Outgoing National Association of Theatre Owners CEO Says ‘Everyone Gets It… Except for Netflix’

John Fithian, president and CEO of the National Association of Theatre Owners, has spent the past three years guiding cinemas out of a pandemic that led many to question whether this would be the exhibition industry’s last stand.

Now, he’s leaving the job feeling more hopeful than ever about the future of the theatrical experience.

“Getting through COVID meant dealing with a blitzkrieg of multiple hard tasks,” Fithian told TheWrap in a one-on-one interview ahead of NATO’s annual CinemaCon event. “We had to develop the protocols for preventing the spread of COVID in theaters and then lobby state governments to allow theaters to reopen, and on the financial side there were countless talks on the federal and state level for grants and tax advantages to allow theaters to stay afloat as the box office started rebuilding.”

And after all of that, what does Fithian see for the future? “I see an industry that recognizes the importance of the theatrical experience as strongly as ever,” he said. “Things have changed, and we’ve had to change, but think two years ago when people were wondering if the public was ever going to come back to theaters and if films would still be released exclusively on the big screen. The answer to both is unquestionably ’Yes.’”

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There’s a notable exception, Fithian admitted: Netflix, which has held fast to its limited-release strategy, continuing to pump most of its films directly to its streaming subscribers. Even so, CinemaCon 2023 in Las Vegas will be a victory lap for Fithian as he retires after 31 years at NATO, passing the torch to former Fox exec and Justice Department official Michael O’Leary. Over those decades, Fithian’s work has included fighting government censorship by working with the Motion Picture Association to update its ratings system, overseeing the industrywide transition from film to digital projectors, and navigating theaters through their love-hate relationship with streaming services over the past decade.

But there’s no question for him that the pandemic was his toughest challenge and his proudest accomplishment. Now, as he leaves, movie theaters are still facing serious challenges when it comes to recovering from COVID’s financial devastation, with AMC facing weak earnings, high debt and flailing stock and Cineworld emerging from bankruptcy proceedings.

But as Fithian lays out in the interview below, theaters are getting help from a film industry that is steadily returning to the “quality, quantity and diversity” that exhibitors enjoyed in the late 2010s, and that is why he holds out hope as he says goodbye.

The following interview was edited for length and clarity.

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The 2022 box office finished at $7.36 billion, about 35% behind 2019. So far this year, the 2023 box office is about 16% behind 2019. Is this recovery going at the pace NATO expected and at the pace theaters need to recover?
For the most part, we are very pleased with the rapid regrowth of the box office. The pandemic had a devastating impact on movie production, but the good news is that people are already coming back to cinemas on a per movie basis in equivalent or better numbers than they were pre-pandemic.

So what do I mean by that? Let’s take last year, where we had about 63% of the wide-release movies — movies on 2,000 screens or more — that we had in 2019. Theaters did about 64% of the 2019 box office off of those movies. In other words, last year, people were coming to movies at the same pace per movie, as they were pre-pandemic. So there’s no hesitancy of our patrons in every demographic to come back out to the cinemas.

It’s just a matter of having enough quantity, quality and diversity of movies to get that pace back up and beyond where it was in 2019. And we’re very, very encouraged on future movie supply because we are seeing from nearly every studio and streamer plans for an increased number and diversity of films to be released theatrically with a window.

Let’s break down that phrase further: quantity, quality and diversity. We’re entering a summer season with many more high-profile films than last year, which started off very well in May and June but entered a months-long drought in mid-July. How do you see this summer playing out?
I wouldn’t be surprised if this summer is as strong as 2018 and 2019. I know that sounds optimistic, but they’re just a bunch of big titles this summer and, more importantly, a slew of mid-budget titles and smaller titles that are filling in the gaps.

We’re already seeing the vast overperformance compared to pre-release predictions on movies we’ve had so far. I mean, no one anticipated how gigantic “Super Mario Bros.” would be or how long it’s holding up in the marketplace. And then there’s “Air,” a mid-budget made primarily for adults that is holding above expectations. If a normal summer slate continues performing like the start of 2023, where titles outperform their pre-release expectations, it’s going to be a very big summer. And that is very exciting.

Four years ago, you told TheWrap that theaters would prefer to have five films that make $200 million domestic in place of two films that make $500 million domestic, because the former tends to give theaters more favorable terms on ticket revenue share. There’s a lot of films that could get close to $500 million, but do you think there will be more of those $200 million hits in the coming year?
I absolutely do. First of all, we love “Avatar” and “Top Gun” because they bring some people back to the marketplace who gave up on going to the movies. But we love movies in the middle and the indie films like “Everything Everywhere All at Once” that can come out of nowhere with word of mouth and make a lot of money. It’s hard to predict which will be the next film to perform like that, but they will come, because they always do.

Yes, it’s true that five films at $200 million for us is better than two that hit $500 million. But we what we want is both, because with it comes diversity of content that can bring out seniors, families and other demographics that aren’t looking at blockbusters. And then what happens? They see a slew of trailers that are targeted for them. And then they start to believe, “Oh, I can get back into a couple times a year, four times a year, even a movie a month.”

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But on the flip side, we’ve seen acclaimed dramas that appeal to older audiences like “The Banshees of Inisherin” and “The Fabelmans” dramatically underperform compared to similar pre-pandemic films. Does that concern you?
I don’t agree that that audience hasn’t come back for those kinds of films. I believe that that audience comes back when they hear that the films are great, right? It’s not about the production level or who the directors are. It’s about the one to see.

Steven Spielberg is one of the greatest directors of all time, but that was a very personal story — semi-autobiographical, personal, limited in scope, even though absolutely beautifully shot and beautifully done. That’s not a mass-appeal movie, right? So there are multiple factors, and we can never predict with any certainty because we have to wait until Thursday night or Friday before we know if a movie will work or not. This is the magic of this business is that no one knows anything about any particular movie, for real, until our movie fans tell us what they think of it.

When you have the type of movie like “Everything Everywhere” that really catches on, is something new and fresh for a variety of demographics, it’s going to stay in the marketplace forever. And we keep movies on our screens as long as they’re doing well. In the fall we had a weird sprinkling of movies and I’ve heard many people say that the types of people that come to those more mature movies just aren’t coming back. We don’t agree with that. We still believe that there’s an audience for every budget level and every genre in theaters, and it just comes down to bringing the right film to theaters with the right message to make that audience aware and want to buy a ticket.

A theory we have discussed with analysts is that many of the films that contend for Oscars are having a harder time getting audiences to turn out because they don’t have the big-screen spectacle, which combined with the shorter theatrical window makes it more likely that they see those films on streaming. Do you think there’s weight to that?
OK, there’s a lot of different levels to that which we need to unpack. It’s a brain teaser, I love it.

Let’s start with the Oscars. We’re talking to the Oscars and their governors about the fact that that their rules need to need to reflect or change or incentivize voters to consider movies that have been successful theatrically. That’s what movie fans are telling us. They like the movies they see in theaters. But right now, all a movie needs to qualify is to have a theatrical run for a couple weeks in a couple of cities. Apple sort of had something like that with “CODA.” It was a great film, but we are trying to encourage the Academy to change the rules in ways that encourage more nominees like “Everything Everywhere All at Once” and “Top Gun: Maverick.”

Now the theatrical window. We’re now in an industry where theatrical windows are being determined on a film-by-film basis. Studios are making much more flexible and sophisticated strategies about how long a movie plays in theaters and how to get the most value out of their marketing and distribution spending. I think both studios and theaters are still figuring out how to release the so-called “smaller” films under this new model, but in the long run I think we’re going to figure it out because studios and filmmakers still recognize that giving a film a theatrical release helps give it greater awareness than just immediately dropping it on streaming, and that’s good both for theatrical and home as well.

And we’re now seeing Apple and Amazon recognize that with plans to release more films in theaters. Regardless of whether the festival/awards circuit films recover, how do you see those streamers factoring into theatrical’s future?
They will play a huge factor. This is historic. What I just said about the importance of theatrical to the whole financial outlook of a film is what we have said in talks with Apple, Amazon and Netflix for years, and now Apple and Amazon are seeing the hard data and changing their strategy accordingly. “Air” should be just the beginning of Amazon’s plans to release a dozen or so films in theaters every year, and many of them will be mid-budget films that will provide the diversity theaters need to bring in other demographics.

Meanwhile, Apple is partnering with studios like Sony and Paramount to release “Napoleon” and “Killers of the Flower Moon” nationwide in theaters. But I also don’t want this historic transition by the streamers to distract from what the legacy studios are doing. Under David Zaslav, Warner Bros. is recommitting to prioritizing theatrical. Brian Robbins and the Paramount team had a huge year with multiple hits in theaters. Tom Rothman has always championed the theatrical experience at Sony, Universal releases over 20 films a year and Lionsgate is building up their theatrical slate too.

And Disney… look, Bob Chapek was not our friend. I’ll just be honest. He did not believe in the theatrical model. It was all about Disney+ and their investors were saying it was all about Disney+… until they looked at the money and suddenly Wall Street said, “Uh, theatrical is important.”

Now there’s a leadership change and everybody at Disney now who handles movie production understands the importance of theatrical. I’m talking people like [co-chairman] Alan Bergman and [theatrical distribution chiefs] Cathleen Taff and Tony Chambers who understand how theatrical builds momentum for streaming. So we are bullish and confident that we are going to get more films in the coming years that will play exclusively in theaters for many weeks from studios and streamers who understand why our model has worked for decades. Literally everyone gets it.

Well, except for Netflix, but oh well. I guess everybody can’t be right.

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