With Wonder Woman 1984 debuting here in Canada as a $30 CAD rental, I can’t help but consider the premium video on demand (VOD) market on shaky, unstable ground. Long term I suspect it’s more of a stopgap action out of studio desperation than viable future for movies.
At a glance it shouldn’t be this way. Premium VOD is a great value alternative to theaters. While VOD means the loss of a theater level screen and sound you avoid the time and coordination of commute, loud audience members, and pay a lot less. Here in Toronto, a $30 CAD rental matches two tickets at $15 a pop. Add in transportation costs and expensive concessions and there’s a significant savings with premium VOD. Also, by swapping out the theater middlemen in exchange for streaming distributors like Apple and Amazon, studios ensure a higher percentage of box office income from every sale.
But the biggest threat to premium VOD isn’t theaters; it’s all the other home entertainment options available elsewhere for less, or in the case of streaming services like Netflix or Disney Plus, for “free”.
Focus for a minute on competition within the first run film space. One could rent three or four “standard” titles for the cost of one premium VOD. And you don’t have to be that patient for films to transition into standard VOD pricing; this year I’ve seen many films bump from $30 to $7 CAD in a matter of weeks. More movies, especially smaller independents, are releasing on standard VOD day and date with any theatrical premiere. I suspect the pandemic, not to mention pressure from Universal and Warner to reduce the theatrical window means movies can’t retain premium pricing for long.
There’s also been a wealth of first run films this year that debut first on a paid streaming service. Corporate behemoths are shoring up their streaming libraries to reduce churn and battle the competition, and that translates into higher budgets to chase the films that historically would only debut in theaters. For Netflix that includes new releases by directors David Fincher, Aaron Sorkin, and George Clooney. Amazon released five films from Steve McQueen in the Small Axe series. Warner plans to debut every first run release day and day in theaters and HBO Max for 2021. All these movies have a cost in the form of a monthly subscription fee, but it can feel invisible, almost utility-like to the end user.
Add to all this the glut of streaming TV shows that debut every week, new Xbox and PlayStation gaming consoles, and there’s a lot of ways to spend your time that are not a $20 to $30 one time rental.
Some might argue pessimism around premium VOD to be misguided. Studios have been sticking to the premium VOD model all year, and Universal claims it’s part of their long term release strategy. But it feels like the industry has far more headwind towards holding out the biggest blockbusters for theaters or for the subscription streaming wars. It’s a bewildering situation: Mulan on Disney Plus for $30 USD was a likely flop. Three months later the movie was rolled into the standard Disney Plus experience and became sound strategy, marketable content to leverage against Netflix and HBO Max.
The endgame of a weak premium VOD market makes for a scary proposition for many films. I can see theaters — already on the verge of collapse — getting propped up by mega corps like Disney and WarnerMedia to serve as distribution centers for increasingly rare four quadrant blockbusters. Almost everything else, from micro budget genre fare to mid budget awards prestige, gets gobbled up by a big streaming service.
It’s simple economics: the biggest pockets ensure a reliable payout for investors. For cheaper films, Netflix et al give a front end paycheck for exclusive debut and distribution rights that’s far higher than financiers would get by rolling the dice on theaters and VOD. Conversely, for the next $300 million Marvel or Christopher Nolan adventure, streaming and VOD can’t close to meriting enough income; full priced theaters are a necessity. Given the screens that survive will dwindle in number and narrow their output, movie theaters become an increasingly rare spectacle. Everything else will stream at home.
There will be exceptions. Small budget independents may find a match with the right audience through select theaters that aren’t in part of the AMC/Regal/Cinemark chain (think Alamo Drafthouse or one off self financed theaters like the New Beverly in L.A. or the Music Box in Chicago) or go straight to VOD. However, financial success in this market may be difficult. Theater distribution revenue would be a fraction of what was possible pre pandemic. VOD may have less direct competition, but I’d expect it to be a harder marketing proposition in the face of growing streaming services and the biggest studios spending millions to market tentpole releases.
This is a tough future for film lovers. Good coverage will require signing up for several monthly services at once. Long term availability and marketing for specific films will be dicey based on the the quiet policy Netflix and its competitors have for when titles join and leave their service. Mid and small budget pictures will shift to digestible genres to look attractive to streaming giants. Theaters that survive through 2021 will have little to show beyond $200 million action movies.
Perhaps the decline of premium VOD is just the inevitable forcing function of new technology as tastes fragment online. Other media, especially music, has happily embraced subscriptions over a la carte purchases for a while now. Still, the film market a few years ago was a better bargain. It’s thrilling to have so much available at home today but the cost of higher paywalls, worse discoverability, and certain genres all but collapsing is hard to stomach.