Have streaming services and COVID-19 killed off cinemas for good?

Have streaming services and COVID-19 killed off cinemas for good?
Source: Aly Song, Reuters
Streaming services have seen a significant increase in value while the theater industry has suffered historic losses, especially as many studios transition to releasing films primarily via streaming rather than in theaters.

In December 2020, Warner Bros. announced that its entire 2021 movie lineup would be released exclusively on HBO Max in the United States rather than going to theaters. Disney has taken a similar stance by releasing a number of new films on its streaming platform.

With these recent announcements, the future of theater chains in the US is in doubt.

Where are major cinemas currently?

In March of 2020, much of the world entered a lockdown to prevent the spread of COVID-19. Around the same time, the stock price of two of the largest North American theater chains – Cinemark and AMC – began to drop at an alarming rate.

According to Yahoo! Finance, both companies’ shares (AMC and Cinemark) had dropped to half their value over a 60 day period.

Cinemas have been taking unique measures in order to stay in business. Some chains have offered potential customers the possibility of renting screening rooms for various events while others have offered to deliver food from their concession stands in order to profit. Regardless of these efforts, theaters have not seen any significant, long-lasting gains in share value.

However, measuring the value of the largest streaming services such as Netflix, Hulu/Disney+ and Amazon Prime proves a little more challenging.

How are streaming services performing?

While membership numbers for most streaming services have increased over the past year, streaming services weren’t exactly struggling even before the pandemic. Other than Netflix, Inc., the largest streaming services are also owned by companies that do not deal in streaming primarily. Disney+ and Hulu are both owned by The Walt Disney Company while Amazon Prime is owned by Amazon.com, Inc.

For a brief period during the beginning of the pandemic, The Walt Disney Company saw significant losses in share value that was likely due to its theme parks closing down. However, the company has shown historic gains since the fourth quarter of 2020.

Meanwhile, Amazon has greatly benefited from the pandemic as it deals in delivery services, streaming platforms and is one of the largest server providers in the US. Since March of 2020, Amazon has nearly doubled in value.

Streaming services have seen a significant increase in value while the theater industry has suffered historic losses. As with the Warner Bros./HBO Max deal, many studios are transitioning to releasing films primarily through streaming services rather than in theaters.

Film performance: streaming vs cinema

“Soul,” the highly anticipated Pixar film, greatly underperformed in the box office over the 2020 winter holidays. Pulling in a total of just US$101.3 million, the film, the first from Pixar to feature a Black lead character, made a fraction of what it would have been expected to make in non-pandemic times.

By comparison, “Toy Story 4,” which opened in 2019, generated a box office revenue of US$1.078 billion.

While it may initially seem as if the movie generated negligible profit for The Walt Disney Company, data regarding the performance of the film on Disney+ states otherwise.

According to research firm Screen Engine, 13% of Disney+ subscribers bought a subscription just to watch the film. The firm also reported that the film gathered 1.669 billion minutes of watch time within the first week it was released on the streaming platform.

What now?

With the current trend of studios releasing films to exclusive runs on streaming platforms, it is hard to imagine theaters maintaining their presence in a post-COVID world.

Theaters were already struggling to fend off streaming services prior to the pandemic and the performance of films on streaming platforms compared to in cinemas has demonstrated to companies that the mass public will be satisfied with paying a monthly subscription for consistent content.

“Movie theaters are clearly in trouble,” Stephen Lovely of Cordcutting.com told TMS, “and studios clearly need to be concerned about a decline even after the pandemic is over. But that might end up leading to bigger changes than ‘let’s just release this big-budget movie on our streaming service instead of in theaters.”

If this trend continues, movie theaters will have to make significant changes in order to survive.

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