Theaters Owners in Panic Mode as Netflix Looks To Buy Warner Bros. - “Hopefully the Deal Gets Killed”

Movie theaters are already fighting an uphill battle and Netflix just tossed another giant boulder onto the slope. The streamer announced plans to buy Warner Bros. for a staggering $82.7 billion, a deal that still needs regulatory approval but has already shaken exhibitors who rely heavily on the studio’s steady output of theatrical releases.

For many theater owners, the idea of Netflix controlling one of Hollywood’s most historic film factories feels like watching the floor drop out from under them.

“The world just shifted on its axis,” said Stacey Spikes, co founder of MoviePass, summing up the shockwave rolling through the exhibition industry.

Some theater operators are downright hoping the deal collapses. Chris Randleman, chief revenue officer at Flix Brewhouse, talked about how crucial Warner Bros. is to keeping theaters alive.

“Hopefully the deal gets killed so Warners can be sold to a better entity. The ball is in the court of the talent in Hollywood. I hope they come out against this, because that could change things. All the IP in the world isn’t going to mean anything if you don’t have filmmakers and movie stars willing to work with you.”

Netflix insists it “expects” to keep releasing movies in theaters. Still, during a call with press and investors, co CEO Ted Sarandos offered a less than glowing reassurance about maintaining the kind of theatrical strategy Warner Bros. has used for decades.

“I wouldn’t look at this as a change in approach for Netflix movies or for Warner movies,” Sarandos said. “I think, over time, the windows will evolve to be much more consumer friendly, to be able to meet the audience where they are quicker.”

That comment instantly lit a fuse for exhibitors and filmmakers who have spent the last few years rebuilding from pandemic era disruptions. One unnamed A-list director shared the fear many share.

“The most ominous words I read were that the windows will ‘evolve’. I know exactly what it means. Netflix wants to put movies in theaters for one week to two weeks then it’s right to streaming. At that point, why put it out”

For exhibitors, release windows are everything. Before the pandemic, most films enjoyed a 90-day exclusive theatrical run. Now many hit premium video platforms within weeks. Eduardo Acuna, CEO of Regal Entertainment, warned that any further contraction could be devastating.

“It has been widely proven that shorter windows would result in lower revenue generation potential for movies,” Acuna said. “These lower revenues would inevitably result in theater closures, which would limit consumers’ ability to see movies in the format that filmmakers originally intended.

“Furthermore, it would result in job losses and economic harm to surrounding businesses to those theater closings. Ultimately, consumers would be worse off.”

Still, not every theater owner sees this situation as doom at first glance. Some believe Netflix might find itself surprisingly attached to the very theatrical model it once disrupted. Tim Richards, founder and CEO of Vue Entertainment, thinks the streamer could have a change of heart once it starts handling massive franchises like Batman, Ocean’s 11, The Lord of the Rings, Harry Potter and The Conjuring.

“It could be a big win for us,” Richards said. “Once they’re releasing movies like Barbie or Minecraft that are making a billion dollars in theaters, they’re going understand that our business model can make them a lot of money, while also driving interest in movies when they go on streaming.”

I’d like to think that is true, but Netflix has never championed theatrical releases. If they have one of two theatrical bombs, that will just give them the excuse to shorten up those theatrical releases.

The timing of the deal is particularly tough for exhibitors. Theaters have been scraping by with fewer films in the marketplace and studios producing less overall. The 2019 Disney acquisition of 21st Century Fox already removed one major supplier, and losing Warner Bros. as a traditional theatrical powerhouse would hit even harder.

This year has been especially strong for the studio, which currently holds the number one market share with hits like Sinners, A Minecraft Movie, Superman and Weapons. Acuna didn’t downplay the stakes, saying:

“This is very consequential. Warner Bros. had seven movies open to over 40 million this year. That’s never been done before and they’ve done a fantastic job of making a lot of movies across many different genres.”

Sarandos tried to point out that Netflix isn’t a stranger to theatrical releases. “It’s not like we have this opposition to movies into theaters,” he said, noting the company has released 30 films theatrically.

Titles such as A House of Dynamite and Jay Kelly do appear on the big screen, though usually on hundreds of screens instead of thousands. These runs are often to qualify for awards rather than to chase box office revenue, but exhibitors benefit from Netflix’s friendlier revenue split.

The streamer typically takes around 35% of ticket sales, far below the 50% to 60% major studios take for wide releases.

Some theater owners even think Netflix’s gigantic investment might push them toward embracing more traditional distribution. The cost of acquiring Warner Bros. is massive, and those billions need to come from somewhere. Randleman hinted that theatrical revenue might suddenly look more appealing.

“My official position is, I hate this, and I want this to not happen but I’m not in full freakout mode. Money is still money. You can only raise prices so much on your subscriptions. How do you pay for your 80 billion investment Well, ticket sales can help you make a dent.”

For now, everyone in the exhibition world is holding their breath. If regulators approve the sale, Netflix will control a studio built on a century of theatrical tradition. The question is whether the streamer will preserve that tradition or reshape it in a way that leaves theaters scrambling once again.

Sure, Paramount has now put in a Hostile big of for $108 billion, so we’ll have to see how this plays out.

Via: Variety