On today’s episode, Cinema United CEO Michael O’Leary addresses the alarm among exhibitors at the prospect of Netflix acquiring Warner Bros. and HBO. He also discusses the state of moviegoing and points to some positive signs that have emerged amid a rocky year at the box office.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:11):
Welcome to Strictly Business, Wridy's weekly podcast featuring conversations with
industry leaders about the business of media and entertainment. I'm
Cynthia Lyttleton, co editor in chief of Variety Today. My
guest is Michael O'Leary, President and CEO of Cinema United.
Cinema United is the largest trade organization for exhibitors in
the world. It represents the owners of about thirty one
(00:33):
thousand screens in all fifty states in the US and
about thirty thousand screens overseas. O'Leary's job got a lot
tougher earlier this month when Netflix reached its deal to
buy Warner Brothers and HBO. That immediately sparked fear in
the exhibition community that Warner Brothers would curb its enthusiasm
for the theatrical film business. Given Netflix's traditional approach to releasing
(00:58):
movies and theaters for all only very short times and
only very select titles, the loss of supply for Warner
Brothers would be a big problem for movie theater owners
because Warners is such a big supplier of theatrical film,
the biggest of the Hollywood majors most years O'Leary and
I talk at length about this dynamic and the general
(01:18):
impact of entertainment consolidation on exhibitors, and we also talk
about the state of movie going in twenty twenty five.
It's been a very up and down year. It's likely
to end up flat at best with twenty twenty four's
domestic box office hall. But O'Leary points to encouraging signs
that he sees in the data, especially around gen Z's
attitude to moviegoing. He has some thoughts about how studios
(01:42):
and exhibitors can do more together to improve movie marketing
and customer experiences at the turnstiles. Cinema United was previously
known as the National Association of Theater Owners. O'Leary has
been head of Cinema United for nearly three years. He
clearly has a good command of the issue use his
members face. We're going to talk about the issue issues
(02:07):
facing the exhibition, But of course, in the last five days,
there's been no bigger topic being talked about in all
of Hollywood, but particularly in the film community. A lot
of very vocal opposition to the idea of Netflix, given
its dominant streaming position. Adding these significant assets, Warner Brothers
(02:28):
Studios and HBO. Netflix has a very different view and
very different strategic approach to how it handles movies. It
does put movies in theaters, but for a very short time. This,
as you know, has people really animated and really upset.
Let me start by asking you, Michael, what are you
hearing from your members?
Speaker 2 (02:47):
There's the concern among our members. After this deal was announced,
we put out a statement very quickly signaling our opposition
to it. I think it's important to look at this
deal in the life larger context. So as we come
to the end of twenty twenty five, now this has
been kind of an uneven year for exhibition and for
(03:07):
the movie industry, and I think on the whole it
will be viewed when it's finished as a positive. But
it's not where we wanted it to be. And so
I think there was some you know, kind of noise
in the system in terms of how much stronger can
the industry get, what does a continuing recovery look like?
And then you layer this on top of that, and
it's just another incredibly important existential variable which has come
(03:30):
into play and which driving our approach to all this
is frankly history and recent history at that history shows
us that when legacy studios are absorbed, the overall production
of motion pictures for the theater goes down. And obviously
the most recent example of that is Disney acquiring Fox
(03:51):
resulted in about forty three percent less movies being made
for theatrical production by those two studios, and that translates
to roughly a nine hundred million dollar loss in box office.
That's almost a billion dollars. Imagine if you had an
additional billion dollars to put on the end of the
twenty twenty five total. That gets us closer to where
(04:12):
we want to be. But imagine if you go the
other way and take another nine hundred out of it.
Of particular concern is that in the present case, the
acquiring entity is Netflix, which has had a clearly stated
antipathy towards theatrical exhibition for going on a decade, and
so that causes, frankly, the concern to be even more elevated.
(04:34):
If the percentage of movies drops by forty three percent
when the acquirer is Disney, which takes a backseat to
no one in terms of their support of theatrical you
really have to wonder what the impact might be if
it's Netflix is the acquirer?
Speaker 1 (04:48):
Can I challenge you on the forty three percent stat
because of course Disney acquired Fox in twenty nineteen. We
all know what happened in twenty twenty twenty one. Is
that skewed at all by the pandemic? Or are you
saying that a role average Now that the biz is
back to little.
Speaker 2 (05:02):
Strength, we believe it's reflective of a larger trend. We're
happy to be proven wrong if we wake up next
year and that numbers are back where they used to be,
which is in the mid ti twenties. Further two, we
would welcome that with open arms. I don't think there's
a lot of evidence that that's going to happen.
Speaker 1 (05:16):
We know that exhibitors feel the wide availability of movies
across many streaming platforms, especially so close to their initial release,
that that is just telegraphing to consumers. Don't go to
the movies, you can just wait a few weeks. It'll
be on one of these streaming platforms. Do you have
any anecdotal or any evidence to show that that is happening,
(05:38):
that that is costing certain movies box office. Netflix does
experiment with putting their movies in for very short time,
I think to get that pop, what do you see?
Speaker 2 (05:47):
That's a very important question and the answer is more
complicated than simply streaming versus going to the movie theater.
There's a lot of variables that go into the uncertainty
in our market right now, and one of them, which
is related to what you're talking about, is shrinking windows.
What's happening, we believe as a result of these increasingly
shrinking windows is that consumer perceptions are changing as to
(06:09):
when a movie will be available to them in the home.
And there's actually research that's out there now that suggests
that up to twenty six percent of the movie going
public believes that movies will be available to them in
the home faster than they actually are available in the home. So,
in this type of environment where people are being inundated
with information from all different directions, that type of perception
(06:32):
is fatal. And so we believe that if you had
a strong, consistent, reliable window that consumer could know is
how long it's going to be in the theater, you'll
put more people in the theater. And then I think
the other part of this which people often overlook or
don't completely appreciate is movies that begin in the theater
(06:52):
are more successful on each subsequent platform thereafter. So if
you're running a platform and you want to draw eyeballs,
one way to do it is to make sure that
you have a sufficient supply of movies that were theatrical.
I don't think it's binary streaming versus movies, frankly, because
people that watch a lot of movies in the theater
(07:13):
probably subscribe to a lot of streaming services too, and
we need those people to come to the theater.
Speaker 1 (07:20):
We've seen some experimentation at Netflix. We saw them experiment
with a theatrical sing along release of K Pop Demon
Hunters over Halloween weekend. Do you see signs on the
horizon that Netflix is loosening about the way they think
about movies.
Speaker 2 (07:35):
Well, I don't want to speak for Netflix. They're an
incredibly successful company and they are very good at what
they do. I think they are. As you note, they
have been putting things in theaters for different reasons, but
as we look at this as a core essential to
a strong theatrical ecosystem, they have yet to embrace a
(07:56):
truly meaningful window. They will some times put movies into
a theater long enough to allow them to qualify for awards.
Those frequently are not marketed particularly well, and they're almost
never reported. The box office is never reported, and I
think that if you're truly committed to being in the theater,
(08:20):
you need to have that reporting function because people want
to show, hey, this is a good movie, this is
how much money we made, and they don't do that.
Speaker 1 (08:27):
Do your members have a standard that they would like
to see embraced by major studios?
Speaker 2 (08:32):
We have For purposes of this conversation, which has been
going on for a couple of years now, we have
talked about kind of the core essentials are a consistent
slate of wide movies going into the theaters, supported by
a period of exclusivity. Last year at Cenemacon, I made
a speech about this and I said it should be
at least forty five days. We've used that as a marker.
There needs to be marketing commiserate with the size in
(08:55):
the scale of the movie, and we believe that those
at core essential elements s FOD window, the subscription window,
maybe ninety days, but those are kind of the key
elements that we've been consistent about when we have conversations
with people.
Speaker 1 (09:08):
I know you've heard this before from the distributors. They say,
but I do all this marketing for the theatrical release,
and it does telegraph to the audience this is important,
pay attention. And then they say that I want that
home entertainment window or the streaming window to come sooner
so I can still piggyback off of all of that marketing.
You know, marketing is one of the many things in
(09:29):
our world is changing. Have there been any constructive discussions
or experimentation to bridge that gap somehow?
Speaker 2 (09:36):
So? I think marketing is an area where we can
work together for a better result, frankly, and we've started
to have some of those conversations about how do we
do this better. If you were to ask me, where
I really think the marketing pinch has felt the most,
it's not in the top twenty movies. It's not in
the blockbusters. It's in twenty one through one hundred, what
we call at Cinema United, the next eighty. The box
(09:58):
office drop post pay pandemic for those movies is three
times as big as the box office drop for the
top twenty. And those are the movies, they're the smaller movies,
the medium sized movies, they need the marketing, they need
the time in the theater to build an audience. So
that is an area where we should try and come together,
because the truth is our industry cannot survive without those
(10:21):
next dating movies. We cannot just become simply a blockbuster
industry that has a certain number of event films throughout
the year. It's unsustainable that we have to bolster the
rest of the sleep.
Speaker 1 (10:32):
So Michael was a DC veteran. You can see that
this is leading to hearings that there's going to be
a lot of discussion about this before the sides get
to the finish line. What role do you see Cinema
United playing in the larger conversation about whether this merger
would make Netflix just simply too big and too powerful.
Speaker 2 (10:50):
One of the things that interests me is when you
have these big mergers, not just in the entertainment space,
but in any space, they inevitably become narratives about stock price,
about how much money is in, about executive compensation, and
those types of things, and they're rarely about necessarily the
downstream practical impact of the merger itself. And so I
think that our primary focus is to educate people and
(11:13):
to elevate awareness. You know, the people that I represent
are the vast, vast majority of them are small business owners,
and they operate in rural communities, They operate in small towns.
It's not just the big circuits that you hear about
a lot or that appear a lot in variety. It's
different places all around the country, and they're the ones
that are going to feel the impact if there's fewer movies.
(11:35):
So we are getting out there trying to educate people
about these things. I grew up in western Montana, and
it's not uncommon for people or to drive thirty forty
miles and all types of weather to go to a theater.
Those theaters go away, then we're losing something, not just economically,
not just culturally, but a way that we communicate with
each other. And so part of our job is to
get out there and to make that case.
Speaker 1 (11:56):
We've been talking about Netflix, but Paramount now is also
factor or really wants to be a factor in this
final decision. How do you think your members feel about
the possibility of these assets going to Paramount.
Speaker 2 (12:08):
G at this juncture. The way I would characterize it
is we are concerned about consolidation in general. Obviously, if
you have an acquiring studio that has a historical reverence
and support for theatrical we think that's probably a positive.
But at the end of the day, goes back to
something we talked about right at the outset, which is
(12:30):
if the number of movies that are for theaters goes down,
that's a problem for us, and we would have to
date that opposition. So we are not in a position
right now where we're choosing sides. We're evaluating both of
the situations and we'll go from there. But our north
star is really, really very clear. If it results in
fewer movies in the theaters, that's bad for exhibition, it's bad
(12:52):
for consumers, and frankly, we think it's bad for the
entire industry.
Speaker 1 (12:55):
Obviously, it's a very new regime at Paramount, first big
change there in more than thirty years. What's your general
sense of the new regime there. They certainly seem to
be very committed to theatrical movies.
Speaker 2 (13:07):
I think they have a track record of being committed
to it. You know, David Ellison has done some incredibly
successful things for theater. They're building a team over there,
that believes in theatrical as well, So I think those
are all very positive.
Speaker 1 (13:19):
Science setting aside Netflix and Paramountain and Warner Brothers of
it all, let's talk in general about moviegoing and the
exhibition market. As you mentioned, it has been an up
and down year for the box office that I know,
there's hopes for a strong finish with James Cameron bringing Avatar,
fire and ash. In terms of rebuilding since the pandemic,
(13:40):
where do you think twenty twenty five is going.
Speaker 2 (13:43):
To follow on the whole? I think there are some concerns.
At the same time, there's some really good, you know,
information out there about consumer enthusiasm, which bolsters kind of
our optimism for the for the future. You know, over
two hundred million Americans went to the theater last year.
The percentage of people that are habitual moviegoers, which is
(14:04):
six or more movies a year, continues to rise at
one up eight percent just in twenty twenty five. The
enthusiasm for the theater is being driven frankly by gen
Z people, and so we feel like what's happening now
is we're building that next generation of moviegoers, and that's
not something that you do in one year or two
(14:24):
years or three years. It takes a certain amount of time.
You know, even younger people like this are starting to
go back to the theater. So we feel very good
about that. The slate for next year I think has
some real promise to it. So notwithstanding kind of the
inconsistent nature of twenty twenty five, we feel like we're
in a very good position going into next year. What
(14:45):
we really need is to not have these kind of
gaps in the schedule where there's just not a lot
out there that appeals to folks, because, as you know,
you know, movie going begets movie going and you go
to the theater and you have a good experience, and
you enjoy the movie, and you maybe see a trailer
or two and you say, oh, I want to come back,
and it becomes kind of a rhythm and you start
to come back. And when you have these gaps where
(15:06):
you have difficult quarters or difficult period of like six weeks,
you lose that momentum. And I think that is one
of the things that we still haven't fine tuned to
the point where we can carry that forward.
Speaker 1 (15:18):
That old fashion foot traffic is so important over the
year's variety. We have reported on efforts to build that
kind of bridge between the exhibitor and the home online
access to movies. None of them ever really took root.
And then again we closed our eyes and Netflix, you know,
came and really invented the model. But is there anything
(15:38):
you think exhibitors can lean into in terms of dealing
with that gap, How the exhibition, how that experience can
be a little bit more connected with the swirl that
goes on about movies and movie personalities and movie franchises
twenty four to seven on social and online.
Speaker 2 (15:55):
Yeah. I mean, look, I think part of it this
goes back to the conversation we were having about marketing
and what is it that drives people to the theaters.
It's not necessarily like it used to be, which was
commercials on linear TV. It's different things. You're seeing people
starting to experiment with different ways using social media more effectively.
TikTok obviously has a huge influence. The studios do that,
(16:16):
and exhibitors do it. Individual exhibitors do it again under
the auspices of marketing. Is this an area where we
could maybe work together more effectively. Absolutely, I think there's
a lot of potential for growth there. You know, if
I know, for example, that someone goes to see Superman
three times, well they might be a candidate for seeing
it in the home later on, and so how do
(16:37):
we make that make those things work? So I think
there's a lot of opportunities there, but we've got to
seize that those opportunities and make the most of them.
Speaker 1 (16:46):
You reference that so much of exhibition ownership in the
US is small businesses. Is that at all a challenge
in that studios are dealing with a lot of smaller
companies In terms of trying to affect anything that could
be more like national skew in terms of an online
promotion or something like that.
Speaker 2 (17:04):
It really shouldn't be And I think we should be
sophisticated enough that you can do multiple things at the
same time. You may not have the exact same approach
with a multi national circuit that you do with a
four screen in the middle of Idaho, but you should
be able to make that work. The truth is we're
in the digital age where films are transferred digitally, So
getting the films to the people should be relatively seamless,
(17:27):
and there ought to be ways similar to communicate how
to market it. But one of the challenges that some
of the smaller circuits have is they don't necessarily know
they're getting a movie told right before it's there, and
it's very hard to market in that short window. I
don't see kind of the diversity of sizes of theaters
domestically or internationally. I see that as a strength, not
(17:49):
a hindrance to creating more movie going audiences. The one
thing that I've learned I travel a lot, and I
go to different size theaters all over the country. The
one thing that I've learned a lot is there's not
a person in the industry who knows the people that
go to a specific theater than the person who owns
(18:10):
that theater. And you will see them in the lobby
talking to people, asking them how their kids are, what
did you think of that movie? What movie are you
excited about seeing? This fall? And we have to take
that knowledge and make it work for us. So there's
a lot of opportunities out there. We just have to
figure out how to create critical mass with all the
different things that we know about people who love coming
(18:31):
to the theater.
Speaker 1 (18:33):
Do you feel like the adversity of the last five
six years has made people more open to change?
Speaker 2 (18:38):
I think that the last five years should make our
industry stronger. At the same time, change is always difficult,
and people embrace it at different speeds, And part of
what's challenging is I think we all recognize that there's change,
but we don't know what the next iteration looks like exactly,
so that creates some uncertain and but one of the
(19:01):
things you've started to see in the last couple of
years is this kind of notion of experiential theater and
people coming to the theater for the movie and then
staying afterwards and talking about it, or going early and
doing some type of activation around the movie. That's really
really important. One of the things that gives me a
great deal of hope is if you'd have asked me
(19:21):
three years ago, what do I think one of the
biggest problems our industry has, I would have without question
said access to capital. You know, coming out of the pandemic,
the economy wasn't great, and there were just all money
was tight and there's left of eggs. But I also
think that what happened that probably doesn't get the attention
that it deserves is at that difficult fiscal time, theater
(19:44):
owners of all size is recognized that in order for
us to survive, and not only survive, but to thrive,
we have to create special experiences and a lot of
that goes to what happens when you walk into the theater.
So they started reinvesting. We did a report recently which
said that in the last twelve months, the North American
(20:04):
theater and industry alone reinvested one point five billion dollars
in their theaters. And you're going to see that in
terms of, you know, better projectors, better sound, better chairs,
nicer lobbies, more food and concession options, new carpeting. It
should you should see it as soon as you walk in.
And we believe that that one point five billion dollar
(20:27):
investment again by the one screen theaters all the way
up to the biggest theaters, that's a sign of intent
that we are committed to making experience as special for people.
And so in terms of the evolution and the change
you're talking about, I think you see it in small way.
We talk about the next great era of cinema. We're
at the beginning of that, and I'm excited about the
(20:47):
commitment that our folks have to that.
Speaker 1 (20:49):
Did us exhibition overall? Did it lose a significant number
of screens in the US after the pandemic. Were their
theaters that closed, It just never reopened.
Speaker 2 (20:58):
There were some that closed. I wouldn't say that lost
a significant amount. This industry has always ebbed and flowed.
Speaker 1 (21:04):
We've seen efforts to kind of create these movie going events,
not just in anticipated franchises, but things like Taylor Swift
putting her concert movie in theaters for a limited amount
of time, putting her Life of a Showgirl album release
party for a weekend. You know, show up on the
weekend or you'll miss it, kind of thing. I would
imagine exhibitors love those kinds of stunts, anything with Taylor Swift,
(21:26):
But are those challenging to work with to like marshal
everything for one weekend and you're not going to have
that like the longer tail effect as you would with
a more typical film.
Speaker 2 (21:36):
Obviously, there are challenges with things like that. There's a
lot of amazing work going on out there in exhibition
where they will curate specific events, and they will start
weeks in advance, and they will put together and they'll
create specific posters, and they will reach out to specific
audiences in the community that they know that are going
to be interested in that. Obviously, it's very hard to
compete with Taylor Swift, so that's kind of the high
(21:57):
water mark. But there's a lot of great things that
are going on out there. Well.
Speaker 1 (22:01):
Taylor Swift is nothing if not the queen of all
media and marketing. And if she finds value in the
theatrical experience, which she clearly does, that says a lot.
One thing we talk about every week when we're talking
about box office premium large format screens, those have become
a bigger and bigger factor, a bigger component of box office,
especially for big, big tent pole titles. How is the
(22:23):
premium large format world plugging into the overall box office picture?
And are there is there any tension between more traditional
the more traditional mom and pop exhibitors. Is that seen
as a bit of cannibalistic.
Speaker 2 (22:37):
It can be To be candid with you, and I
think that one of the things that's happened over the
last twelve to eighteen months is we've become more sophisticated
in the way we talk about There's clearly an audience
for the big PLF experience that's willing to pay a
higher price point to have certain bells and whistles. But
one of the things that's super important for people to
remember and incredibly important for us as an industry to
(22:58):
constantly reinforce is that every theater, in your local theater
is a premium experience, and so there's something there. We
talk about there being something for everyone at the theater. Now.
We talk about that most often in terms of the
variety of films, but it's also in terms of what
is the experience that you want to have, and if
you have a family and you've got five kids in tow,
(23:19):
you may want a more traditional setup, which is still
an amazing setup. So you know, if you go to
some of the theaters that are out there right now,
you will see ten or eleven auditoriums, and they're all
different because they're all catering to different types of crowds. Ironically,
some of them are purposely very small to kind of
create the one screen experience. So PLF is very very
(23:42):
important and it will continue to grow, but it cannot
be at the expense of the rest of the house,
and we have to be very careful about that. So
when we're creating experiences, we do it across the spectrum
of facilities that we have let.
Speaker 1 (23:55):
Me close by asking you what would you like our
audience of Showbiz Insider ten know about exhibition, about what
it takes to run a theater, about the business of
movie going.
Speaker 2 (24:06):
One of the things that we've really focused on on
the last year, because we think it's critically important, is
we talk about our industry not as a Hollywood industry,
but a main street industry. And I'm always talking to
my friends in distribution and saying, go to the middle
of America and see what's happening there. Go to places
in western Montana, or in Nebraska or Iowa or wherever,
(24:26):
and what you're going to find is that movie theaters
are the heartbeat of main streets all over the country
and in the world, frankly, And one thing that I
don't think people understand is how important the movie theater
is beyond just being a place to go see a movie.
There's recent research that shows that for every dollar that
is spent in a movie theater, there's an additional dollar
(24:47):
and fifty cents which is spent in the surrounding community.
So that could be in a restaurant, in a bar, shopping, transportation,
you name it. And so these really are the cornerstones
of towns all over the United States, and it's a
place where people can come together and have a shared experience.
And the truth is, in our society that doesn't happen
very much anymore. And I may be alone in this,
(25:09):
but I actually think that's really important. And I think
that so we talk about the economics of the industry,
and we talk about the cultural impact of film, but
there's also an impact in terms of the types of
communities that we live in. And we think that's an
incredibly special thing which doesn't show up on a balance sheet,
but is very very important.
Speaker 1 (25:25):
Current events and are going to put a bigger spotlight
on this realm of entertainment and the particular pressures and
the challenges. I think this is the moment time when
Hollywood really has to decide whether it's going to invest
in moviegoing. So much to discuss, Michael, Thank you so
much for coming on in.
Speaker 2 (25:41):
Thank you it's terrific.
Speaker 1 (25:42):
Thanks for listening. Be sure to leave us a review
at the podcast platform of your choice. Please go to
Variety dot com and sign up for the free weekly
Strictly Business newsletter, and don't forget to tune in next
week for another episode of Strictly Business
Welcome to Strictly Business, Wridy's weekly podcast featuring conversations with
industry leaders about the business of media and entertainment. I'm
Cynthia Lyttleton, co editor in chief of Variety Today. My
guest is Michael O'Leary, President and CEO of Cinema United.
Cinema United is the largest trade organization for exhibitors in
the world. It represents the owners of about thirty one
(00:33):
thousand screens in all fifty states in the US and
about thirty thousand screens overseas. O'Leary's job got a lot
tougher earlier this month when Netflix reached its deal to
buy Warner Brothers and HBO. That immediately sparked fear in
the exhibition community that Warner Brothers would curb its enthusiasm
for the theatrical film business. Given Netflix's traditional approach to releasing
(00:58):
movies and theaters for all only very short times and
only very select titles, the loss of supply for Warner
Brothers would be a big problem for movie theater owners
because Warners is such a big supplier of theatrical film,
the biggest of the Hollywood majors most years O'Leary and
I talk at length about this dynamic and the general
(01:18):
impact of entertainment consolidation on exhibitors, and we also talk
about the state of movie going in twenty twenty five.
It's been a very up and down year. It's likely
to end up flat at best with twenty twenty four's
domestic box office hall. But O'Leary points to encouraging signs
that he sees in the data, especially around gen Z's
attitude to moviegoing. He has some thoughts about how studios
(01:42):
and exhibitors can do more together to improve movie marketing
and customer experiences at the turnstiles. Cinema United was previously
known as the National Association of Theater Owners. O'Leary has
been head of Cinema United for nearly three years. He
clearly has a good command of the issue use his
members face. We're going to talk about the issue issues
(02:07):
facing the exhibition, But of course, in the last five days,
there's been no bigger topic being talked about in all
of Hollywood, but particularly in the film community. A lot
of very vocal opposition to the idea of Netflix, given
its dominant streaming position. Adding these significant assets, Warner Brothers
(02:28):
Studios and HBO. Netflix has a very different view and
very different strategic approach to how it handles movies. It
does put movies in theaters, but for a very short time. This,
as you know, has people really animated and really upset.
Let me start by asking you, Michael, what are you
hearing from your members?
Speaker 2 (02:47):
There's the concern among our members. After this deal was announced,
we put out a statement very quickly signaling our opposition
to it. I think it's important to look at this
deal in the life larger context. So as we come
to the end of twenty twenty five, now this has
been kind of an uneven year for exhibition and for
(03:07):
the movie industry, and I think on the whole it
will be viewed when it's finished as a positive. But
it's not where we wanted it to be. And so
I think there was some you know, kind of noise
in the system in terms of how much stronger can
the industry get, what does a continuing recovery look like?
And then you layer this on top of that, and
it's just another incredibly important existential variable which has come
(03:30):
into play and which driving our approach to all this
is frankly history and recent history at that history shows
us that when legacy studios are absorbed, the overall production
of motion pictures for the theater goes down. And obviously
the most recent example of that is Disney acquiring Fox
(03:51):
resulted in about forty three percent less movies being made
for theatrical production by those two studios, and that translates
to roughly a nine hundred million dollar loss in box office.
That's almost a billion dollars. Imagine if you had an
additional billion dollars to put on the end of the
twenty twenty five total. That gets us closer to where
(04:12):
we want to be. But imagine if you go the
other way and take another nine hundred out of it.
Of particular concern is that in the present case, the
acquiring entity is Netflix, which has had a clearly stated
antipathy towards theatrical exhibition for going on a decade, and
so that causes, frankly, the concern to be even more elevated.
(04:34):
If the percentage of movies drops by forty three percent
when the acquirer is Disney, which takes a backseat to
no one in terms of their support of theatrical you
really have to wonder what the impact might be if
it's Netflix is the acquirer?
Speaker 1 (04:48):
Can I challenge you on the forty three percent stat
because of course Disney acquired Fox in twenty nineteen. We
all know what happened in twenty twenty twenty one. Is
that skewed at all by the pandemic? Or are you
saying that a role average Now that the biz is
back to little.
Speaker 2 (05:02):
Strength, we believe it's reflective of a larger trend. We're
happy to be proven wrong if we wake up next
year and that numbers are back where they used to be,
which is in the mid ti twenties. Further two, we
would welcome that with open arms. I don't think there's
a lot of evidence that that's going to happen.
Speaker 1 (05:16):
We know that exhibitors feel the wide availability of movies
across many streaming platforms, especially so close to their initial release,
that that is just telegraphing to consumers. Don't go to
the movies, you can just wait a few weeks. It'll
be on one of these streaming platforms. Do you have
any anecdotal or any evidence to show that that is happening,
(05:38):
that that is costing certain movies box office. Netflix does
experiment with putting their movies in for very short time,
I think to get that pop, what do you see?
Speaker 2 (05:47):
That's a very important question and the answer is more
complicated than simply streaming versus going to the movie theater.
There's a lot of variables that go into the uncertainty
in our market right now, and one of them, which
is related to what you're talking about, is shrinking windows.
What's happening, we believe as a result of these increasingly
shrinking windows is that consumer perceptions are changing as to
(06:09):
when a movie will be available to them in the home.
And there's actually research that's out there now that suggests
that up to twenty six percent of the movie going
public believes that movies will be available to them in
the home faster than they actually are available in the home. So,
in this type of environment where people are being inundated
with information from all different directions, that type of perception
(06:32):
is fatal. And so we believe that if you had
a strong, consistent, reliable window that consumer could know is
how long it's going to be in the theater, you'll
put more people in the theater. And then I think
the other part of this which people often overlook or
don't completely appreciate is movies that begin in the theater
(06:52):
are more successful on each subsequent platform thereafter. So if
you're running a platform and you want to draw eyeballs,
one way to do it is to make sure that
you have a sufficient supply of movies that were theatrical.
I don't think it's binary streaming versus movies, frankly, because
people that watch a lot of movies in the theater
(07:13):
probably subscribe to a lot of streaming services too, and
we need those people to come to the theater.
Speaker 1 (07:20):
We've seen some experimentation at Netflix. We saw them experiment
with a theatrical sing along release of K Pop Demon
Hunters over Halloween weekend. Do you see signs on the
horizon that Netflix is loosening about the way they think
about movies.
Speaker 2 (07:35):
Well, I don't want to speak for Netflix. They're an
incredibly successful company and they are very good at what
they do. I think they are. As you note, they
have been putting things in theaters for different reasons, but
as we look at this as a core essential to
a strong theatrical ecosystem, they have yet to embrace a
(07:56):
truly meaningful window. They will some times put movies into
a theater long enough to allow them to qualify for awards.
Those frequently are not marketed particularly well, and they're almost
never reported. The box office is never reported, and I
think that if you're truly committed to being in the theater,
(08:20):
you need to have that reporting function because people want
to show, hey, this is a good movie, this is
how much money we made, and they don't do that.
Speaker 1 (08:27):
Do your members have a standard that they would like
to see embraced by major studios?
Speaker 2 (08:32):
We have For purposes of this conversation, which has been
going on for a couple of years now, we have
talked about kind of the core essentials are a consistent
slate of wide movies going into the theaters, supported by
a period of exclusivity. Last year at Cenemacon, I made
a speech about this and I said it should be
at least forty five days. We've used that as a marker.
There needs to be marketing commiserate with the size in
(08:55):
the scale of the movie, and we believe that those
at core essential elements s FOD window, the subscription window,
maybe ninety days, but those are kind of the key
elements that we've been consistent about when we have conversations
with people.
Speaker 1 (09:08):
I know you've heard this before from the distributors. They say,
but I do all this marketing for the theatrical release,
and it does telegraph to the audience this is important,
pay attention. And then they say that I want that
home entertainment window or the streaming window to come sooner
so I can still piggyback off of all of that marketing.
You know, marketing is one of the many things in
(09:29):
our world is changing. Have there been any constructive discussions
or experimentation to bridge that gap somehow?
Speaker 2 (09:36):
So? I think marketing is an area where we can
work together for a better result, frankly, and we've started
to have some of those conversations about how do we
do this better. If you were to ask me, where
I really think the marketing pinch has felt the most,
it's not in the top twenty movies. It's not in
the blockbusters. It's in twenty one through one hundred, what
we call at Cinema United, the next eighty. The box
(09:58):
office drop post pay pandemic for those movies is three
times as big as the box office drop for the
top twenty. And those are the movies, they're the smaller movies,
the medium sized movies, they need the marketing, they need
the time in the theater to build an audience. So
that is an area where we should try and come together,
because the truth is our industry cannot survive without those
(10:21):
next dating movies. We cannot just become simply a blockbuster
industry that has a certain number of event films throughout
the year. It's unsustainable that we have to bolster the
rest of the sleep.
Speaker 1 (10:32):
So Michael was a DC veteran. You can see that
this is leading to hearings that there's going to be
a lot of discussion about this before the sides get
to the finish line. What role do you see Cinema
United playing in the larger conversation about whether this merger
would make Netflix just simply too big and too powerful.
Speaker 2 (10:50):
One of the things that interests me is when you
have these big mergers, not just in the entertainment space,
but in any space, they inevitably become narratives about stock price,
about how much money is in, about executive compensation, and
those types of things, and they're rarely about necessarily the
downstream practical impact of the merger itself. And so I
think that our primary focus is to educate people and
(11:13):
to elevate awareness. You know, the people that I represent
are the vast, vast majority of them are small business owners,
and they operate in rural communities, They operate in small towns.
It's not just the big circuits that you hear about
a lot or that appear a lot in variety. It's
different places all around the country, and they're the ones
that are going to feel the impact if there's fewer movies.
(11:35):
So we are getting out there trying to educate people
about these things. I grew up in western Montana, and
it's not uncommon for people or to drive thirty forty
miles and all types of weather to go to a theater.
Those theaters go away, then we're losing something, not just economically,
not just culturally, but a way that we communicate with
each other. And so part of our job is to
get out there and to make that case.
Speaker 1 (11:56):
We've been talking about Netflix, but Paramount now is also
factor or really wants to be a factor in this
final decision. How do you think your members feel about
the possibility of these assets going to Paramount.
Speaker 2 (12:08):
G at this juncture. The way I would characterize it
is we are concerned about consolidation in general. Obviously, if
you have an acquiring studio that has a historical reverence
and support for theatrical we think that's probably a positive.
But at the end of the day, goes back to
something we talked about right at the outset, which is
(12:30):
if the number of movies that are for theaters goes down,
that's a problem for us, and we would have to
date that opposition. So we are not in a position
right now where we're choosing sides. We're evaluating both of
the situations and we'll go from there. But our north
star is really, really very clear. If it results in
fewer movies in the theaters, that's bad for exhibition, it's bad
(12:52):
for consumers, and frankly, we think it's bad for the
entire industry.
Speaker 1 (12:55):
Obviously, it's a very new regime at Paramount, first big
change there in more than thirty years. What's your general
sense of the new regime there. They certainly seem to
be very committed to theatrical movies.
Speaker 2 (13:07):
I think they have a track record of being committed
to it. You know, David Ellison has done some incredibly
successful things for theater. They're building a team over there,
that believes in theatrical as well, So I think those
are all very positive.
Speaker 1 (13:19):
Science setting aside Netflix and Paramountain and Warner Brothers of
it all, let's talk in general about moviegoing and the
exhibition market. As you mentioned, it has been an up
and down year for the box office that I know,
there's hopes for a strong finish with James Cameron bringing Avatar,
fire and ash. In terms of rebuilding since the pandemic,
(13:40):
where do you think twenty twenty five is going.
Speaker 2 (13:43):
To follow on the whole? I think there are some concerns.
At the same time, there's some really good, you know,
information out there about consumer enthusiasm, which bolsters kind of
our optimism for the for the future. You know, over
two hundred million Americans went to the theater last year.
The percentage of people that are habitual moviegoers, which is
(14:04):
six or more movies a year, continues to rise at
one up eight percent just in twenty twenty five. The
enthusiasm for the theater is being driven frankly by gen
Z people, and so we feel like what's happening now
is we're building that next generation of moviegoers, and that's
not something that you do in one year or two
(14:24):
years or three years. It takes a certain amount of time.
You know, even younger people like this are starting to
go back to the theater. So we feel very good
about that. The slate for next year I think has
some real promise to it. So notwithstanding kind of the
inconsistent nature of twenty twenty five, we feel like we're
in a very good position going into next year. What
(14:45):
we really need is to not have these kind of
gaps in the schedule where there's just not a lot
out there that appeals to folks, because, as you know,
you know, movie going begets movie going and you go
to the theater and you have a good experience, and
you enjoy the movie, and you maybe see a trailer
or two and you say, oh, I want to come back,
and it becomes kind of a rhythm and you start
to come back. And when you have these gaps where
(15:06):
you have difficult quarters or difficult period of like six weeks,
you lose that momentum. And I think that is one
of the things that we still haven't fine tuned to
the point where we can carry that forward.
Speaker 1 (15:18):
That old fashion foot traffic is so important over the
year's variety. We have reported on efforts to build that
kind of bridge between the exhibitor and the home online
access to movies. None of them ever really took root.
And then again we closed our eyes and Netflix, you know,
came and really invented the model. But is there anything
(15:38):
you think exhibitors can lean into in terms of dealing
with that gap, How the exhibition, how that experience can
be a little bit more connected with the swirl that
goes on about movies and movie personalities and movie franchises
twenty four to seven on social and online.
Speaker 2 (15:55):
Yeah. I mean, look, I think part of it this
goes back to the conversation we were having about marketing
and what is it that drives people to the theaters.
It's not necessarily like it used to be, which was
commercials on linear TV. It's different things. You're seeing people
starting to experiment with different ways using social media more effectively.
TikTok obviously has a huge influence. The studios do that,
(16:16):
and exhibitors do it. Individual exhibitors do it again under
the auspices of marketing. Is this an area where we
could maybe work together more effectively. Absolutely, I think there's
a lot of potential for growth there. You know, if
I know, for example, that someone goes to see Superman
three times, well they might be a candidate for seeing
it in the home later on, and so how do
(16:37):
we make that make those things work? So I think
there's a lot of opportunities there, but we've got to
seize that those opportunities and make the most of them.
Speaker 1 (16:46):
You reference that so much of exhibition ownership in the
US is small businesses. Is that at all a challenge
in that studios are dealing with a lot of smaller
companies In terms of trying to affect anything that could
be more like national skew in terms of an online
promotion or something like that.
Speaker 2 (17:04):
It really shouldn't be And I think we should be
sophisticated enough that you can do multiple things at the
same time. You may not have the exact same approach
with a multi national circuit that you do with a
four screen in the middle of Idaho, but you should
be able to make that work. The truth is we're
in the digital age where films are transferred digitally, So
getting the films to the people should be relatively seamless,
(17:27):
and there ought to be ways similar to communicate how
to market it. But one of the challenges that some
of the smaller circuits have is they don't necessarily know
they're getting a movie told right before it's there, and
it's very hard to market in that short window. I
don't see kind of the diversity of sizes of theaters
domestically or internationally. I see that as a strength, not
(17:49):
a hindrance to creating more movie going audiences. The one
thing that I've learned I travel a lot, and I
go to different size theaters all over the country. The
one thing that I've learned a lot is there's not
a person in the industry who knows the people that
go to a specific theater than the person who owns
(18:10):
that theater. And you will see them in the lobby
talking to people, asking them how their kids are, what
did you think of that movie? What movie are you
excited about seeing? This fall? And we have to take
that knowledge and make it work for us. So there's
a lot of opportunities out there. We just have to
figure out how to create critical mass with all the
different things that we know about people who love coming
(18:31):
to the theater.
Speaker 1 (18:33):
Do you feel like the adversity of the last five
six years has made people more open to change?
Speaker 2 (18:38):
I think that the last five years should make our
industry stronger. At the same time, change is always difficult,
and people embrace it at different speeds, And part of
what's challenging is I think we all recognize that there's change,
but we don't know what the next iteration looks like exactly,
so that creates some uncertain and but one of the
(19:01):
things you've started to see in the last couple of
years is this kind of notion of experiential theater and
people coming to the theater for the movie and then
staying afterwards and talking about it, or going early and
doing some type of activation around the movie. That's really
really important. One of the things that gives me a
great deal of hope is if you'd have asked me
(19:21):
three years ago, what do I think one of the
biggest problems our industry has, I would have without question
said access to capital. You know, coming out of the pandemic,
the economy wasn't great, and there were just all money
was tight and there's left of eggs. But I also
think that what happened that probably doesn't get the attention
that it deserves is at that difficult fiscal time, theater
(19:44):
owners of all size is recognized that in order for
us to survive, and not only survive, but to thrive,
we have to create special experiences and a lot of
that goes to what happens when you walk into the theater.
So they started reinvesting. We did a report recently which
said that in the last twelve months, the North American
(20:04):
theater and industry alone reinvested one point five billion dollars
in their theaters. And you're going to see that in
terms of, you know, better projectors, better sound, better chairs,
nicer lobbies, more food and concession options, new carpeting. It
should you should see it as soon as you walk in.
And we believe that that one point five billion dollar
(20:27):
investment again by the one screen theaters all the way
up to the biggest theaters, that's a sign of intent
that we are committed to making experience as special for people.
And so in terms of the evolution and the change
you're talking about, I think you see it in small way.
We talk about the next great era of cinema. We're
at the beginning of that, and I'm excited about the
(20:47):
commitment that our folks have to that.
Speaker 1 (20:49):
Did us exhibition overall? Did it lose a significant number
of screens in the US after the pandemic. Were their
theaters that closed, It just never reopened.
Speaker 2 (20:58):
There were some that closed. I wouldn't say that lost
a significant amount. This industry has always ebbed and flowed.
Speaker 1 (21:04):
We've seen efforts to kind of create these movie going events,
not just in anticipated franchises, but things like Taylor Swift
putting her concert movie in theaters for a limited amount
of time, putting her Life of a Showgirl album release
party for a weekend. You know, show up on the
weekend or you'll miss it, kind of thing. I would
imagine exhibitors love those kinds of stunts, anything with Taylor Swift,
(21:26):
But are those challenging to work with to like marshal
everything for one weekend and you're not going to have
that like the longer tail effect as you would with
a more typical film.
Speaker 2 (21:36):
Obviously, there are challenges with things like that. There's a
lot of amazing work going on out there in exhibition
where they will curate specific events, and they will start
weeks in advance, and they will put together and they'll
create specific posters, and they will reach out to specific
audiences in the community that they know that are going
to be interested in that. Obviously, it's very hard to
compete with Taylor Swift, so that's kind of the high
(21:57):
water mark. But there's a lot of great things that
are going on out there. Well.
Speaker 1 (22:01):
Taylor Swift is nothing if not the queen of all
media and marketing. And if she finds value in the
theatrical experience, which she clearly does, that says a lot.
One thing we talk about every week when we're talking
about box office premium large format screens, those have become
a bigger and bigger factor, a bigger component of box office,
especially for big, big tent pole titles. How is the
(22:23):
premium large format world plugging into the overall box office picture?
And are there is there any tension between more traditional
the more traditional mom and pop exhibitors. Is that seen
as a bit of cannibalistic.
Speaker 2 (22:37):
It can be To be candid with you, and I
think that one of the things that's happened over the
last twelve to eighteen months is we've become more sophisticated
in the way we talk about There's clearly an audience
for the big PLF experience that's willing to pay a
higher price point to have certain bells and whistles. But
one of the things that's super important for people to
remember and incredibly important for us as an industry to
(22:58):
constantly reinforce is that every theater, in your local theater
is a premium experience, and so there's something there. We
talk about there being something for everyone at the theater. Now.
We talk about that most often in terms of the
variety of films, but it's also in terms of what
is the experience that you want to have, and if
you have a family and you've got five kids in tow,
(23:19):
you may want a more traditional setup, which is still
an amazing setup. So you know, if you go to
some of the theaters that are out there right now,
you will see ten or eleven auditoriums, and they're all
different because they're all catering to different types of crowds. Ironically,
some of them are purposely very small to kind of
create the one screen experience. So PLF is very very
(23:42):
important and it will continue to grow, but it cannot
be at the expense of the rest of the house,
and we have to be very careful about that. So
when we're creating experiences, we do it across the spectrum
of facilities that we have let.
Speaker 1 (23:55):
Me close by asking you what would you like our
audience of Showbiz Insider ten know about exhibition, about what
it takes to run a theater, about the business of
movie going.
Speaker 2 (24:06):
One of the things that we've really focused on on
the last year, because we think it's critically important, is
we talk about our industry not as a Hollywood industry,
but a main street industry. And I'm always talking to
my friends in distribution and saying, go to the middle
of America and see what's happening there. Go to places
in western Montana, or in Nebraska or Iowa or wherever,
(24:26):
and what you're going to find is that movie theaters
are the heartbeat of main streets all over the country
and in the world, frankly, And one thing that I
don't think people understand is how important the movie theater
is beyond just being a place to go see a movie.
There's recent research that shows that for every dollar that
is spent in a movie theater, there's an additional dollar
(24:47):
and fifty cents which is spent in the surrounding community.
So that could be in a restaurant, in a bar, shopping, transportation,
you name it. And so these really are the cornerstones
of towns all over the United States, and it's a
place where people can come together and have a shared experience.
And the truth is, in our society that doesn't happen
very much anymore. And I may be alone in this,
(25:09):
but I actually think that's really important. And I think
that so we talk about the economics of the industry,
and we talk about the cultural impact of film, but
there's also an impact in terms of the types of
communities that we live in. And we think that's an
incredibly special thing which doesn't show up on a balance sheet,
but is very very important.
Speaker 1 (25:25):
Current events and are going to put a bigger spotlight
on this realm of entertainment and the particular pressures and
the challenges. I think this is the moment time when
Hollywood really has to decide whether it's going to invest
in moviegoing. So much to discuss, Michael, Thank you so
much for coming on in.
Speaker 2 (25:41):
Thank you it's terrific.
Speaker 1 (25:42):
Thanks for listening. Be sure to leave us a review
at the podcast platform of your choice. Please go to
Variety dot com and sign up for the free weekly
Strictly Business newsletter, and don't forget to tune in next
week for another episode of Strictly Business
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!