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One of the most destructive ideas for a brand is thinking that what worked yesterday will work today and tomorrow. Customers change; the world changes; brand reputations change and competition changes. Doing what once worked when the current landscape is different is a strategic formula for spectacular failure. We will emerge from shelter-in-place with different habits – some long lasting – and with different perspectives.
The movie theater industry is one of the most public defenders of the past. During our confinements, we became comforted and entertained by Netflix and other streaming services. And, we were thrilled to watch a first-run movie at home. With movie theaters closed, the movie studios have been honing their strategies to match our changing behaviors.
Last month, Universal’s “Troll World Tour” movie came to our TV screens, bypassing the closed cinemas. In its first three weeks, the movie generated $100 million in rentals. The head of the film studio’s parent division, NBCUniversal, told The Wall Street Journal that once movie theaters are opened, the studio intends to release other first-run movies across both theater screens and in-home screens.
AMC, the world’s largest movie theater chain, blasted NBCUniversal, telling The Wall Street Journal that Universal can forget about ever showing its movies in AMC theaters again. As long as NBCUniversal is renting first-run movies directly to the home market, forget about ever doing business with AMC. So there!
Cineworld, the world’s second largest chain, joined AMC in this tit-for-tat argument several days later. Basically, these chains, which account for a large percentage of movie-theater screens are saying that they want to go back to the way life was in December 2019. Forget that the world has moved on to digital and in-home entertainment. These two brands want to continue doing what has always worked for them but not necessarily for customers. This is a brand killer strategy.
How enjoyable will it be to eat Sno-Caps, Raisinettes and buttered popcorn with a facemask and rubber gloves? How many of us will wonder about the health and hygiene of the person who sat in this theater seat before me? How many of us will be wondering about the air we are breathing for 2 plus hours? How many of us will trust that the theater has thoroughly sanitized the seats, counters, floors, etc., between shows? “Hygienically clean” is the new strategy for enclosed spaces. Movie theaters will need to deliver these promises in ways that are credible and visible.
When we leave the cocoon for the outside world, we will have different perspectives and standards for how we manage our personal spaces whether at home or out of home. Statista, a German portal for statistics gathered by market research firms and other research-generating enterprises, just released data showing that out of 710 U.S. respondents in a recent survey only 9.4% “… want things to go back to exactly the way they were.” Did AMC and Cineworld miss this research?
Research company Morning Consult polled 2,200 U.S. adults and found that slightly under 40% of respondents thought they might feel comfortable attending a sport event. But, only 21% indicated that they might feel comfortable attending a sporting event in January 2021. Even though many sporting events take place outside, people are still thinking they may be uncomfortable attending. Apply these data to home movie viewing: watching first-run films in enclosed venues may make us feel uncomfortable for some time.
Even the nine-decade bastion of theater-distribution-only films, the Oscars, has changed its rules this year to reflect the quality and ubiquity of streamed feature films. Movies that have not been shown in theaters will be eligible for consideration for the prestigious awards. Last year, the Netflix film, “The Irishman” had to be shown in a theater to qualify for an Oscar. Now, The Academy of Motion Picture Arts and Sciences is saying that once theaters reopen, this new rule will “no longer apply.” However, as the saying goes, “… once the genie is out of the bottle….” The Academy of Motion Picture Arts and Sciences may find it very difficult to turn back the clock. After nine decades it would seem as if The Academy might actually try to keep up with the times and new movie-lover behaviors.
The movie theater owners are also going to be grappling with Disney, as the latest Star Wars film, “The Rise of Skywalker” will be released to Disney+, the new streaming service from Walt Disney Company. As reported in The Wall Street Journal, Disney Executive Chairman Bob Iger is considering releasing additional films directly to Disney+. Along with what NBC Universal is doing this will continue to obscure any remaining boundaries between streaming and traditional theater releases.
AMC and Cineworld made a lot of money doing things the old-fashioned way and want to continue to do so. Theaters take a 50% percentage from the box office receipts leaving the studios 50%. In contrast with streaming, about 80% stays with the studio.
The movie theater chains do not seem to have a customer-focused argument. Instead they want to ignore changing customer preferences. Preserving the past and ignoring the present are pathways to pain for brand-businesses.
In the space of a few months, we have increased our dependence on digital entertainment, video conferencing, and socialization. Netflix added 15.8 million new subscribers last quarter while Disney+ added 22 million in two months, according to Bloomberg Technology. Richard Waters for Financial Times wrote that the “digital future is suddenly rushing closer.” He quoted Microsoft’s CEO, Satya Nadella as saying that social distancing has brought “a remote everything,” and “As Covid-19 impacts every aspect of our work and life, we have seen two years’ worth of digital transformation in two months.”
In protecting their revenue stream, movie theater owners were against television, cassettes and DVDs none of which stopped people from going to the movies. And, research by NBCUniversal indicates that 51% of people who rented the Trolls movie said they would have “definitely” gone to see the movie in the theater. In fact, The New York Times reported that over the weekend, in San Antonio, Texas, with stay-at-home lifted, three Santikos Entertainment movie theaters opened and there were moviegoers. The theaters followed strict protocols: 75% of seats in the auditoriums were left unsold, Plexiglas separated customers from cashiers and sanitation procedures were posted online.
Many people prefer the movie theater experience, as those in San Antonio did. People will probably return to movie theaters. No one knows whether the urge to rent first-run films will last, even though the typical rental fee is around $20, less than what a family of 4 would pay at the theater. But, for the movie theater chains a warning: customers today do not like having to make either-or compromises, so theater owners beware. Forcing people to chose between a movie theater viewing or an in-home viewing will turn off customers. People want the best of both – first-run in theaters and first-run at home.
An article in Bloomberg suggested that the symbiotic nature of the “movie theater-film studio” relationship shows that both parties – studios and theaters – need each other and should stop bickering. But, the movie studios do not need a partner with an antiquated, out-of-date business model whose best days were yesterdays.
Rather than fighting yesterday’s fight, the movie theater operators should not be afraid of letting go of the old way of doing business. Movie theater owners need to develop strategies that offer customers the best of both types of offerings: in theater and digital. It is time to move on, scrapping a strategy that is holding the movie theaters back from truly satisfying customers who will still want to be entertained. The story of a brand that believes in continuing to do what once worked while living in a new world will not make it to the big screen.
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