How WarnerMedia just killed the Hollywood way of doing business

“It’s holy shit time.” 

So proclaimed one Hollywood manager just minutes after WarnerMedia announced on December 3 that it will be releasing its entire 2021 slate of movies on HBO Max, the company’s fledgling streaming platform. The lineup of films, which includes major tentpole releases such as Suicide Squad 2, Godzilla vs. Kong, Dune, and The Matrix 4, will simultaneously be released in theaters. 

The move marks the most significant milestone yet in the streaming-versus-theatrical debate that has been roiling for years now, growing more agitated and desperate in recent months due to COVID-19, which has all but decimated the theatrical moviegoing business. Yet even as COVID-19 has shuttered movie theaters around the world and caused movie studios to make historically unheard-of decisions—for instance, moving would-be theatrical films such as Hamilton and Mulan over to their streaming services (both of those were released on Disney Plus) or selling off otherwise worthy films to Netflix or another tech giant (such as Enola Holmes and Greyhound, which bowed on Netflix and Apple TV Plus respectively)—studios have nonetheless clung mightily to the belief that when it comes to big-budget films, there is simply no upside in releasing them on streaming. The reason? The box-office revenue for those films is simply too vast to justify a streaming release. This explains why, up until now, studios have been feverishly punting their most valuable gems into 2021 and beyond, praying that by the time their movies are set to debut in theaters, we’ll all be vaccinated and chomping on popcorn in close proximity to other humans again. (With Mulan, which cost a reported $200 million to make, Disney tried to insulate itself by charging subscribers $30 to see the movie during its first month in release.)

But WarnerMedia’s move throws down the gauntlet on what has largely been an almost academic debate. One year from now, there will be actual data showing just how much money the company made or lost on its audacious bet. It won’t be a matter of hypotheticals; there will be actual numbers showing how movies like The Matrix 4 fared on streaming, at least in terms of how many new subscribers it attracted to HBO Max in the quarter it was released, if not actual viewing metrics. Nor is this a toe-dipping experiment, as the company has teed up for this Christmas with Wonder Woman 1984, the first tentpole to be sacrificed to a combined HBO Max and theatrical release, a move prompted by the most recent surge in COVID-19 cases.

This is a company going all in. Granted, WarnerMedia is being very clear that this is a one-year thing, driven wholly by the pandemic and (not that its executives are saying this) what was learned from the disastrous rollout of Tenet in theaters back on Labor Day weekend. But putting all of its planned 2021 movies on HBO Max at the same time as debuting them theatrically remains the biggest, most declarative statement yet in terms of the future of streaming. 

As for the logistics of how this will work, the movies that WarnerMedia is releasing on HBO Max will be made available to subscribers for 31 days. After a month, the movies will only play in theaters for a normal release time. Then people will be able to rent them via online platforms such as Amazon and iTunes.

It’s not clear when the movies will return to HBO Max.

Perhaps most interesting is that it’s WarnerMedia making this clarion call. The company has been more slow-footed than many of its peers in terms of streaming. Disney has made its motives clear for a couple of years now in any way it possibly could, down to reorganizing its entire entertainment division around Disney Plus. NBCUniversal has taken on movie theaters and bullied them, essentially, into granting shorter release windows (the time between when a movie is released in theaters and when it hits streaming platforms). Not to mention that Universal was one of the first studios to start throwing its movies over to premium video on demand, rather early on in the COVID-19 pandemic (Trolls World Tour, The King of Staten Island, etc.).

WarnerMedia, in contrast, has moved more laboriously, fumbling the rollout of HBO Max in May and sending out mixed signals: Tenet was a kiss to movie theaters and talent (Christopher Nolan). Wonder Woman was one to HBO Max. The result has been a very dismal stock situation for AT&T, which owns WarnerMedia—something that was surely not lost on executives at the company when they drafted the release for their new movie strategy. No one knows better than Disney (and AT&T) what happens when you tell Wall Street that you’re all about streaming! Disney’s stock is up almost double in 2020 and is currently trading at about its 52-week high, with a market cap of more than $275 billion. Meanwhile, AT&T’s stock is down about 25% in 2020, with its market cap currently about $208 billion.

But if Wonder Woman was a kiss, Thursday’s decision is a long and vehement embrace of HBO Max, at a time when the service desperately needs it in order to catch up to rivals such as Netflix and Disney Plus. It will also give WarnerMedia more leverage with Roku, the biggest streaming platform out there and the one that has yet to agree to offer HBO Max.

Indeed, whatever this means for balance sheets next year, and whether or not The Matrix 4 makes money, HBO Max simply couldn’t get a bigger endorsement or selling point for consumers. Executives over at Disney are surely starting to wipe their brows, as they have yet to say what they’ll do with Black Widow or the Avatar sequel, but Disney’s analyst day on December 10 just got more interesting.

Brow wiping is going on elsewhere in Hollywood, too. According to sources, the town’s agents are “worried”—that’s putting it mildly—about what WarnerMedia’s bold move means for deals for their talent on what are suddenly streaming releases. Built into theatrical deals, particularly on big-budget franchise movies, are lucrative back-end deals that allow actors and directors to reap hefty paydays when their movies do well at the box office. This structure does not translate to streaming, where more money is made up front. This also applies to producers—another group that’s stressing out today. As for movie theaters, which are already holding on for dear life due to COVID-19, one insider called it “a side blow.”

Also a fairly generous term. 

The bigger question is what the aftereffects will be once 2021 has wrapped and, presumably, we are, indeed, all vaccinated (or somehow inoculated) and chomping on popcorn. Will audiences still want to go back to theaters to see big action movies, or will the convenience of home viewing have become too familiar by then? Will theaters even be around—and what will they look like? As one source pointed out in response to WarnerMedia’s move, theaters could start charging $5 a ticket, seeing as they make most of their money on concessions anyway. How will WarnerMedia feel about streaming once COVID-19 has (hopefully) passed and its stock price has rebounded? Will HBO Max still be getting a wet kiss?    

It is, in so many ways, holy shit time.