Cinemas, streaming...
Some observations after watching Christmas Chronicles 1 and the news from HBO about its 2021 film slate.
Two things this week made me revisit the debate around cinema vs on-demand streaming at home.
Firstly, HBO announcing that it is to release its 2021 film slate on its streaming platform at the same time as cinemas, which sent cinema chain operators’ prices crashing down last week.
Secondly, sitting down to watch Christmas Chronicles part 1 with my family on Netflix.
Christmas Chronicles 1 (“CC”) and its sequel were both trending in the top 10 most watched films on Netflix UK (at the time of writing). It’s a film that stars Kurt Russell and Goldie Hawn and a couple of other relatively unknown actors/actresses.
After watching the film, I was surprised to hear that CC never came out in the cinema and was streamed on Netflix first in 2018. CC is the sort of film that families would normally flock to watch during the Christmas time, and if I watched it in the cinema, I would not have been disappointed after paying £50 to cover ticket costs and popcorn etc.
This is in contrast to most kids films I have watched with my family in the cinema, which have largely been disappointing. It seems a lot of films nowadays lack originality and in most cases humour. A lot of the blame for the lack of innovation must be pointed towards the films that keep getting churned out from saturated film franchises like Marvel, DC, Star Wars and Fast and Furious. I’ve watched films from all these franchises, but am in no hurry to pay top dollar to watch their new releases in the Cinema.
Source: https://www.weforum.org/agenda/2020/07/impact-coronavirus-covid-19-hollywood-global-film-industry-movie-theatres/
Then, whilst doing some desktop research for this blogpost, I noticed that one of the big cinema chains struck a deal with Netflix to show Christmas Chronicles 2 (the sequel) in less than a handful of cinema locations (Deadline.com). Its not a new phenomenon (remember the Irishman, which was shown on select cinemas too).
These sort of viewings are an experiment for Netflix and the Cinema operators that participate. I believe these ventures will benefit Netflix and other streaming platforms longer term, since it offers them another source of revenue growth outside of the home. Of course it will benefit cinemas’ short term cash profile, which will help service their debt.
This then brings back the debate around streaming platforms buying Cinemas themselves and taking control of the cinematic experience. Again, this is not a new theory, and there have been rumours recently* about Amazon/Netflix acquiring Cinema chains. We have seen a similar playbook before, where “new world” companies buy “old world assets”, e.g. Elon Musk’s move to buy the NUMMI auto plant (using federal subsidies) after GM walked away from it in 2010.
Netflix has seen its credit ratings improve to the BBs, and with cheap credit everywhere it would not be difficult for them to raise enough to buy up more cinemas from distressed sellers. As stated in one of the articles below, buying a cinema chain would be a drop in the ocean for Amazon, but just because something is cheap does not mean Amazon has to acquire it.
The other complexity with Cinemas is that there appear to be large variations in cinema-goers trends globally, for example, in China, audiences grew over 860% from 2009-2019 (Src: WeForum).
Cinemas are not down and out, but the space is likely to evolve into something quite different to what it was pre-pandemic, which may involve new players transforming the sector. Hopefully, that should also benefit the content and experience for consumers…that would then help the long term sustainability of Cinemas.
https://www.wired.co.uk/article/netflix-buying-cinemas
https://www.wired.com/story/netflix-amazon-theater-chains/
*Disclaimer - Not investment advice, I currently have no direct interest in the Streaming Platforms/Cinema Operators*