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Studios still need movie theaters, and they’re making the deals to prove it

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Streaming hasn’t ended theaters just yet

Illustration by Alex Castro / The Verge

During the course of the pandemic, the future of movie theaters looked grim. Cinema owners teetered on the edge of bankruptcy amid ongoing closures and lockdown orders, and streaming services introduced new release models that made clawing back theatrical exclusivity even harder for already struggling exhibitors. Theaters appeared to be facing an existential crisis, close to being snuffed out by a world that no longer needed them for distribution.

But as cinemas have begun to reopen their doors and feature films finally make their silver screen debuts following prolonged delays, the story has started to change. In recent months, a number of studio owners have struck deals with exhibitors — including Regal parent Cineworld, Cinemark, and AMC — to lock in exclusive theatrical releases. It’s a sign that even studios attached to major streaming services believe they still need theaters to make a major release a success.

During an earnings call this week, AMC boss Adam Aron formally announced that the company had reached an agreement with Warner Bros. to release films exclusively in cinemas for 45 days beginning in 2022 — a shift away from WarnerMedia’s hybrid release model that saw all 2021 Warner Bros. films premiere in theaters and on HBO Max on the same day.

“It’s no secret that AMC was not at all happy when Warner decided in December to take movies to the home on HBO Max simultaneously with theatrical release,” Aron said. “Therefore, it’s especially gratifying that Warner is yet again embracing an exclusive theatrical window. And for us at AMC, it’s especially pleasing to be working so harmoniously with Warner Bros. once again.”

The deal patches up a very public falling out between theater chains and studios last year that followed contentious announcements about streaming-exclusive releases for films that were intended to debut in theaters alone. The issue became so heated that at one point last year AMC said it would ban Universal films from its theaters. Months later, they struck a deal for much narrower theatrical releases, and Aron this week said the two companies had the “best working relationship that we’ve had together in many years.” As for other moviemakers, Aron said that the theater chain was in discussion with every major studio about exclusive releases.

“We are hearing considerable support in Hollywood that an exclusive theatrical window is an important way to build big and successful movie franchises,” Aron said. “Clearly, though, this whole subject is quite topical. It’s very much a work in progress.”

AMC has plenty of incentive to paint a copacetic picture of its post-pandemic future on a call with its shareholders, and theatrical exclusivity windows of 45, 31, or as little as 17 days — all of which theaters have agreed to in this new pandemic-era environment — are a far cry from the 90-day windows that cinemas typically enjoyed pre-COVID. But negotiations for exclusive exhibition rights certainly indicate studios need these windows to help their films succeed, at least where big-budget releases like F9, A Quiet Place Part II, or the forthcoming James Bond film No Time To Die are concerned, said Shawn Robbins, a chief analyst at Boxoffice Pro.

“These are the types of films that Hollywood has relied on for decades, and they are the money makers,” Robbins told The Verge by phone. “So from that perspective, having a film exclusively in theaters serves as a launching pad for that revenue stream for the studio while also serving, from the audience perspective, as a communal way to see these movies in a way that really isn’t duplicated in the home.”

Still, and perhaps most importantly, the pandemic has so transformed the traditional movie release structure that theaters will need to get creative with their long-term post-pandemic strategies for surviving a devastating blow to their business. AMC has indicated it is already considering new avenues for revenue, perhaps by showing sporting events or tapping into the gaming community (though how that would even begin to look is anyone’s guess at this stage).

“Every business has to evolve and adapt to the times, and theaters have done it several times over the past century. This is just kind of the first big example of it happening in at least a generation or more,” Robbins said. “We’ve seen expansions and dine-in theaters, bars, premium screens like IMAX and several chains have their own proprietary formats — Regal has RPX and then there’s the Dolby Cinema. I think these types of enhanced viewing experiences are the way of the future for theaters.”

Moving forward, theaters may have to rely on these enhanced experiences and things like subscription and loyalty services to boost their business. Ticket bundling or dynamic ticket pricing based on the demand for a movie could also benefit both theaters and paying audiences who may not want to pay the same price to see smaller titles as they do for major releases, Robbins said. In the future, studios will also have to coalesce around a more standardized release model, though that could potentially take several years.

At the end of the day, though, studios have shown they need theaters just as much as cinemas need their films. “I think the fact that Warner Bros. has been very vocal,” Robbins said, “and now several times committed to going back to exclusive windows starting next year, really underlines where the future of this is going.”