Jeff Logan is feeling relieved.
For the first time since COVID shuttered theaters, business is booming, bringing to audiences “John Wick: Chapter 4,” “Scream VI” and, last weekend, “The Super Mario Bros. Movie, And Logan, who owns the Logan luxury theaters in rural South Dakota, is back in the black after two years where profits vanished while the studio failed to produce enough big movies to keep running.
“It’s good,” he says. “We don’t have to reassure our bankers every time we meet for coffee.”
Logan’s Theaters isn’t the only one experiencing a dramatic change of fortune. Overall, the domestic box office is $2.3 billion, up 36.8% from the same period last year and a stunning 589.5% improvement in 2021, according to comScore. The exhibition industry is finally looking like its pre-pandemic self again. This is partly attributed to studios releasing new installments of successful franchises, but it is also linked to a change in attitude among major media companies when assessing the value of theatrical releases.
In recent years, Hollywood has had a serious case of Netflix envy, with studios choosing to launch their own streaming services. To do this, they collected a lot of Red Ink building splash streaming shows and undercut movies that were exclusively screened in theaters as a way of building excitement for the likes of Disney+, Paramount+ and HBO Max. Gave. But recently, Wall Street has turned sour On the economics of streaming, agreeing that the media conglomerates that run these services need to focus as much on making money as they do on attracting subscribers. Investors aren’t too thrilled about all the debt that has been created. This has made box office revenue an important part of their overall financial health.
“Studios have found religion,” says Eric Handler, an analyst with Roth Capital Partners. “They are beginning to recognize that the best way to maximize profits is by having a particular theater window rather than releasing everything at once on demand. There is a lot of marketing value in having your film in theaters.
For now, Netflix has largely stuck to its model of releasing nearly all of its movies directly to its platform, with only a handful of award contenders enjoying an in-theater run. But streaming companies like Amazon and Apple are moving in a different direction. Last weekend, also as “Mario” dominated the box officeAmazon took a minor hit with “Air,” a drama about Nike’s courtship of Michael Jordan starring Matt Damon and Ben Affleck. The film was released on over 3,000 screens, the biggest opening ever for a film from the streaming service, and benefited from a $40 million marketing campaign. As “The Super Mario Bros. Movie” grossed a whopping $204 million in its first five days of domestic release, “Air” racked up north of $20 million — impressive for a film aimed at adults.
“Amazon is taking a swing,” says Kevin Wilson, MGM and Amazon Studios theatrical distribution executive. “But I don’t think you can replace ‘Air’ going into theaters this weekend with publicity, word-of-mouth and marketing.”
Amazon isn’t too worried if “Air” loses money at the box office. To be profitable in theaters, where studios split revenue with exhibitors, films must double their production and marketing budgets, meaning an Affleck-Damon film would need to gross at least $260 million. However, opening “Air” in wide release means it will hit the company’s Prime Video streaming service with even more buzz. More importantly, it creates additional revenue streams, such as on-demand rentals and other licensing opportunities, that are not possible by going straight to streaming. That’s partly why Amazon hopes to release a dozen movies to theaters annually, while Apple is preparing to bring Ridley Scott’s “Napoleon” and Martin Scorsese’s “Killers of the Flower Moon” exclusively to the big screen. is working on bringing them over to Apple TV+. This leaves cinemas with a greater selection of films to screen. And this is critically important as the number of major releases is still down 20% from pre-COVID levels.
That’s not to say that the future of the big screen is bright. Many companies in the sector are struggling. Cineworld, the second largest theater chain, is bankrupt and has had to file for bankruptcy. abandon its plans To sell its US and UK businesses after failing to find a buyer. Instead it will raise funds to continue its operations in those countries. And AMC, the largest cinema company, has nearly $5 billion in debt on its balance sheet. It’s been kept alive because it unfairly became a meme stock during the pandemic, with investors fueling its rise based on sentiment rather than fundamentals. It seems to be coming to an end. After boosting AMC’s stock to a high of more than $72 per share in 2021, it has come back down to earth and now trades at around $5.
Although the pandemic did not destroy cinemas, some major venues may have dimmed their marquees forever, with the number of screens down by about 5%. The ArcLight chain of high-end theaters has ended, Hollywood’s iconic Cinerama Dome is closed, and New York’s regal Union Square, once the highest-grossing cinema in the country, is planning to close.
Privately, movie studios have long held that exhibitors haven’t done enough to build their theater venues, that they just shove movies onto their screens without attending to the subtleties of customer service (they probably are correct). But they’ve also learned that consumers aren’t going to sign up for Netflix and all of its challengers. If they want their films to be seen, they need a different model.
“There are only so many people who will subscribe to your streaming service,” says Eric Wald, an analyst at B. Riley & Company, so if you want to attract eyeballs to your movies, theatrical becomes a more efficient option. “
As for Jeff Logan, he’s glad that studios, after treating them like movie theaters more than cinemas needed them, are changing their tune.
“Theatres want to say a big ‘I told you so,'” he says.