In the 1950s, boxing gave way to football and basketball as consumer expectations changed, leaving room for the emergence of new sports. Today, technology companies like Amazon and Apple are changing the movie industry landscape by leveraging their strengths and disrupting traditional studios.
The domestic box office is struggling to recover, and even though 2023 is on track to beat 2022, that’s like winning a race against a snail. March ticket sales were a third lower than in the good old days before the pandemic, despite the release of major films like John Wick 4, Antman 3, and Shazam 2. Marcus Theaters remains optimistic, believing that re-habitualizing moviegoers with a diverse range of films is key to recovery. However, the industry faces challenges as shares in companies like Marcus and AMC continue to decline.
Traditional studios are grappling with how to make money in this shifting landscape. Lionsgate's separation from Starz is intended to unlock value, while Disney, on the other hand, is playing a precarious game of yoyo with its streaming strategy. Despite reaching 100 million subscribers, they’re saddled with over $45B in debt and may struggle to keep their core titles exclusive. The industry's overreliance on sequels and franchises has led to superhero failures like Shazam 2 and Antman 3, making Hollywood seem more like the Upside Down from Stranger Things.
The entertainment industry is in turmoil. Mergers, layoffs, and the pandemic have shattered the job security of thousands of workers. By the summer, Disney alone will have axed 7,000 people, while Netflix, WBD, and Paramount have followed suit with hundreds more. The big bosses are scrambling to cut costs and please Wall Street while the workers are left in chaos and exhaustion. The old Hollywood dream is dying, replaced by a new corporate work ethic that demands more for less. Workers face pay cuts of up to two-thirds, or worse, unemployment. It’s a grim picture of an industry in crisis.
Meanwhile, tech giants Amazon and Apple are capitalizing on this crisis, investing in theatrical releases and blending traditional and digital distribution strategies. They are driven more by owning the customer attention funnel than by making money from the movies. Unlike traditional studios, tech companies can adapt and innovate, focusing on outcomes that their business models support. With rising interest rates, technology companies are looking to focus on increasing high-margin revenue streams. Apple makes more money from services than products. Every song, show, or app you buy from Apple gives them a bigger profit margin than an iPhone or a MacBook. How much bigger? Products earn 37 cents per dollar, while services earn 71 cents. That's why Apple’s willing to invest in movies that hook you into signing up for Apple TV+ Friday Night Baseball. They're not just entertaining you; they're boosting their bottom line.
The movie industry might hope that the $1 billion in investment from Apple and Amazon will save the day, but this influx of cash might not even save struggling theater chains in the short term. With the disappointing box office revenue and a clear indication that the future of hits will come from tech giants rather than traditional movie studios, the Academy is considering new theatrical distribution requirements for films to be eligible for best picture, which could support elements of the art form designed for theaters and extract more money from technology companies. However, the movie industry may be eroding its business model by relying on these tech giants to save the day in the short term and find that they’re commoditizing their ability to tell stories in the long term.
Innovations in TV and streaming devices, such as Amazon's Fire TV lineup, demonstrate how tech giants’ are playing a different game. Streaming is here to stay, offering entertainment on demand and reshaping the movie industry. Still, humans crave communal experiences, and recent film successes show that the theater-going experience remains valuable.
"Streaming is the way of the future, but it won't kill theatrical. In fact, I think moviegoing will become more eventized, where it's like going to the theme park or a concert, as opposed to your regular viewing experience.” - Anita Gou
The movie studios must realize that the industry is changing faster than Pete Davidson's relationships. They must cherish the stories they can tell and embrace the opportunities technology companies present. After all, everybody wants to be associated with movies – the glitz, the glamour, and the potential for a communal experience that transcends the screen. The movie industry must adapt to the changing landscape and prioritize the elements technology companies value most – access to talent and great storytelling. While storytellers and studios must recognize how stories are told is changing and partner with the right brands to survive and thrive in this new era of entertainment.