released theatrically. And to top it off, there would be no extra charge to current subscribers of HBO Max.

Evan Shapiro, a TV and video industry veteran, discussed in a LinkedIn post why this makes total sense. It is all about customer lifetime value (LTV). In essence, there is no LTV when distributing to theaters because there is no relationship between WarnerMedia, or any Hollywood studio,
and the viewer. People are not loyal to Lions­gate films. They are loyal to a franchise or maybe a director (I will go see anything Guy Ritchie or Taika Waititi create) or an actor. But WarnerMedia as a streaming service, aka HBO Max, has a tremendous amount to gain monetarily by cultivating its subscribers’ LTV. And the only way to do that is to give them the best content—especially content they cannot find on a rival streaming service.

This could be a death knell for movie theaters. Why would consumers, who are already paying for a monthly streaming subscription, pay more money to see a movie they could already see for free? Of course, the experience is different, but it may not be different enough to win out over watching a movie at home on a large-screen TV. So, will people stop going to the movies altogether? Will theaters die out? These are complicated questions. During the pandemic, theaters have suffered heavily. It’s unfortunate, but theater traffic was already declining. The pandemic might just be the final nail in the coffin. The result is that a few theaters and theater chains have called it quits.

But the theater experience is unique. I do not believe every movie needs to be seen on the big screen, but many are best experienced with heart-pounding Dolby Atmos sound and a bigger-than-life image. If that’s the case, then theaters need to reinvent themselves. Rather than serving as the point of entry for a new movie release, perhaps they need to become complimentary. Consider the Cinemark movie chain. It began a program in several states after they reopened from lockdown to let patrons rent out a theater to watch a movie. It was a private watch party. In many cases, these movies were older releases capitalizing on viewer nostalgia for, say, The Breakfast Club. The cost was nominal—just $99. So, if you grabbed a bunch of friends, maybe the movie would cost everybody $10 or less. In addition, the experience would allow for easy social distancing as everyone could pick seats well apart from each other. Cinemark probably quickly realized that this was not a gimmick and started offering first-run movies, albeit from a limited catalog released during the pandemic, for just $50 more. Having participated a couple of times, I jumped on the chance to get a private theater for Wonder Woman 1984.

It is easy to get caught up in how technology, such as streaming video, evolves from some other type of technology, such as broadcast television. But what we often miss is how evolutionary changes like streaming impact ancillary markets and industries. That is exactly the case with movie theaters. They need to reinvent themselves, to figure out where they fit into this new viewing behavior in which consumers can watch whatever they want, wherever they want, and from whatever device they happen to be close to. There will always be a place for different experiences with the same content, such as virtual reality. Movie theaters are no different. But to stay relevant, they will have to think well beyond just offering alcoholic beverages and dinner fare.

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