This investigation shows why the streaming floodgates are about to open

At a conference in 2015, netflix (NFLX 4.69%) CEO Reed Hastings predicted, “We will see linear TV decline every year for the next 20 years and Internet TV grow every year for the next 20 years.

In 2020, this forecast seems more prescient than ever. Watch hours on streaming services like Netflix and Roku (ROKU 2.47%) exploded during the pandemic as consumers stayed at home.

At the same time, linear television and cinemas are reeling from COVID-19. Broadcast and cable networks rely heavily on ad revenue, which has shrunk due to the pandemic and accompanying recession. Live sports, one of the biggest draws of traditional television, have been largely absent during the crisis. Magna Global predicts a 12% decline in global linear TV advertising spend this year. Overall advertising in the United States, excluding political spending, is expected to fall by 17%. Meanwhile, cord cutting is expected to accelerate as consumers cut spending in a bad economy and shift to lean bundles.

Movie theaters are even more in demand. Strings like AMC Entertainment (AMC 0.04%) and Cinemark (CNK 5.46%) have been closed since March and are awaiting the green light from state regulators and studios before reopening. AMC, the world’s largest theater chain, warned in June that its status as a going concern was in doubt. The business has since been forced to push back its reopening date to July 30.

Image source: Getty Images.

A permanent change

The pandemic is accelerating a number of transitions in e-commerce, video conferencing and cloud computing. The same thing happens with video streaming.

With theaters closed, Hollywood brought the new releases straight to home viewers. Paramount sold Lovebirds to Netflix, and highly anticipated features like Jon Stewart Irresistible and that of Pete Davidson King of Staten Island both went straight to multiple on-demand platforms.

It was Trolls World Tour which, however, dealt the biggest blow to the direct mail movement. The Comcast-belonging (CMCSA 0.08%) The universal product generated nearly $100 million in on-demand sales in just three weeks at $19.99 a piece. This prompted NBCUniversal CEO Jeff Shell to say The Wall Street Journal, “As soon as the cinemas reopen, we plan to release films in both formats”, that is to say in theaters and on demand. The statement upset AMC, whose CEO responded by banning Universal films from its theaters. The two parties have since been in talks.

The chips are piling up more and more on the side of the studios. They are now aiming to break the windowing protocol, under which films are screened exclusively in theaters for 75 days before being available at home.

A new survey shows consumers also support ending the practice of windowing. The graph below shows how American adults expressed their preferences for watching recently released movies in a Morning Consult/The Hollywood Reporter survey:

Answer Percentage
Strongly prefer watching movies at the cinema 19%
Rather prefer watching movies at the cinema 18%
Kinda prefer to watch it at home via streaming 21%
Strongly prefer to stream it at home 32%
no opinion ten%

Source: Morning Consultation/The Hollywood Reporter

While a substantial percentage of respondents prefer going to the cinema, watching at home is the big winner here, especially as nearly a third of respondents said they strongly prefer the experience at home. In other words, consumers, like studios and streamers, want to see an end to the windowing process.

The infrastructure is in place

There are five major studios in Hollywood today: Disney, which owns former Fox assets, AT&Tit is(T 1.00%) Warner Bros, Universal, ViacomCBSit is(PARA 5.02%) paramount, and sonyit is(SONY 1.42%) Colombia.

All of these studios have some sort of streaming asset that they could use to deliver new releases directly to home viewers. Disney owns Disney+ and a majority stake in Hulu. Warner Bros. to AT&T’s HBO Max. Comcast’s Universal has Peacock and Comcast cable subscribers soon to be launched. ViacomCBS owns CBS All Access as well as Showtime Anytime, and Sony owns Crackle.

It wouldn’t be difficult for any of these studios to offer new releases on their streaming platforms, whether for a pay-per-view price or a premium subscription. Studios typically only keep 50% of box office revenue, sharing it with theaters, while they tend to pick up 80% of on-demand sales, making the direct-to-home method more appealing to a commercial point of view.

If consumers, streamers and studios prefer to release movies day-to-day – industry jargon for simultaneously in theaters and at home – it seems only a matter of time before windowing takes hold. turn off. Cinemas will resist, but COVID-19 is putting enormous pressure on their finances. The longer the pandemic continues, the more current habits will set in and the more time studios will have to experiment to find an on-demand model that works best for them.

Ending windowing would be a big win for streamers as well as studios. Movie theaters and the rest of the cinema ecosystem, which includes shopping malls and advertisers like National Cine Mediacould be on a downward spiral that may prove impossible to escape.

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