Bloomberg columnist Lucas Shaw offers a theory on the fundamental shift taking place in regard to how studios are planning to distribute their movies and other content in 2023. After following an “all-in” approach targeted at streaming during 2020 and 2021, studios were shocked to see their stock valuations fall by one-third or more as investors began to shift their focus to profitability over subscriber gains.
Shaw points to the studios shifting their strategies in three different areas. First, they are putting their movies back in theatres after holding back throughout the pandemic. The success of hits such as TOP GUN: MAVERICK and ELVIS in 2022 was measured in both box office returns and subsequent sales through Premium Video on Demand and new subscribers to streaming platforms.
For years, exhibitors have argued loudly that success at the box office creates downstream value for the studios. After 2+ years of experimentation with streaming, studios led by Paramount, Warner Bros., and Disney are buying back into cinema, by releasing all their high-profile 2023 titles in theatres.
Second, after several years of walling off in-house content so that it could play only on a studio’s own streaming platform, distribution execs are once again opening up distribution to third-party streaming platforms. Disney is a prime example. Former CEO Bob Chapek had reserved all Disney content for Disney+, under the assumption that exclusivity would drive new signups.
Unfortunately, this approach also resulted in Disney forgoing significant revenues from licensing. Returning CEO Bob Iger has shifted the company’s priorities to a focus on profitability, through a balance of increased revenue along with cost reduction.
Hollywood’s third new move is to generate new revenue by partnering with advertisers. Nearly every top-tier streaming service is trying to capitalize by offering low-cost subscriptions that show ads or no-cost channels – so-called “free ad-supported television” or FAST – such as Pluto from Paramount or Freevee from Amazon.
While these changes do not amount to a complete return to pre-pandemic distribution models, they do borrow lessons from the traditions of Hollywood in an attempt to find a way back to profitability.