DTC Streaming Won’t Replace Cinemas says Ampere Analysis

The COVID-19 pandemic has put significant pressure on the traditional model for releasing new films. With theatres closed, several studios have experimented with releasing films direct-to-consumer (DTC) via a streaming service. But research from Ampere Analysis suggests that while the pandemic will likely change the way films are released even after the pandemic, it’s unlikely in the long term that we’ll see major releases bypassing movie theatres completely.

Universal Pictures was the first major studio to take a major release straight to streaming. Universal released its animated feature Trolls World Tour via various premium video on-demand (PVOD) services (where users pay a fee to rent a film for a short window). The strategy proved a success, as Universal pulled in $100 million in rental fees during the first three weeks of release.

Others have since followed suit, including Disney which released its film adaption of Artemis Fowl directly via Disney+, and now plans to release its live action version of Mulan via PVOD platforms.

Theatrical windows shortened, not removed

This straight to streaming strategy is tiding film studios over during lockdown. But as theatres reopen, Ampere Analysis says studios will use hybrid strategies, shortening the amount of time films spend exclusively in cinemas, rather than cutting out cinemas completely.

For it’s analysis, Ampere modelled four different scenarios for how studios might distribute films in the next few years:

  1. Replace first window theatrical distribution with PVOD
  2. Adopt strategies of using PVOD and theatrical windows sequentially
  3. Replace traditional windowing with a pure direct-to-consumer offering
  4. Release films theatrically before making titles available exclusively on their own direct-to-consumer services

Ampere found that for a fictional mid-tier movie release (called ‘The Ampere Movie’), the second of these options would likely generate the most revenue for the studio.

Prior to the pandemic, The Ampere Movie might have been expected to generate $247 million using a traditional model for theatrical windowing. Using this traditional model in 2021, the film would only make $215 million due to changed consumer habits and continuing social distancing measures. But by shortening the window of exclusivity in theatres, and then releasing it via a PVOD platform, The Ampere Movie would make $240 million in 2021.

Ampere PVOD

This model is already being used by some studios. Universal has agreed a deal with cinema owner AMC which shortens the window of exclusivity to just 17 days, after which Universal will being releasing films on PVOD services.

Whether this model will take off or not depends on negotiations between cinema chains and film studios. Theatre owners will want reassurances that any changes will not erode their own businesses, or be the first steps to cutting them out of the picture. But Ampere’s analysis found that cinemas’ revenues under this model wouldn’t be significantly affected.

And Ampere believes that there is too much risk involved for film studios to want to cut out cinemas entirely. The high ticket prices and ability to charge on a per-customer basis mean that theatrical distribution is still very profitable for studios.

“Most of the studios have been experimenting with strategies during lockdown that completely eschew the theatrical window,” said Peter Ingram, analyst at Ampere Analysis. “However, despite the change we are expecting to the cinema market, theatrical remains one of the best revenue streams for titles throughout their life cycle. Not only do most people see the film in its theatrical window, but tickets are charged on an individual basis. By comparison, when a film is bought via PVOD, or watched via an SVOD service, it can be shared with friends and family under a single transaction.”

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