The movie industry has been arguing with itself over the proper length of the theatrical window at least since the first video rental store opened more than three decades ago. So when Netflix announced plans for a quickie run through theaters for Martin Scorsese’s three-and-a-half hour mob epic “The Irishman,” which Netflix agreed to bankroll when traditional studios would not, it was no surprise to hear theater operators raise objections.
The big theater chains insisted on a 90-day window and refused to book the film without it. Netflix searched for a compromise, but the two sides were unable to reach a deal. As it stands, “The Irishman,” which stars Robert De Niro, Al Pacino and Joe Pesci, will get a 26-day run in a few hundred theaters, mostly owned by smaller chains, before debuting on Netflix’s streaming platform — enough for Oscar eligibility but probably not enough to threaten any box-office records.
The episode does reflect a growing threat to the box office, though.
The argument over the primacy of the theatrical window is often framed in artistic and aesthetic terms: movies are made to be projected on a big screen; being part of an audience in a theater is an important social ritual that enhances the experience of seeing the movie; even the best TV screens can’t do justice to the glory and fidelity of 70mm film. Insofar as economics came into the discussion it was usually through the back door: the theatrical window needed to be preserved to protect the economic viability of theaters that can project movies onto a big screen in front of an audience.
But for the major studios and distributors, it has always been about money, specifically the studios’ interest in maximizing movies’ earnings across all distribution channels. That interest sometimes overlaps with the economic interests of the theaters, but where it hasn’t it is the studios’ interests that have prevailed.
When the video rental market first emerged in the mid-1980s, the typical window between theatrical and home video release for films distributed by a major studio was six to nine months.
As the home video market grew, and the revenue it generated increased, the studios’ economic calculus changed. The majors reckoned that by shortening the theatrical window the home video release could coattail off the marketing efforts that surrounded the theatrical release and they would not have to spend as heavily to re-promote the film.
Over the protests of exhibitors the theatrical window was gradually whittled down. But only to the point where the the boost to home video did not undermine the studios’ own interest in maintaining a robust box office.
Big box office numbers still brought bragging rights — never to be underestimated in Hollywood — but more important, the licensing fees the studios collected from downstream markets such as pay-TV and international sales were often contractually pegged to the domestic gate. Video retailers also used box office as a gauge of a film’s appeal, so the size of the grosses affected the number of video copies sold.
When cable-delivered pay-per-view came along, promising more efficient in-home delivery than videocassettes, the theatrical window was again threatened. But this time, theater owners found an unlikely ally in the 30,000-strong phalanx of video rentals stores that had grown up by then. Together, the revenue that theaters and video stores delivered to the studios was simply too great to risk giving pay-per-view a better window and cable operators, to their great dismay, found themselves shunted to third in line.
The introduction of digital formats and platforms, starting with DVDs and later broadband internet, again threatened to upend the apple cart. The enhanced threat from piracy that came with digital technology put pressure on the studios to compress the entire distribution cycle, as long release windows meant longer periods in which piracy could thrive.
For a while the studios attempted to restrict the geographic distribution of DVDs through various technical measures to try to protect overseas theatrical markets, and fought piracy as best they could in the courts. But ultimately they settled on a system of simultaneous worldwide theatrical release to reduce the opportunities for piracy and maximize their own revenue. The theatrical window was saved again.
Then came Netflix.
Netflix does not reckon the value of a movie the same way a traditional studio would. Though “The Irishman” premiered at the New York Film Festival last week to mostly ecstatic reviews, which would normally promise a big box office, Netflix doesn’t reckon the value of a film the same way a traditional studio would. It isn’t concerned with maximizing earnings from the film across all distribution channels because there is only one distribution channel it cares about: its streaming platform.
Its foremost concern is whether “The Irishman” will help it sign up and keep new subscribers, because that’s the metric that moves its share price. It agreed to a theatrical release largely to make the film eligible for the Oscars, which it could achieve with a limited run, and to placate the filmmakers, who wanted it seen on the big screen and with whom Netflix would no doubt like to work with again.
Exhibitors’ efforts to play hardball with Netflix on the length of the theatrical window were doomed from the start because Netflix had no overlapping interest in ticket sales. They are not relevant to how Netflix calculates its return on investment in a movie.
The bigger problem for exhibitors is that Netflix is not alone in pursuing a different strategy and “The Irishman” is not a one-off. Netflix’s competitors Amazon Prime and now Apple TV Plus, have also embarked on making original feature-length films, and their incentives are the same.
While Apple has made a show of promising all its films a theatrical release before they’ll appear on its streaming platform, for now that feels more like a play to put itself on the map for producers and directors shopping films than a long-term strategy.
The recent comments by Amazon’s head of films Jen Salke are more typical of the genre.
“We don’t evaluate our movie performance based on theatrical tickets sold. We didn’t pretend to think that we would suddenly have 30 million people watching the movie in the theaters,” Salke said about the Sundance darling “Late Night.”
“People can say, ‘Oh that failed, you must have gotten a spanking,’ and like, I didn’t, but O.K., whatever you want to say,” she continued. “Everything we do is designed to enhance, or to drive Prime subscriptions.”
Then there are the major studios.
Warner Bros., Universal Studios, Disney and 20th Century Fox are all now owned by companies that are building their own direct-to-consumer streaming platforms to compete with Netflix.
While I wouldn’t expect Disney to skimp on the theatrical release for the next “Star Wars” or Marvel superhero film, it now shares an imperative with Netflix and Amazon to drive subscriptions to their streaming platforms, and what drives subscriptions is original content.
Disney didn’t spend $71 billion to buy Fox just for the shingle. It bought it pump up the throw-weight of its original content to drive subscriptions to Disney+.
Likewise, AT&T didn’t drop $84 billion for Time Warner just to make movies. It bought it to get its hands on Warner Bros. and HBO so it can use their original content to drive subscriptions to HBO Max.
The return on those investments will not come down to how well Disney, Fox and Warner Bros. maximize earnings from their films across all distribution channels.
Creative differences
“The Irishman” also reflects a growing threat to theaters’ hold on the aesthetic high ground.
Hollywood has already seen many writers and showrunners decamp for Netflix and Amazon, lured by the promise of creative autonomy and the bigger canvas offered by not having to squeeze a story arc into 60, 90 or 120 minutes.
The most creative and groundbreaking storytelling today, especially stories aimed at adults, is not happening at the movies or on commercial network television. It’s happening over-the-top.
Up to now, however, many A-list directors have been reluctant to follow the writers off campus. But as “The Irishman” shows, their calculus is starting to change as well.
At three-and-a-half hours and $160 million, “The Irishman” would have been a heavy lift for a traditional studios. Long run times mean fewer showings per theater per night, which hurts box-office grosses. And lower grosses can depress earnings in downstream markets.
In discussing “The Irishman,” Scorsese made clear he understood the trade offs but decided to go with Netflix.
“We needed to make an expensive picture,” he told Variety. “The movie business is changing hour by hour — not necessarily for the better — and many of the places we would have gone to for funding in the past were no longer viable. Then we started talking to Netflix. We agreed on everything, most importantly that we all wanted to make the same movie. So we went forward.”
Added Emma Tillinger Koskoff, one of the film’s producers, “In terms of budget and scope, it was much more appetizing to Netflix than to a traditional studio.”
Having watched the ebb and flow of battle over the theatrical window for better than 30 years, I’m not prepared to declare theaters doomed. Moviegoing isn’t going to go away just yet.
But direct-to-consumer streaming is developing into more than just another distribution channel to be managed in juxtaposition with other channels. It’s evolving into a different mode of moviemaking altogether. One where movie theaters may not always be the first stop.