The movie theater industry is on edge, fearing a potential merger between Warner Bros. and Netflix could be the final straw for an already struggling ecosystem. This proposed deal, valued at $82.7 billion, has sparked concerns among theater owners and industry experts alike.
Netflix's co-CEO, Ted Sarandos, reached out to theater owners on Monday, offering a glimmer of hope amidst the uncertainty. However, the real issue, according to exhibition sources, lies not with the personalities involved but with the decreasing number of movies being released and the potential demise of another major Hollywood studio.
The pandemic and labor strikes of 2023 have exacerbated the problem, with box office experts estimating that up to 20% of regular moviegoers have not returned post-pandemic. Domestic box office revenue has struggled to reach $9 billion annually, a significant drop from the pre-COVID era.
Mike Bowers, chairman of Cinema United's executive board and CEO of Harkins Theatres, warns that further consolidation in the industry poses an existential threat to cinemas and the entire ecosystem. He emphasizes that reaching a tipping point could lead to a complete collapse, leaving no support system to sustain the industry.
Sarandos' relationship with theater operators has been complex, with his focus on serving Netflix subscribers often clashing with filmmakers' desire to preserve the theatrical experience. While Netflix has allowed certain movies an exclusive run in theaters, it's typically for a short period, and the service has booked only 30 titles this year, including the successful KPop: Demon Hunters.
The surprise victory of Netflix in acquiring Warner Bros. has left exhibitors worldwide stunned. The Ellisons, with their close ties to President Trump, were initially seen as the frontrunners. However, Sarandos' discreet efforts, including a meeting with Trump at the White House, played a role in Netflix's success.
Cinema United, the largest trade organization for exhibitors, quickly mobilized after the Netflix announcement, issuing a stern warning about the proposed acquisition. CEO Michael O'Leary stated that Netflix's business model does not support theatrical exhibition and that regulators must consider the negative impact on consumers and the industry.
Ellison has reiterated his commitment to releasing more than 30 movies annually should he win, aiming to satisfy moviegoers' appetite. However, the recent past has shown that consolidation, even with legacy studios, often results in fewer films being made for theatrical distribution. The combined total of new titles released by Disney and 20th Century Fox has declined by 46% since 2016.
Sarandos counters these concerns, emphasizing Netflix's commitment to releasing movies as they are today. An anonymous exhibition executive adds that Netflix must commit to a robust slate with meaningful exclusivity and marketing support. One studio chief believes Netflix will ultimately eliminate windows, citing Sarandos' comments about evolving consumer-friendly practices.
Wall Street analyst Eric Handler raises a crucial question: how much marketing support will Netflix provide? This could be a significant concern, especially with Warner Bros. contractually obligated to release movies in theaters until 2029.
The future of the movie theater industry hangs in the balance as this potential merger unfolds, leaving many to wonder if the iconic experience of watching movies on the big screen will survive in a rapidly changing entertainment landscape.
