The Lasso of Truth

You are in a real pickle. You've borrowed money for your project, and persuaded other people to invest their money as well. Everyone expects a return. The product is finished and ready to launch. Then there is a delay. Then another delay. And another. Everyone is getting antsy. What should you do?

That is the dilemma that some Hollywood studios find themselves in. Smaller, cheaper movies can be off-loaded to a variety of buyers. But your big-ticket movies are a different story. Movie theaters are mainly closed, and no one knows for sure when they will fully reopen. Factor in that no one knows how quickly theater attendance will return to normal – or if ever. Factor in the phenomenal growth of streaming. You've got a complicated decision on your hands.

One might imagine that when a studio decides to make a movie, they simply get out their checkbook, make sure their bank balance is good, then start writing checks. Of course, the reality is much different. Movie financing is extremely complex with loans, investors, interest payments, and lots of legally dense contracts. I was once asked to consult on an issue involving – of all things – Superman. I was given all the legal documents attached to the movie. Oh, boy.

The issue is that while money cannot speak, hear, touch, or smell, it does expect to make a return on itself. If that return isn't forthcoming in a timely manner, things can get ugly. So, when you have an expensive movie stuck on a hard drive, what do you do?

A few studios have decided to release movies theatrically. Christopher Nolan's Tenet was released and everyone anxiously awaited the result. Its box-office return was underwhelming and it appears that the movie will ultimately lose money. Another movie, Disney's Mulan, went straight to Disney+. That is another important wrinkle; if you divert your movie to streaming, it might be a wise investment because it helps build your streaming platform.

The new Bond film, No Time to Die, is a super big budget film. I can hardly imagine how worried its money is, including the zillions of marketing tie-ins to the film. Hollywood was abuzz with the rumor that MGM was shopping the movie to streaming platforms Apple and Netflix. A sale price of $600 million was kicked around. Apparently, that was the approximate amount invested in the movie, and that figure would have at least made the studio whole. But either the rumor was false, or the price was too high. No sale. It currently has a theatrical release scheduled for April, 2021.

The film Wonder Woman 1984, the requisite sequel to Wonder Woman, was scheduled for June 2020, but never opened. Now we learn that the movie has been partly sold to HBO Max. In particular, it will open theatrically and also be available on HBO Max. The latter has so far struggled to attract subscribers, and clearly they are hoping this will stimulate subscriptions. HBO is owned by AT&T's WarnerMedia, so the pockets are deep enough to purchase a big movie. To make the situation even more complicated, reportedly, the movie was plagued by poor test screenings and reshoots. Every movie is a gamble, but maybe the studio panicked and just wanted to get this one off the books.

Did Wonder Woman 1984 do the smart thing? Will this hybrid release at least let them recoup their investment? If movie-theater attendance is spotty for awhile, could this hybrid plan be a template for future movies? We'll see if the Lasso of Truth can give us the answers.

jeffhenning's picture

Not being a person working in the industry, I can offer no true insight.

One thing I can offer, though, is that the hybrid model that's been caused by the pandemic is not going to go away soon or, most likely, at all.

People are going to be very gun-shy about going to theaters a year from now even if there is a kick-ass cure or vaccine.

Not being a show-biz numbers guy, I have no idea how this will pan out. I do know one thing: what worked in the past is the past. If you are an entertainment company of any type, producing your product and getting consumers to pay for it is drastically different than it was 2 years ago.

I imagine that everything involving show-biz is going to be new for everyone in the coming year. That's not necessarily a bad thing.

I don't remember who said it, but there is a great quote (that I may have wrong): "With chaos, comes opportunity." It could be Sun Tzu. Not sure.

This is the time for studios to re-imagine themselves. Like many industries have had to do.

Are they up to it? I doubt it.