After Warner Bros.: The new long-term deal Hollywood studios, movie theaters and Netflix need

Key Points
  • Blumhouse Productions' Jason Blum expects the movie theater business to survive coronavirus but does think the theatrical window needs to shorten if traditional studios want to compete with streaming services like Netflix.
  • The Hollywood power broker thinks shorter theatrical release windows mean multiplexes no longer need to have films like 'Marvel Avengers' and horror flicks like his own dominate a majority of the screens, providing more opportunity for genres like dramas and romantic comedies.
  • AT&T's Warner Bros. just announced it will release every 2021 move on HBO Max at the same time as in theaters, but WarnerMedia's CEO told CNBC the decision was related to the pandemic, not the long-term future.

In this article

Hollywood power player Jason Blum on the post-Covid outlook for movie theaters
Hollywood power player Jason Blum on the post-Covid outlook for movie theaters

Hollywood movie producer Jason Blum recently told the New York Times that coronavirus has "shaken the movie business to its bones," but the head of Blumhouse Productions, best known for its horror films, is bullish on the post-Covid future of movie theaters. Though he sees some big changes coming if the traditional studios and exhibitors want to thrive in the coming era alongside streaming services like Netflix.

Among the biggest, and most contentious changes, is a shorter theatrical release time for films. Blum says more movie studios will need to embrace this model — Universal Studios already has agreed with chains like Cinemark, Cineplex and AMC — in preparation for a time when people can safely go back to theaters, which he is bullish on.

"I don't think movie theaters are going anywhere," Blum said, at Thursday's CNBC Evolve livestream on the transformation of the media landscape. "I think people will run back to movie theatres when we can, I know I am."

But Blum says how long movies play in theatres is definitely going to change.

"What Covid did is make what was happening over the course of five to eight years happen in 10 months," Blum said. "So much of the power has transferred to the streamers for storytellers and it's really accelerated what is happening to the theatrical window."

AT&T's Warner Bros. just announced it will release every 2021 move on HBO Max at the same time as in theaters.

Shares of AMC fell by as much as 16%, while Cinemark fell 22% on the news, but WarnerMedia CEO Jason Kilar said the market is overreacting and blamed the pandemic for his company's 2021 decision.

"Everyone should take a breather," Kilar said in an interview with CNBC. "Let's let the next six, eight, ten months play out. And then let's check back in."

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Blumhouse, which has long experimented with new models in Hollywood, has released movies during the pandemic that went to streaming immediately through partners like Amazon, as well as films like "Freaky" which debuted in theaters a few weeks before heading to streaming on this Friday, Dec. 4.

Blum said the traditional studios will need to adopt a three-week theatrical release model for movie theaters — though for some films it could be longer. After that, the movies move to the home.

"What we will see over the long-term is many, many, many movies playing in theaters for a much shorter period of time, and for the consumer that's a great thing," he said during the interview at the CNBC Evolve event, which occurred before the Warner Bros. news broke.

Blum's vision of the new Hollywood business model is not only bullish for theaters, but for genres that have migrated to streaming in recent years. While "tentpole" films may continue to dominate the box office gross, Blum thinks the next era of moviegoing will offer more diverse genre offerings on the big screen.

"Instead of going to the multiplex and having 'Avengers on screens 1 through 8 and two other movies on 9 and 10, you'll have 8 different movies playing every weekend, the only thing is they just won't last as long," Blum said. "You'll have the ability to go to the theater and see things that are not just horror movies like we make or superhero movies."

Genres like drama which have migrated to streaming will get another shot at the big screen. "There are very few dramatic movies releases and when windows are shorter drama will come back," he said, along with romantic comedies. "The way we define the theatrical release is the biggest shift in the movie business."

He added that if that does not change, he does not see how theaters can compete with streaming.

Netflix and the streaming competition

His view does not mean tentpole movies are going away or any less powerful in the post-Covid theater model.

Blum said that, aside from Netflix, it simply isn't possible to make a film for $150 million or more and not have it released in theaters. "It's not a sustainable model. It's financially impossible. Tent poles movies have to play in theaters. You can't make them worth the investment to play them straight to streaming."

But he does see more collaboration between big tech companies in streaming and Hollywood, though tensions do remain.

One of the big points of friction which has gone away is big tech's belief it could compete without Hollywood executive talent.

"They had senior people, but they weren't senior Hollywood people," Blum said. "It took them years to realize making TV shows and movies is different from doing other things."

Blum remains frustrated by the focus on data analytics from the technology sector as it grows in entertainment, as well as the way they promote the data.

They don't share full results, they only share success and not failure. It's meaningless, completely meaningless.

He says if Blumhouse used an algorithm to decide which films to make, 80% of the movies it has produced would have never been made, including "Get Out", "Whiplash," and "Black KkKlansman" and the new Showtime series "The Good Lord Bird."

"I hate the idea shows are made because of data," he said. "I don't subscribe to that."

His biggest gripe about data is the way in which Netflix shares it. "It's a farce," Blum said.

Netflix may claim that 60 million people saw a show, but that is defined by watching for at least two minutes, not from start to finish. "They don't share full results, they only share success and not failure. It's meaningless, completely meaningless, and until there is transparency with who is watching and at least how many complete the shows, we as producers have no hope of having any ability to help get our shows in front of the audience we think we should be reaching," Blum said.

When streaming and theater revenue converge

Blum does believe that, eventually, a streaming service will decide to provide data transparency on who is watching from beginning to end, but "we're not even close to that."

What will make that data transparency effort take place will be a larger shift in how talent is paid for streaming content. Currently, one of the biggest differences between studio movies to be released in theaters and streaming content is that streaming payment is all upfront, regardless of performance with audience. Blum thinks that will change and at some point streaming services will pay talent based on performance of content, in the same way that box office performance is used as a formula for sharing revenue with Hollywood talent.

"If a movie is seen by a billion people on Netflix or 10, that's it," Blum said of the upfront payment model, though he added that talent currently is being paid for streaming content "healthily and fairly."

"Someone is going to start sharing revenue and in order to be paid per person you have to know how many people it was, and at some point, some streamier will have to start doing that," he said.

Blum remains confident that even with major changes in movie theaters and streaming, the core bullish thesis on the entertainment business has not changed. "Human beings need stories like we need air. We need stories to live and people are not watching in movie theatres but spending more time consuming stories than ever before," he said. "There is an inherent desire ... never going away, and one of our favorite delivery systems is being in a dark room with a 60-foot screen."

Disclosure: Comcast is the parent company of NBCUniversal and CNBC.

CNBC Evolve: Transforming Media with Blumhouse's Jason Blum
CNBC Evolve: Transforming Media with Blumhouse's Jason Blum