Cigar Aficionado

When the Netflix movie Roma won the Academy Award as 2018’s best foreign film—after the streaming giant unleashed a multimilliondollar advertising campaign lobbying for the same film to win the Oscar for best picture—legendary director Steven Spielberg spoke out against streaming as anathema to the movie industry, a movement that would spell the death knell for theatrical distribution of movies. “I love television,” the director said at the time. “But there’s nothing like going to a big dark theater with people you’ve never met before and having the experience wash over you. That’s something we all truly believe in.” Spielberg even suggested Netflix films shouldn’t qualify for Academy Award consideration because of their minimal theatrical releases.

Fast-forward to this September, when the long-delayed Academy Museum of Motion Pictures finally opened its doors in Los Angeles with a glamorous gala. Who delivered the welcoming remarks? None other than Ted Sarandos, co-chief executive officer of Netflix. He also happens to be the president of the Academy museum’s board.

“I think that reflects the entire shift in the industry right there,” says Stephen Galloway, former editor of The Hollywood Reporter.

Is streaming taking over the movie industry? To some extent, it would appear. With production budgets that cumulatively approach $100 billion, streaming platforms such as Netflix, Amazon Prime, HBO Max and others have a worldwide reach into the homes of hundreds of millions of people.

But where the streaming invasion seems like a given here in year two of the Covid-19 pandemic, studios were already worrying about competition from streaming before the Corona-virus tanked the box office. How would plans by Netflix and other streaming services to stream first-run films—instead of releasing them into theaters—upend the old order? 

By the end of 2020, the studios viewed streaming as the savior of the movie industry, a way to get their films to a public that was largely shut up in their homes during the pandemic. Streaming now appears to have become a permanent and prominent part of the cinema environment.

The massive growth of streaming was, say some observers, an inevitability, one that was merely accelerated by lockdown. “What the pandemic did is accelerate the proliferation of streaming for the public. People wanted to be entertained,” says Paul Dergarabedian, senior media analyst for Comscore. “Many people found themselves suddenly streaming and subscribing. Streamers were in the perfect position, in of the timing and the nature of how they operate.”

The streaming avalanche was already heading our way. The pandemic simply amplified its impact. “Right now, the movie industry is in the midst of the biggest paradigm shift since the introduction of VHS,” says Owen Gleiberman, film critic for Variety. Adds film-blogger Jeffrey Wells, who writes the Hollywood-Elsewhere.com website, “It’s one of the most dramatic things that’s ever happened to me as a moviegoer.”

Netflix established itself as the free-spending streaming behemoth beginning in 2007, creating content that quickly began winning television-industry awards, such as “House of Cards” and “Orange Is the New Black.” Then it set its sights on the Oscars. The company, which got its unlikely start mailing subscribers DVDs via mail in 1998, posted $25 billion in revenues for 2020, and $2.8 billion in net income, up 23.8 percent and 47.4 percent, respectively, over 2019 numbers. Hulu, now majority owned by Disney, went live in 2008, and later followed with its own creative content, most notably “The Handmaid’s Tale.” Amazon Prime Video, part of Jeff Bezos’ $220 million megacompany, ed the fray in 2011. November 2019 saw the debuts of Apple TV+ and Disney+, the latter with its war chest of Star Wars and Marvel properties. HBO Max went live in May 2020.

Before streaming, a movie’s initial reach was limited to theaters, its success calculated simply: What were the box-office grosses? Whether it was the all-important opening weekend, or a film’s worldwide total, if a movie didn’t sell tickets, everyone knew it. The same was true of TV ratings, with numbers that showed how many people watched a given offering. For most of the history of television, the broadcast and cable networks engaged in a pitched ratings battle with each other, because bigger audiences meant higher ratings, which propelled advertising rates (and profits) upward. 

But Netflix and its competitors, which had no need for commercials, were opaque about their audience numbers from the beginning, never revealing how many of its subscribers watched any one film or series. What was the metric for success or failure for a film that debuts on Netflix or another streaming service? The potential audience is in the hundreds of millions, but the actual viewing figures are kept secret.

“If a movie has a purely theatrical opening and doesn’t do well, there will be articles saying that it failed,” said a streaming industry insider, who spoke on condition of anonymity because they were not authorized to speak for their company. “But if it’s on HBO Max and in theaters at the same time, then everyone can say they did well and the filmmaker can claim a victory.” 

It’s a sensitive subject, one few in the business care to discuss. Cigar Aficionado reached out to Netflix, Amazon, HBO Max and other streaming services with questions for this story. All declined the interview requests. Those representatives who did speak would not do so for attribution.

Even as the movie industry began to recalculate its metrics, the Covid-19 pandemic ground everything to a halt—and the movie industry found itself racing into the streaming universe toward which it had been tip-toeing.

“None of this should be surprising,” says Time film critic Stephanie Zacharek, chair of the New York Film Critics Circle. “Before the pandemic, there was definitely a trend toward people claiming to prefer to stay home to watch films, so companies had already decided this was the future. That was happening before the pandemic. Everything we’ve seen since has been moving in accordance with that.”

The numbers that do exist show the great power of these streaming services, particularly among the giants. As of the end of June 2021, market leader Netflix had a subscriber base of 209 million worldwide. Its next closest competitors, Amazon Prime (147 million) and Disney+ (116 million), have a strong lead over relative newcomers such as HBO Max, projected to have an audience of more than 70 million by the end of 2021. The old-school powerhouses of broadcast television are lagging far behind in this brave new world: NBC’s Peacock claims an audience of only 54 million, and CBS All-Access has only 30 million. (ABC and Fox are part of the Disney machine.) 

Even before Netflix’s ascension, there was an ongoing discussion about the future of movies in theaters. Was there a theatrical future for the kind of films that won the Oscars, but rarely the box-office race? Even the studios’ output of original films (i.e., films that didn’t come from a book, a comic or a TV show) had dwindled. “In 2019, the year before the pandemic, there were only a couple of original films that were hits,” says a streaming industry insider. “There was Get Out and Once Upon a Time in Hollywood. Most of the rest were tentpole films [movies that are all-but-certain to make big returns, often at a big production cost] or Marvel movies.”

Before the pandemic, the debate grew about whether arthouse movies—the kind of films that dominate the Oscar and critics’ award selections—could continue to survive in theaters, or whether they’d be displaced by the growing flood of comic-book and special-effects films that dominated the box-office charts. The audience, after all, was drawn to the multiplex by the kind of intellectual property (IP) tentpoles that kept the old studios alive: superheroes, best-seller adaptations, films based on old television shows, videogames, even board games. “Disney has all the best IP: Marvel, Lucasfilm, Pixar, the Muppets,” says Galloway, now dean of the film school at Chapman University. 

Despite the rise of streaming and the ability to watch so much content from the comfort and quiet of your own home, the gross domestic box-office returns in the United States continued to grow steadily in the past decade, hovering between $10 to $12 billion a year from 2009–2019. That was, until the pandemic. In March 2020, movie theaters ed schools, offices, athletic stadiums, art museums and so much more that were closed in the name of public health. In 2020, the figure plummeted to $2.1 billion. 

“Overnight on March 20, 2020, we went from 5,000 movie theaters to just 100 drive-ins,” Dergarabedian says. Movie release dates were pushed back, changed again, and in many cases moved to streaming platforms as the world struggled to figure out when things would return to normal. Suddenly, the movie audience was forced to engage with streaming services if they wanted to see new films. As the Firesign Theater once said, “Welcome to the future—it’s just starting now.” 

When the lockdown came, studios could simply sit on their finished titles and wait to resume production; but movie
theaters faced a serious financial crisis. Says Richard Abramowitz, CEO of Abramorama, a media company that specializes in distribution and marketing of independent films, “We’ve lost so many theaters in New York. Theaters have hurt desperately for 18 months. I see a potential downward spiral unless we pull out of Covid within the next year.”

Prior to the pandemic, much of the controversy between movie studios and theater owners dealt with windows of exclusivity: the period of time when movies are only available in theaters. The theater chains, which specified at least a 90-day window for years, have seen the standard window for a theatrical film (before it becomes available in an on-demand platform on a pay-per-view basis) drop to 72 days. Netflix shrunk that window for Martin Scorsese’s 2019 multi-Oscar-nominee, The Irishman. When no theater chain would agree to Netflix’s shorter window demand of 45 days, Netflix rented a limited number of theatrical screens around the country (including a Broadway theater) to show the film for 26 days, before it streamed the film to its subscribers at the end of 2019.

Covid-19 initially pushed the release dates for many big titles to late 2020, such as the James Bond film, No Time to Die and the Tom Cruise sequel Top Gun: Maverick. (The Bond flick finally opened in theaters in early October; Top Gun has been pushed all the way to May 2022.) Other movies were switched from theaters to a digital release, such as the Tom Hanks World War II drama Greyhound, which Sony had originally slated for a June 2020 theatrical release. Instead, the rights were sold to Apple TV+, which released it digitally. 

Before it became clear that the lockdown was going to last, there was pushback from theater chains about studios’ plans to switch from theaters to streaming for major 2020 titles. At one point, AMC threatened to boycott all Universal Pictures releases, over threats by the studio to stream such films as The King of Staten Island and F9 without a theatrical release.

When it became clear that theaters weren’t going to open for the rest of 2020, Disney, Paramount and Warner Bros., among other studios, pushed some delayed titles into 2021 and beyond, even as they announced a plan to release some major titles through their streaming platforms, instead of to theaters. That plan was met by howls of outrage by filmmakers, whose work had been
created with an immersive live theatrical experience in mind.

When director Denis Villeneuve learned that his big-budget, special-effects-laden version of the science-fiction classic, Dune, was being released on HBO Max instead of in theaters, he wasn’t pleased. “Frankly, to watch Dune on a television, the best way I can compare it is to drive a speedboat in your bathtub,” he told Total Film. “For me, it’s ridiculous. It’s a movie that’s made as a tribute for the big-screen experience.”

Actress Scarlett Johansson, whose contract for her film, Black Widow, included a percentage of the box-office take, sued Disney in July 2021, after the studio released the Marvel movie on its Disney+ streaming platform the same day it opened in theaters. Johansson, who was paid a reported $20 million for the film, settled with Disney at the end of September.

“Never mind what Scarlett lost at the box office,” said one show-business manager, “what about how much Disney gained in subscriptions by people who wanted to see the movie? Instead of just buying a ticket, they’re now Disney+ subscribers. That’s going to have to become a factor in negotiations with talent in
the future.”

As the vaccines arrived and theaters began to reopen in the spring of this year, the major streamers modified their plans to a release pattern known as day-and-date (including for Dune): Their new films would open in a limited number of theaters the same day the film would be available via an on-demand source, whether streaming or pay-per-view.

“There will always be pressure on release windows; everything will be a lot shorter,” says John Sloss, principal at Cinetic Media, a film financing and distribution company. “The pandemic accelerated that. I hope theatrical comes back, but streaming will eventually overwhelm everything, including TV and cable.
Netflix has had so much success. They’ve made it inevitable for conglomerates to prioritize competing with Netflix.”

Gleiberman points to the day-and-date release of Dune with dismay: “It’s being presented as the ultimate big-screen experience—a vast and jaw-dropping film. Why would you open it at home?” he says. “But the studios are doing all kinds of calculations and analyzing various metrics: ‘Yes, we took a hit at the box office, but look how much we made on Disney+.’ Some of these movies are just being given away on HBO Max, even if the calculation doesn’t make sense.”

The pandemic’s ability to refocus the mass audience from moviegoing to subscription home services in part reflects a generational change. The shift in viewing habits from theaters to personal screens, whether massive 4K UHD TVs, tablets or smartphones, was long since adapted by the millennial and Zoomer generations. “Younger audiences are used to seeing things in nontheatrical ways,” says Peter Rainer, film critic for The Christian Science Monitor. “They’re not as entrenched in that way of seeing films, like those of us who were brought up to watch movies in the way they were meant to be watched: in a theater.”

And shorter content is always in demand, despite the multi-million-dollar flop of Quibi, the short-form streaming service that flamed out in 2020. Consider Tik-Tok, a phone-centric, short-form video-streaming app released in 2016 that has become a new launchpad for show-business careers. It recently hit one billion subscribers.

 “The younger generation wants instant access to everything. They don’t want to have to wait to hear a favorite song on the radio and they don’t have to,” notes one streaming industry insider. “People want to be able to access and watch things when they want to do it. That’s a change in society. I’m in my 40s and I still like a print newspaper; I still have a landline. But people in their 20s and 30s think I’m totally analog. If you look at the film industry, over its history, there have been moments where things changed drastically, whether it’s the arrival of sound or the arrival of color or the arrival of VHS and DVD or, now, streaming.”

Even as commercial calculations about what qualifies as a “box-office hit” continue to evolve, the awards-industrial complex churns forward. While the Academy and various critics’ groups amended their criterion to qualify for consideration in 2020, the 2021 landscape so far seems to have reverted to the classic stance: A movie is something that plays in a movie theater. Period. So if your movie hasn’t been released in a theater somewhere for a week during the calendar year, it won’t qualify for consideration.

Arthouses have begun to reopen (in anticipation of the annual year-end rush of award-contending films). But conventional wisdom holds that older audiences, whether Academy voters or just people who the serious, smaller films that tend to dominate the major film awards, will be less eager to go back into theaters, both for health concerns and for a more obvious reason: convenience. Notes one streaming industry insider, “Even if we fast-forward to a world with herd immunity, the fact that you can get a movie at home means that very few people will be saying, ‘I have to rush to the theater to see that.’ Instead, they’ll say, ‘I’ll wait till it comes on my 60-inch flat-screen in three weeks.’”

Adds Rainer, “I have friends who are inveterate moviegoers of 50 years standing, who said, ‘It’s so great to call up a movie on HBO Max.’ I try to see films on the big screen. It does make a difference.”

Wells points to the paradoxes within his own complaints. On the one hand, he bemoans the loss of the theatrical experience, even as he complains about what that experience has become. “I would love to see the new Will Smith film, King Richard, with a smart audience; it’s a good sports film,” he says. “It’s a shame that a lot of people will miss feeling the connection that you get watching a film like that together. On the other hand, you can’t not talk about how unpleasant the theatrical experience has become. You’ve got trailers that last for 15 or 20 minutes. You have people on their phones. It’s not cinema as I have known it.”

An added irony about the rise of streaming: “It’s really pretty great,” Wells its, “that you can watch almost anything you want at any time you want, and in high def.”

But films that aren’t released in theaters lose a certain credibility, no matter how the business model changes. Matt Zoller Seitz, TV critic for New York magazine and the author of books about Oliver Stone, Wes Anderson and “The Sopranos,” says, “In books, the hardcover is the promotion campaign for the paperback. In movies, the theatrical release is the ad campaign for all the other platforms that the film may be sold on. What people miss is that the film’s value depends on how it did in theaters. If you can point to its box-office performance, you can get more money for it when you stream it, than if it had not been in a theater.”

But, as one industry insider noted, “Not even Dr. Fauci knows what’s going to happen.” With Covid still an unpredictable variable in confronting the risks of daily life, movie theaters may become the kind of palaces of spectacle exclusive to sensation-packed tales of sci-fi and comic-book heroes, while serious films will be the province of streaming services.

Says Time’s Zacharek, “The idea of watching movies at home is so comfortable. It’s easy to think, ‘I want this sweatpants life.’ I love when I have two hours in a theater where all I have to worry about is what is in front of me. I would do anything to not have to give that up.”

The streaming services and the movie studios behind them still can only guess at just how big this at-home universe could become and what form it will ultimately take. As the appetite for streaming content metastasizes with the expansion of broadband networks, the battle for the largest share of the audience will only get more pitched.  In the end, even the critics are ing the streaming world. In June, Netflix announced that Steven Spielberg had ed them in a deal to produce multiple new films for the streaming platform every year. 

“There is an arms race to become the dominant company,” says Galloway. “Netflix is spending $17 billion on content—just this year. That’s unimaginable. If you multiply that across several companies, you have $50 to $100 billion devoted to creating content. Now consider that, 20 years ago, Paramount spent $1.5 billion for its entire slate of films. 

“But, in the same way that a handful of studios dominated Hollywood during much of the 20th century, the streaming services believe a handful of the major streamers will dominate. And they’re all spending money to knock out the competition.”