After three of the worst years on record in the movie business, there was an almost palpable sense of relief in Hollywood when two bona fide blockbusters appeared on this year’s list of best picture nominees for Sunday’s Academy Awards.
The academy has often overlooked big commercial films in favour of recognising capital-C cinema. But the nominations this year of Top Gun: Maverick and Avatar: The Way of Water — already two of the highest-grossing pictures ever — appeared to make a point about something more than just quality filmmaking.
The two films had proved that even in the streaming era, movies are still capable of drawing masses of people to a darkened cinema. Tom Cruise, who starred in and co-produced Top Gun, held the film’s release for two years during the pandemic in order to secure a cinematic run instead of releasing the film straight to streaming — a practice many studios had embraced to boost subscriptions to their services. James Cameron, the director and producer of Avatar, also made clear that his 3D film was meant to be seen on the big screen, not in the living room.
Now, in the wake of the films’ success, the major Hollywood studios — most facing intense investor pressure to halt the losses in their streaming businesses by next year — are rediscovering the charms of old-fashioned box office revenue. In Hollywood, where the Netflix model has eaten away at traditional sources of income, this feels like vindication.
“Just about every studio and every streamer has indicated that they’re going to send all of their movies to the theatres first, and then to a streaming service,” says Rich Gelfond, the CEO of Imax. “The fact is that a theatrical run improves the streaming run. The programmers were naive when they thought people would sit on their couches and watch every piece of content. The market has corrected itself.”
Two of Hollywood’s biggest CEOs, Bob Iger of Disney and David Zaslav of Warner Bros Discovery, appear to have turned their backs on the most radical streaming experiments launched during the frenzied race for subscribers. These included releasing films on their streaming services on the same date as in theatres, and sometimes putting feature films on to streaming without a theatrical release at all.
Now they want to go all-in on splashy theatrical releases. Iger, the veteran Disney chief who stepped out of retirement to return to the company in November, says he will “lean into” the company’s most profitable franchises — including Marvel, Pixar and Star Wars — while “aggressively curating” its general entertainment output.
“If you look at the trajectory of Marvel over the next five years, you’ll see a lot of newness,” Iger said this week at an investor conference. “We’re going to turn back to the Avengers [superhero] franchise but with a whole set of different Avengers . . . We still are developing Star Wars films.”
The risk, however, is by doubling down on a handful of potential blockbusters, the studios end up neglecting the mid-market and indie films that some executives believe to be the industry’s lifeblood.
Tom Rothman, chairman and CEO of Sony Pictures Motion Picture Group, says studios will have to find a balance between the big “tentpole” pictures and newer work.
“Sequels and superheroes are important — that’s probably half our slate,” he tells the FT. “But also really important: do not give up on originality. There is something that could kill the movie business, and it’s not Covid, it’s not streaming — the real threat to the movie business is if it stops taking risks on original product.”
Focus on franchises
This year’s Academy Awards arrive as Hollywood studios are suffering from a serious hangover after years of cheap-money investment in their streaming operations. With everyone stuck at home, subscriptions soared — and Wall Street cheered.
But the party ended early last spring, when Netflix said that its 10-year streak of subscriber growth had hit a wall. Suddenly, investors wanted to see a path to streaming profitability — and they became concerned about studios’ debt piles, including at Warner Bros Discovery and Disney. A halting recovery in the box office, where takings were down by $4bn last year from 2019, did not help.
No wonder, then, that the studios are looking to reinvigorate their big franchises, the closest thing to a sure bet as a Hollywood studio executive can find, even with their high production costs. Iger helped usher in a new blockbuster era with his bold acquisitions of Marvel, LucasFilm and Pixar, giving Disney an enviable collection of intellectual property. The result was a string of some of the highest-grossing pictures of all time, including Star Wars: The Force Awakens in 2015, Avengers: Infinity War in 2018 and Avengers Endgame in 2019.
For the traditional studios, placing the box office back at the top of the food chain also repairs what many saw as one of the most egregious mistakes of the past few years: sacrificing millions of dollars of cinema ticket sales in the interest of attracting new streaming subscribers. Now it is accepted within the studios that this was a flawed premise. Putting marketing muscle behind a theatrical release helps films get noticed once they land on a streaming platform.
This year’s best picture nominees highlight the vast financial chasm between big-budget, money-spinning Hollywood franchises and the mid-budget films that the academy often celebrates. Avatar has grossed about $2.3bn at the global box office, while Top Gun — which didn’t benefit from a China release — brought in $1.5bn.
Compared to those hauls, the $28.8mn that Steven Spielberg’s best picture nominee, The Fabelmans, drew at the box office looks like pocket change. The black comedy Triangle of Sadness brought in the least of the best picture nominees, at $4.5mn, despite critical success. The film with the most nominations — Everything Everywhere All at Once — brought a strong $88mn, according to data group Comscore.
Some analysts have said that Disney has worked the Marvel titles too hard, especially as it sought to create original content for the Disney Plus streaming service.
Iger has indicated he may try to be more judicious about commissioning Marvel spin-offs. “Sequels typically work well for us, but do you need a third or a fourth, for instance?” he said. “Or is it time to turn to other characters? There’s nothing in any way inherently off in terms of the Marvel brand. I think we just have to look at what characters and stories we are mining.”
Zaslav is following a similar trajectory, saying he is eager to restart the Superman and Harry Potter series. “We’re going to have a real focus on franchises,” he told investors last autumn. “The DC movies and the Harry Potter movies provided a lot of profits to Warner Bros motion pictures over the last 25 years.”
An adrenaline shot for indie film
With the prospect of even more iterations of superhero franchises, some question how much room there will be for low- and middle-budget films. These movie house staples — romantic comedies, courtroom dramas, breakout indies, serious films for adults — may have an even tougher time getting a cinematic release with Hollywood studios in cost-cutting mode having invested billions in their streaming services.
Lia Buman, co-founder of the independent film and TV production company Tango, said that at the recent Sundance Film Festival, “It didn’t feel like there was as much spreading the wealth among the films”.
“It was very centred on maybe one or two films,” she says. “So I feel like that might be a reflection of the cost cutting or of [people] feeling like they did not want to make a mis-step.”
Yet some in the industry hope that the balance will soon shift away from blockbusters. Buman, whose recent films include the critically-acclaimed Aftersun and Weird: The Al Yankovic Story, says that people in her corner of the film world are nonetheless feeling optimistic as more people return to the cinemas. What Top Gun: Maverick did for mainstream film, she says, Everything Everywhere All At Once did for indies. Released by New York independent studio A24, Everything Everywhere was the breakout film of the year — a wild story of an ordinary Asian-American family travelling through multiverses.
“I feel like it reinvigorated the audience for a smaller film,” Buman says. “It was an adrenaline shot for our corner of the industry.”
Rothman at Sony, the lone major studio chief who decided to sit out the streaming wars and sell content to the streamers instead, says audiences have already started returning to see mid-budget films. He cited the recent performance of his own studio’s A Man Called Otto, starring Tom Hanks, which has taken in about $100mn. He also noted that Universal’s Cocaine Bear and its schlock horror film M3gan have done well at the box office, along with Paramount’s 80 For Brady.
“There are actually a lot of original medium-budget movies that have been extremely successful even in the last six months,” he says. “It’s not true that audiences only want sequels and superheroes.”
Gelfond says he sees the possibility that the changing economics of the business could actually boost smaller films. He concedes that in the past several years the trend has been dominated by blockbusters “and away from smaller films”. But he thinks that a change in the major studios’ models — where there are fewer films made exclusively for streaming — should free up money to make smaller theatrical films.
“I think the pendulum is going to swing back a little bit from blockbusters now that more of the content makers are going to make films for theatrical release and then put them on the [streaming] service later,” he said. “I think the economics of the streaming services will allow them to make more small theatrical movies.”
Another boost for the movie business this year: more movies. Paul Dergarabedian, an analyst at Comscore, says the disruption in film production caused by the pandemic will start to ease in 2023. Last year there were 41 fewer nationwide releases in the US than in the pre-pandemic year of 2019; he expects an increase of 30 films from last year, to about 100 releases.
This should result in box office revenue of $9bn — up significantly from $7.5bn last year but still well below the all time record of $12bn in 2018, Dergarabedian says.
But Rothman thinks the resurgence in the movies will be stronger than that. He believes that 2023 will come “within spitting distance of” the pre-pandemic levels in 2019, at least in the US.
“Moviegoing is back with a vengeance,” Rothman says. “You’re about to see what’s going to be an explosive summer.”
Data visualisation by Chris Campbell
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