Back in 2014, we wrote an article about the decline of cinema. Well we thought it was time to revisit the topic because it seems more relevant now than ever. It’s taking longer than we initially thought, but movies are coming home.

We may have been a few years too early with our prediction, but now it seems others are agreeing. A recent article in The Economist, found that 2020 served a double blow with the to COVID-19 pandemic, and a general lack of blockbuster new releases. The combined impact is that cinema revenue was down 70% in 2020.

While James Bond may have saved the world on 24 separate occasions, it appears he’s trying to dodge the COVID pandemic. The release date of the next Bond feature, No Time To Die, is one of several films which has postponed their official release date. It makes sense that studios don’t want to release big films during a pandemic. After all cinemas can’t sell tickets to locked down audiences.

Another issue raised by The Financial Times, is that cinemas have become more risk averse. Since the GFC in 2008, multiplexes have been less willing to take a chance on films that didn’t fit in the ‘blockbuster’ category. Rather than running the ‘riskier’ films, they prefer to dedicate several screens to the same blockbuster. It makes seeing the film easier for us because the Marvel blockbuster starts every 30 minutes.

Our Preferences Are Changing

While COVID may have been a strong catalyst, it’s not the only factor. The past decade has seen vast improvements in home entertainment systems, while at the same time prices have come down. Most homes now have large flat screen TVs and they are usually connected to a surround sound system.

The home viewing experience has improved exponentially, while at the same time the internet has only gotten faster. Our unprecedented access to information has seen the emergence of on demand streaming services such as Netflix. This new way of viewing movies has already been the demise of the old rental stores like Blockbuster.

A recent study by Statista, found that over the past 2 years, consumer preferences have been shifting to streaming rather than cinema. The results of their study are shown in the chart below:

As we can see, over the past 2 years, our preferences have been shifting away from cinema in favour of home screenings. Watching from home has become more enjoyable thanks to better home systems, and an exponential growth in content available online.

Studios Are Changing How They Release Movies

One blockbuster that did hit the theatres over Christmas, was Wonder Woman 1984. Warner Bros released the movie simultaneously at theatres and on their streaming service, HBO Max. The audience could stream the movie from home, on the same day it was released in theatres.

This is not a one off event either. Warner Bros announced that the same dual release day will apply to all 17 movies they have planned for release in 2021. Previously films were given a 70 day cinema only window. This simultaneous release means that cinemas have lost the 2 month advantage they used to have where they were the only way to see a new movie.

Warner isn’t the only studio shifting their focus to streaming. The world’s largest studio Disney is also shifting to streaming. Due in part to lockdowns, 2020 saw their streaming service, Disney+, grow to over 60 Million subscribers. Before the pandemic, they were hoping to reach this level by 2024. Their target for 2024 has been increased 3 fold. They now expect to have over 240 Million subscribers over the next 4 years.

There is no doubt that they expect the growth in streaming to outlast the pandemic. The Economist recently reported that spending on Disney+ content will be dramatically increased to almost $17 Billion a year. That would put Disney on par with Netflix for original streaming content.

Fans of Star Wars and Marvel, can expect a wide range of content to be released exclusively on Disney+. Series such as WandaVision and The Mandalorian are already streaming.

Another reason why releases my be shifting online, is that because this model works.. While the film is a ‘new release’, studios can charge a premium for streaming. Unlike cinema tickets, where the studio would be lucky to get half the ticket proceeds, with online streaming, the studio earns up to 80% of the rental revenue.

They can charge a high premium for streaming new movies and people will pay. With the original Trolls movie, we bought a family pass for 2 adults and 2 kids for $40. We could have paid a similar amount to watch it at home, and even invited a bunch of the kids friends over to enjoy it too. That’s the advantage of home streaming.. It’s a fixed price even if you have a living room full of friends and relatives.

The recent sequel Trolls World Tour, was released exclusively online. The movie made an impressive $100 Million in streaming revenue. While this is not as large as the $153 Million the first movie made in ticket sales, it is a win for the cinema. Because of the streaming revenue model, the studio made more from the sequel in 3 weeks than they did from the original in 5 months.

The success of Trolls 2 lead Universal to announce that even after the pandemic, all their movies will be released to cinemas and streaming audiences at the same time.

While there will probably always be people who prefer going out to a cinema and spending some time away from the distractions of home, streaming is a fast growing and profitable alternate. Cinemas will need to adjust to compete, or it is likely that their numbers will dwindle in the coming years.

We’d love to know your thoughts.. Do you prefer streaming or cinema, what can cinemas do to make you visit more often. Let us know in the comments section below..