Can Cinemas Survive The Rise of Streaming Services?

Remember going to the movies? Sitting in a crowded theater with a few hundred eager viewers, $12 popcorn in hand, ready to be blown away by the latest Marvel blockbuster?

We do, and it was always great fun.

Here’s the thing: we’re two years into the pandemic, and we can’t pretend things are the same as they were at the beginning. The release of Spider-Man: No Way Home in late 2021 saw countless sell-out cinema showings around the world. It broke box office records and became the highest-grossing film of 2021 and the eighth-highest grossing film of all time.

So, are cinemas dead? Clearly not. Are they under threat? Maybe. What we do know is that the future is uncertain, and the blows that theater chains suffered during the worst of the pandemic have caused some major changes in the way consumers pay to watch films.

Let’s look at what the future may hold for this exciting industry — which brands will likely grow and which will struggle — and dig into the past for an idea of what’s to come.

The Box Office Strikes Back

Source: Pexels

The future of cinema looked absolutely dismal in 2020. In March, it was predicted that the worldwide box office would lose $5 billion as a result of the pandemic.

No Time To Die, the final outing for Daniel Craig as James Bond, was a hotly-anticipated release for both super-fans and casual viewers alike. Scheduled to premiere in March 2020, its release was postponed initially to November 2020, then again to April 2021 — until finally happening in late September 2021.

Grossing $774 million with a budget of $250 million, it was clearly a big success, and cinemas around the world will have loved seeing the ticket sales roll in. The first major release of the mid-covid era, No Time To Die restored faith for cinema aficionados that the blockbuster movie event hadn’t disappeared for good.

It wasn’t a one-off, either. 2021 saw some big releases, including Spider-Man, Dune, and F9 (Fast & Furious 9) taking in hundreds of millions of dollars in box office receipts. There were also some huge non-English releases in China such as The Battle at Lake Changjin ($900m) and Hi, Mom ($848m).

In fact, towards the end of the year, there was an increase in searches for “movie tickets” and Google Trends shows a big spike in mid-December for cinema interest — which was particularly concentrated in India and Australia. “Movie tickets” showed a more gradual increase through 2021, but also peaked during December.

These trends — along with massive box office receipts — are a healthy indicator for cinemas and a reminder that consumer behavior is one of the most important brand metrics to look at, even if fears to the contrary persist.

The Rise of Streaming

People don’t want to stop watching movies. So, if they can’t go to the cinema, they’ll watch streaming services instead — right?

At least, that’s the conventional viewpoint — but the reality is a lot more complicated.

Search trends offer a bit of insight. Interestingly enough, streaming services didn’t record any huge spikes in interest in the same way theaters did. Compared to levels seen pre-pandemic, their activity is consistently high through the year.

In absolute terms, there are way more daily searches for “Netflix” than there are for cinema tickets, but this isn’t a particularly accurate comparison. Many people just turn up at the theater without booking tickets online or they use an app to make bookings rather than Google search.

Instead, we have to consider usage figures.

Streaming services certainly have power in numbers. In the US, revenue from video streaming is predicted to hit $42billion by 2025. Netflix leads the way with 75 million US subscribers and more than 23% of the entire country’s population using the service every day.

In China, the raw numbers are smaller but are following the same upward trend — going from total revenues of $7b in 2015 to $18b in 2020.

It’s clear that there doesn’t seem to be an end in sight to streaming growth.

But if you’re imagining a future where films skip the box office and go straight to the stream, it doesn’t look likely. In April 2020, Universal Pictures decided to release Trolls World Tour on streaming services Fandango Now and Amazon Prime Video for $19.99, instead of releasing in cinemas.

The animated feature seemed to pay off — estimates suggest it took in over $100m in revenue. And while theaters usually take about 50% of the proceeds, streaming platforms only take around 20%.

Thus, it was quite a profitable endeavor for Universal — but not a popular one. The backlash from the cinema industry was immediate, with accusations of “breaking the business model” and threats of future films being boycotted by leading cinema chains. They’ve not repeated this strategy since.

In 2021, it seems like a hybrid model started to gain traction. Let’s have a look at how and why this hybrid model might work in the future.

A New Hope for Movie Fans

Source: Pexels

The hybrid model looks like the most likely outcome in the short- to medium-term.

In this model, studios can start with a standard cinema release and then choose to either release the film on streaming sites in the weeks following or release it on streaming sites concurrently — aka while it’s still in theaters.

While this seems a bit unusual, early trials are looking quite positive.

For example, say you’d love to discuss No Time To Die with your friend, but they haven’t seen it yet, and you don’t want to spoil it for them. The theatrical release has come to an end, so they can’t see it in the cinema.

In previous years, I’d have to wait 4–6 months for it to show up on DVD, and even longer to reach streaming services — that’s a lot of time to keep my mouth shut about what happens in the film.

But No Time To Die appeared on streaming services mere weeks after finishing its cinema run, with a rental price similar to that of a physical ticket. This means the film is still top-of-mind for moviegoers — and it’s easier to persuade your friend to see it while it’s still a hot topic.

Before streaming services, the only way to see a film at home was to wait for it to come out on TV or DVD, and that could take a number of years before licensing agreements would allow it.

Now, you’re able to see the latest blockbusters on Netflix, Prime Video, Disney+, Apple+, HBO Max, or a number of other sites within just a few weeks post-release.

The At-Home Menace

With both streaming platforms and movie theaters enjoying huge popularity even with the pandemic still ongoing, is there something that could possibly shutter the big screens for good?

To be fair, there are plenty of new innovations in screen & audio technology every year, making the home movie-watching experience more and more dazzling as time goes on.

But screen resolutions are now so high that it’s getting harder to wow consumers with crystal-clear visuals. Thus, innovation will need to focus more on new experiences and fresh ways of viewing.

Watching films on a VR headset is an obvious next step, but it cuts out the social aspect of shared viewing to an even bigger degree. It’s fun when you first try it, but unlikely to become consumers’ main viewing experience.

How about 3D films instead? Well, nope — we tried that already, and it didn’t take off.

In fact, if you search the help section on Netflix for 3D information, it says they no longer produce 3D content:

“…despite early enthusiasm, 3D viewing at home failed to captivate consumers. In recent years, many major TV manufacturers have announced that they will phase out 3D TV production. Many studios have also announced their move away from 3D production. Due to these factors, we no longer offer 3D streaming.”

It seems that even the fanciest technological revelations can’t keep viewers away from the big screen (and the regular small screen).

Anecdotally, a certain revelation in the latest Spider-Man film was greeted by fans with thunderous whoops, hollers, and applause. Can you really enjoy that kind of shared experience at home — even on an expensive home theater setup?

It’s difficult to imagine the feeling of watching a movie with a theatre full of people being replicated at home. Think of it this way — it’s the difference between seeing a sports match on your TV screen and being there in the stadium, enjoying a thrilling shared experience with your fellow humans.

Sure, you won’t go out there every day, and watching on TV can be great — but when you do go out, it’s unforgettable.

Maybe it’s time to book another ticket.

Final Thoughts

So, will streaming services kill the cinema experience for good? It remains to be seen. But it doesn’t look like a swift death will happen any time soon.

While PWC predicts that it’ll take 5 years for box office revenue to return to pre-pandemic levels — if there’s anything we learned from the last couple of years, it’s that nothing is certain. The desire for an in-cinema experience may be so strong that we see that figure reached in less than half the time.

Plus, there are many industries out there that stand to gain from a healthy cinema industry. After all, in the creative and technology industries — innovation never sleeps. New ideas, fresh brand messaging, gadgets, social trends, and economic conditions will all have different influences on the media landscape.

If the first two years of Covid-19 didn’t kill movie theatres, what will? It’s hard to imagine a home viewing experience so immersive, entertaining, and socially satisfying that it destroys the desire for the big-screen experience for good.

Hopefully, there’s a bright future for both streaming services and cinemas post-pandemic — but entertainment brands who want to survive will need to get creative to thrive. And their creativity should be heavily informed by consumer insights — which is why we suggest cinemas start investing in advanced brand tracking solutions ASAP.

With the data on hand that reveals what consumers like and dislike about their brand experience — as well as the brand associations they hold — cinemas can move into 2022 with more confidence in their brand marketing strategies.

Originally published at https://latana.com.

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Latana. AI-powered brand tracking helping brands make better marketing decisions via world-class, scalable insights. https://latana.com/

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Latana

Latana

Latana. AI-powered brand tracking helping brands make better marketing decisions via world-class, scalable insights. https://latana.com/

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