Warner Bros. Discovery Is Going All-In on Theatrical Releases – Which Means Max Is, Too | Analysis

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After years of tech-driven disruption (remember when a phone company briefly owned Warner Bros.?), David Zaslav has been trying to strike a back-to-basics, business-as-usual tone with anyone who will listen: Wall Street analysts, Hollywood creatives and most recently the crowd of theater owners gathered in Las Vegas at CinemaCon this week.

The Warner Bros. Discovery chief has strongly rejected the streaming-first strategy of his predecessor, Jason Kilar, the Hulu cofounder who advanced day-and-date or HBO Max-only releases for Warner Bros. movies. At CinemaCon, Zaslav promised long theatrical runs for Warner’s slate of new movies like “Barbie” and “The Flash.”

Movies seemed like something of an afterthought at the unveiling of Max, the replacement for HBO Max, this month. “Shazam! Fury of the Gods,” which faltered at the box office, will have its streaming debut as Max begins service on May 23. There was no mention of streaming-only movies.

The answer was so simple as to be almost revolutionary: Max will depend on Warner Bros.’ theatrical slate for a steady supply of A-level, first-run movies.

“This is a textbook case,” noted Box Office Pro chief analyst Shawn Robbins, of realizing “the wheel doesn’t need to be reinvented.”

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It’s an arrangement that long served HBO, with no objection from exhibitors. And it seems to work for home viewers, too. Movies deemed good enough to make it to theaters perform better on streaming, lifted by the slick saturation-marketing campaigns Warner, like other studios, is used to delivering.

“We do not believe in streaming movies,” Zaslav declared Tuesday in his first-ever CinemaCon address.  “Movies [in theaters] perform substantially better when we bring them to HBO Max than any of the direct-to-streaming movies… We said it nine months ago, and we said it six months ago. We have never felt stronger about it.”

For the foreseeable future, if it’s not worth putting in theaters, Zaslav doesn’t want to hear about it. It’s a prime example of how what previously would’ve been conventional wisdom initially qualified as aggressively outside-the-box thinking amid an industry-wide focus on streaming-centric movies.

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Farewell to the straight-to-streaming movie

That means instead of making movies like “Father of the Bride,” “Let Them All Talk” and “Locked Down,” intended to exist primarily on Max, Warner Bros. Discovery is prioritizing a theatrical-first slate of around 20 movies per year by 2024, up from six last year and 16 this year. As in the before times, these films will earn revenue first through the box office and then through post-theatrical revenue streams like VOD, DVD, streaming and linear television.

Zaslav’s ruthless culling of existing HBO Max content, which included shelving partially finished films like “Batgirl” deemed unworthy of theatrical release, was an early signal of his strategy. The moves seemed to put Warner ahead of the curve on embracing theatrical releases as a way of lifting streaming performance, rather than seeing those goals as at odds with each other.

“Several corporate strategies were employed during the pandemic,” stated Robbins, “out of perceived necessity, to monetize their strongest brands during a time of need. What’s proven shortsighted about trying to hold onto those ideas is that the world has recovered.”

Warner Bros. even took four films — “House Party,” “Magic Mike’s Last Dance,” this week’s “Evil Dead Rise” and this August’s “Blue Beetle” — initially intended for HBO Max and essentially upgraded them to theaters. The embrace of a variety of revenue sources instead of betting everything on streaming is a throwback to older Hollywood strategies.

That includes licensing some properties out. The Warner Bros. slate may still be reserved for Max, but other IP, including HBO shows like “Westworld,” will get licensed to services like Roku or Tubi. Even DC characters aren’t seen as Max-exclusive: “Batman: Caped Crusader” is going to Amazon’s Prime Video instead.

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Exclusivity is so 2021

Zaslav has “reversed Jason Kilar’s entire vision of the future of HBO,” said Ross Gerber, the CEO of wealth management firm Gerber Kawasaki. He noted that the streaming platform even got rid of the HBO name, an implicit rejection of the notion of keeping IP at all costs.

Exclusivity is no longer the name of the game. The strategy has morphed into a far more selective approach. It means Warner Bros. Discovery faces harder questions in deciding which television shows go to HBO, which go to Max and which get licensed out.

For movies at least, the message is clear: Warner Bros. will make movies for movie theaters first. The flip side of this policy is that Max can market itself as the primary streaming home of big-deal Warner Bros. hits. That’s going to be a key variable as more and more studios keep more of their films on their own streaming services for at least the first pay-TV window.

Right now, HBO Max has seen success not just from WB flicks like “The Batman” and “Elvis” but also 20th Century Studios releases like “Free Guy” and “Death on the Nile,” thanks to a pre-Disney deal that saw any theatricals from the former Fox labels go to HBO in the first window before heading to Disney+ or Hulu. HBO Max lost Universal movies in 2021 as NBCUniversal moved that deal in-house. Universal movies have since become a major draw for Peacock.

The mix is changing

Another major implication of leaning heavily on the theatrical slate is that the movies flowing to Max will change. If Zaslav wants 20 movies a year, they can’t, for reasons of expense and time, all be $200 million tentpoles. We’re going to get more “The Color Purple” and “The Nun 2” alongside “The Meg 2: The Trench” and “The Flash.”

Blitz Bazawule and Oprah Winfrey are welcomed onstage by Warner Bros. Discovery CEO David Zaslav as they promote the upcoming film “The Color Purple” during the Warner Bros. Pictures Studio presentation during CinemaCon. (Ethan Miller/Getty Images)
Blitz Bazawule and Oprah Winfrey are welcomed onstage by Warner Bros. Discovery CEO David Zaslav as they promote the upcoming film “The Color Purple” during the Warner Bros. Pictures Studio presentation during CinemaCon. (Ethan Miller/Getty Images)

That, alongside the sheer number of movies Warner plans to release, is reassuring to exhibitors. Quantity of theatrical releases is a key concern for exhibitors, AMC CEO Adam Aron told TheWrap in an interview at CinemaCon.

But the theatrical lift to movies, Aron observed, isn’t just for blockbusters. It seems to work across the board. “When they hit streaming services [after theaters], they are a big deal,” he said.

“A century’s worth of theatrical success breeding strong at-home and downstream revenue, said Robbins, “wasn’t wiped away like some overeagerly predicted might happen three years ago.”

It helps that Zaslav, no stranger to media circles but a relative newcomer to the movie business, wants to ingratiate himself with producers, actors and distributors who bristled at Kilar’s streaming-first strategy. It helps that strong box office performance is promising that theatrical distribution can more than pay for itself, rather than hoping for downstream revenue to balance the books.

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The challenge now is to make sure audiences show up for those non-tentpole films, a problem that predates the pandemic. Warner Bros. spent the latter half of 2019 releasing a slew of old-school, star-driven studio programmers like “Blinded by the Light,” “The Kitchen,” “Richard Jewell,” “The Good Liar” and “Motherless Brooklyn” to near-empty auditoriums.

If movies like “The Fallout” and “No Sudden Move” don’t qualify for streaming releases and the economics still don’t work for theatrical releases, such films might just cease to exist. A decade ago, streaming was, ironically enough, supposed to be the savior of non-franchise, adult-skewing star vehicles that couldn’t cut it in an event-movie ecosystem.

So Zaslav will have to persuade film creatives that his profession of love for storytelling isn’t just talk. As Gerber noted, the longtime Discovery Communications boss is a businessman in a business that isn’t entirely defined by financials. “Entertainment is a business with people who want to be in it for reasons other than money,” Gerber said.

Zaslav has emphasized the financial wisdom of returning movies to theaters, but he took a stab at persuading the true believers Tuesday.

“The phone goes off, the lights go out, we tell a story and it’s magic,” he told theater owners Tuesday.

Wall Street, eyeing Warner Bros. Discovery’s heavy debt load and skeptical of big content budgets, may want something a little less ethereal.

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