How The Pandemic Has Changed Theatrical Releases and the Effect of this Change on Streaming Services - Fordham Intellectual Property, Media & Entertainment Law Journal
27005
post-template-default,single,single-post,postid-27005,single-format-standard,ajax_fade,page_not_loaded,,select-theme-ver-3.3,wpb-js-composer js-comp-ver-6.4.2,vc_responsive
 

How The Pandemic Has Changed Theatrical Releases and the Effect of this Change on Streaming Services

How The Pandemic Has Changed Theatrical Releases and the Effect of this Change on Streaming Services

Imagine this. It’s mid-April, you’re weeks-deep into a quarantine that is seemingly never-ending, you’re tired of watching “acclaimed” Netflix series after series, you need a break. Then you see it: Trolls World Tour released for rent on iTunes for $20. What a steal! The movie theater would be more expensive, and this is a mindless, upbeat film to distract you from the endless spiral of terror the news is throwing at you. What you may not have realized was the statement Universal made by “releasing Trolls World Tour in global theaters and through Video on Demand (“VOD”) on the same day,” which, according to Alexia Quadrani, Head of U.S. Media Equity Research at J.P. Morgan, was Universal throwing out the playbook.1 Regarding the decision, Quadrani noted, “[t]he theatrical window has always been sacrosanct across the industry, serving as a way to protect the theater experience.”2 While Universal may have been the first studio to make this decision, they were not the last. The long-awaited live action adaptation of Mulan was slated for release in March, then July, and after one final push to an August theatrical release,3 Disney made the decision to forego a theatrical release and “debut [Mulan] exclusively to Disney+ subscribers in the U.S. on Sept. 4 for $29.99.”4 VOD has always been second to a theatrical release. Rarely has a film been released on VOD before or at the same time it is released in theaters—that is, until Netflix began releasing original content.

What Netflix has done for years—releasing content straight to VOD5—studios are now realizing is a way to recoup costs that may be lost. LA-based producer Victor Garibay noted in an interview with Entrepreneur India, “[b]ecause theatrical releases are not possible, major movies will either have their release dates delayed or go directly to streaming services… [which] will have major ramifications for movie theaters, marketing agencies and studios. Re-budgeting for marketing, loss of ticket sales, concessions, [and] the fallout of collaborations, etc., will occur.”6 While in April there was backlash from major movie theaters regarding Universal’s decision to release Trolls World Tour on VOD,7 today it is clear that the landscape for media consumption has been changed by the pandemic, and if not for good, for a very long time. While it is possible that VOD release windows will “largely normalize after COVID-19 subsides, it could accelerate changes and perhaps leads to a more flexible window.”8 Quadrani notes, “[t]his could mean that different films have different theatrical windows. For example, films that underperform at the box office would be moved to VOD earlier, while films that meet expectations keep the standard window.”9 In fact, Universal recently announced a deal with AMC Theaters which “allows Universal and its sister studio, Focus Features, to provide AMC with three weekends or 17 days of exclusivity for their films before having the option to release them to on-demand platforms… a major break from the typical 70 days of exclusivity.” 10 This potentially lasting change to movie releases means more content, and sooner, for VOD services.

VOD streaming services are not new, and Netflix has not been the only player for quite a while. “Several different competitors [have] threaten[ed] to chip away at market share from Netflix”, including Amazon, Hulu,11 Disney+, Apple TV+,12 and most recently, NBC’s Peacock and HBO Max.13 As the desire for at-home content increases, and as content is being released to VOD earlier, both streaming services and subscribers alike are being stretched thin. The reason: licensing rights.

Video streaming licensing rights are:

 

[Rights] given to [a] third-party by the copyright holder for the use of their content. The agreement can involve a price paid for the license, the limit of use, and other conditions. For example, the owner of a TV program can give you a license to operate a movie or stream all the seasons of a particular show in your online platform to a specific period. Once the period of the agreement expires, it can be renegotiated or dropped depending on the viewer’s interests.14

 

Video streaming licenses can be placed in two categories—non-exclusive and exclusive:

At times, content owners sign multiple contracts for the same content with multiple on-demand platforms. This is known as [a] non-exclusive agreement and [is] far less expensive than exclusive agreements… Exclusive agreements are a differentiator among content providers, especially when there are a large number of video-on-demand services in the industry. An exclusive license agreement between a content owner and broadcaster can be fixed  for a specific number of years where the broadcaster will have exclusive rights to manage and stream the content. Exclusive agreements are massive investments and come with a hefty price. But, exclusive content can draw large numbers of subscribers to your video-on-demand platform.15

 

Before Disney+ hit the market, “Netflix and Disney had an exclusive relationship,”16 but when Disney announced its plans to launch a streaming service, it severed ties with Netflix, and Netflix had to cut all Disney titles from its lineup in 2019.17 Netflix’s Chief Content Officer noted, “[o]ur early investment in doing original content more than six years ago was betting that… there would come a day when the studios and networks may opt not to license us content in favor of maybe creating their own services.”18

As each major studio decides to start its own streaming service, content will be stretched increasingly thin, and subscribers will have to pick and choose where to put their money. The licenses and content a service has will determine its viability and market share of subscribers, as many have to make the tough decision of which services they can afford and which they cannot. While the pandemic may not last forever, at-home viewership and the ease that comes along with it may continue to grow. The streaming services that are able to not only produce the best content, but also license what their subscribers want will be the companies that come out on top in the race to have the best content on their service.


  1. Media Consumption in the Age of Covid-19, J.P. Morgan (May 1, 2020), https://www.jpmorgan.com/global/research/media-consumption [https://perma.cc/XQ88-HV3M].

  2. Id.

  3. Ahiza García-Hodges, ‘Mulan’ to skip theaters and premiere on Disney+ for $29.99, CNN (Aug. 4, 2020), https://www.nbcnews.com/pop-culture/movies/mulan-skip-theaters-premiere-disney-29-99-n1235831 [https://perma.cc/ZRL4-LYWQ].

  4. Id.

  5. See David Trainer, Loss Of Licensed Content Is An Underrated Crisis For Netflix, Forbes (Mar. 8, 2019), https://www.forbes.com/sites/greatspeculations/2019/03/08/loss-of-licensed-content-is-an-underrated-crisis-for-netflix/#7246103f2111 [https://perma.cc/26XV-URM5].

  6. Priyadarshini Patwa, Coronavirus Entertainment Industry: The Crippling Blow, Paradigm Shift and the Future, Entrepreneur India (Apr. 22, 2020), https://www.entrepreneur.com/article/349638 [https://perma.cc/D3TH-FLHN].

  7. Nancy Tartaglione, Regal Owner Cineworld Chimes In On ‘Trolls World Tour’ Controversy: “We Will Not Be Showing Movies That Fail To Respect The Windows”, Deadline (Apr. 29, 2020), https://deadline.com/2020/04/cineworld-regal-universal-trolls-world-tour-theatrical-windows-1202920828/ [https://perma.cc/SUT4-5AHT].

  8. Media Consumption in the Age of Covid-19, supra note 1.

  9. See id.

  10. García-Hodges, supra note 3.

  11. Dan Moskowitz, Who Are Netflix’s Main Competitors?, Investopedia (May 16, 2020), https://www.investopedia.com/articles/markets/051215/who-are-netflixs-main-competitors-nflx.asp [https://perma.cc/BTK3-ZCMV].

  12. Tara Lachapelle, How Covid-19 Is Changing Entertainment, in Five Charts, Washington Post (May 8, 2020), https://www.washingtonpost.com/business/how-covid-19-is-changing-entertainment-in-fivecharts/2020/05/08/a3f3d8b8-912c-11ea-9322-a29e75effc93_story.html [https://perma.cc/KC24-3F5G].

  13. Media Consumption in the Age of Covid-19, supra note 1.

  14. How does Netflix license TV shows and movies?, Streamhash (Dec. 18, 2017), https://streamhash.com/how-does-netflix-license-tv-shows-and-movies/ [https://perma.cc/9AGY-P7V8].

  15. Id.

  16. Moskowitz, supra note 11.

  17. Id.

  18. Trainer, supra note 5.

Dori Morris

Dori Morris is a third year J.D. candidate at Fordham University School of Law and a staff member of the Intellectual Property, Media, & Entertainment Law Journal. She holds a B.A. in American History, with a minor in Cinema Studies, from the University of Pennsylvania.