- Share this article on Facebook
- Share this article on Twitter
- Share this article on Email
- Show additional share options
- Share this article on Print
- Share this article on Comment
- Share this article on Whatsapp
- Share this article on Linkedin
- Share this article on Reddit
- Share this article on Pinit
- Share this article on Tumblr
It was Jan. 23 when China shut down Wuhan. Spooked by the spread of a novel infectious virus that was rapidly spreading throughout the sprawling city of 11 million, the Chinese government ordered Wuhan into lockdown.
It was two days before the start of the Lunar New Year, the family holiday that marks the beginning of China’s blockbuster season. Box office typically spikes over the New Year and local studios use the holiday to roll out their big tentpole titles. Not this time. Instead, Chinese studios pulled their holiday titles, anticipating quarantine measures that quickly shut down cinemas across the country. China’s cinemas are still shut and all of those would-be blockbusters remain unseen. All except one.
Lost in Russia, the latest in a road-trip comedy franchise from hitmaker Xu Zheng, was planned as a major New Year release. Instead, the movie went straight online, streaming exclusively on the longform video channels owned by internet powerhouse ByteDance, the company behind TikTok. Lost in Russia producer Huanxi Media had been in talks with ByteDance over a potential partnership before the crisis hit. When cinemas started shutting, the companies agreed, within a matter of hours, to a $90 million deal to release Lost in Russia online.
Months before Universal’s all-platform release of Trolls World Tour, before Disney turned Artemis Fowl into a straight-to-streaming title on Disney+ and before Warner Bros. decided to skip theaters and bow Scoob! directly on premium VOD, China was experimenting with breaking the theatrical window, shrinking or collapsing the gap between a film’s release in theaters and its sale on home entertainment. And, at least in the case of Lost in Russia, doing so successfully. Since its online release, Lost in Russia has been streamed more than 600 million times, according to figures from state-affiliated news group The China Times.
China was the first, but as the coronavirus pandemic has shut down cinemas worldwide, territory after territory has followed suit and shrunk or smashed the theatrical window. Studio releases like Sony’s Vin Diesel actioner Bloodshot, Paramount’s video game adaptation Sonic the Hedgehog and Warner Bros.’ Margot Robbie-starrer Birds of Prey have been rushed onto VOD platforms across Europe, Asia and South America. Increasingly, they’ve been joined by local art house titles, such as Céline Sciamma’s French award winner Portrait of a Lady on Fire, which has quickly moved from shuttered theaters to VOD services across most of Europe.
“The studios really opened up the door, giving us permission [to break the theatrical window],” says Thomas Verkaeren, manager of Belgian art house group O’Brother Distribution, which joined forces with distributors Imagine and Cineart to launch VOD Premium, an online offering of art house titles that were either in release when COVID-19 hit or about to bow in the territory. O’Brother’s online offerings included Zoé Wittock’s Jumbo, a standout tale from Sundance, which Verkaeren initially planned to bow theatrically.
In Germany, mini-major Constantin Film dropped its plans for a March 19 cinema release for local comedy Berlin Berlin after theaters shut across the country. The title, a film version of a hit German TV series, premiered on Netflix on May 8. Nick Rowland’s crime drama Calm With Horses, a critical hit out of Toronto, quickly moved from cinemas — where it bowed March 13, a week before theaters were shuttered — to VOD, with Element Distribution and Altitude bringing forward the film’s on-demand release to April 27.
Even in France, which has some of the strictest windowing rules in the world, COVID-19 has forced a change in behavior. In late March, the French government gave national cinema body the CNC the right to unilaterally shorten the VOD windows for films that were on release before the coronavirus shutdown. Beneficiaries included studio titles such as Disney/Pixar’s Onward and Universal’s war drama 1917, to art house features including Melina Matsoukas’ Queen & Slim to French tentpoles like the Martin Provost-directed comedy How to Be a Good Wife.
“In exceptional times, we must provide exceptional responses” said CNC president Dominique Boutonnat in his justification of the move.
But the question remains: How “exceptional” will these measures prove to be? As international theaters lay out plans to return to business — leading independent cinema chain VUE just unveiled a proposal to reopen its British cinemas by July 4, following similar moves by theaters across selected territories in continental Europe — many are questioning the logic of theatrical windowing, arguing the shift to online or all-platform releases is inevitable.
“For a lot of titles, you have a quite a few alternatives to the cinema,” says Ed Border, research director at London-based media think tank Ampere Analysis. “And even as cinemas reopen, social distancing and other regulations mean, short-term, it is unlikely they will be able to achieve the same level of box office … compared to VOD where, theoretically, there is no limit to how high it can scale up.”
But, Border notes, there are still only a handful of territories where on-demand is a big enough business to make it worth it. Ampere estimates digital transactional revenues — both premium video on demand and electronic sell-through (EST) were $4.25 billion in the U.S. last year, or around 40 percent of the $10.5 billion theatrical market. There are healthy on-demand markets in countries like the U.K., Germany, Japan and South Korea — where digital transactional revenues last year were between 30 percent and 40 percent of their respective box office returns. In large swaths of the world, however, bypassing theaters to move online means exchanging cinema dollars for digital dimes.
“Take five big territories — China, India, Russia, Brazil and Mexico — together they make up around a third of global box office, but just 3.5 percent of digital transactional revenue,” says Border.
China provides the starkest example of this. Ampere estimates Chinese box office revenues topped $9.2 billion in 2019, making it the second-largest territory worldwide. Digital transactional revenues over the same period? $89.5 million.
“There are a lot of markets where people just aren’t used to buying movies online,” Border notes. “If you broke the theatrical window, a good chunk of that box office revenue wouldn’t be replaced.”
That goes some way to explaining why few Chinese studios have followed the example of Huanxi Media and ByteDance with its direct-to-VOD bow of Lost in Russia. Only a handful of smaller films — Donnie Yen’s kung fu comedy Enter the Fat Dragon, low-budget comedy The Winners and Media Asia’s boxing drama Knockout — sold to streamers in the first weeks of the shutdown. None of the major studio tentpoles — films like Wanda’s Detective Chinatown 3 or Dante Lam’s $90 million action flick The Rescue — followed suit. Instead, much like the big Hollywood titles — from Disney’s Mulan and Black Widow to Universal’s F9 and the new James Bond pic, No Time to Die — Chinese blockbusters have postponed their release dates to the end of the year or into 2021.
In China, the result of the coronavirus shutdown could actually be a strengthening of the theatrical window, not its collapse. China’s film industry, although heavily regulated by the state, has never had any rules related to theatrical windowing, nor even any explicit agreements between exhibitors and distributors — mostly because the industry never needed any. The country’s booming box office — double-digit theatrical revenue growth was the norm over the past decade — was incentive enough for producers and distributors to keep films in theaters as long as possible. China’s government-controlled Film Bureau issues one-month screening permits needed to release a film in theaters. If a movie is a big hit, the distributors can typically secure a further one-month theatrical extension so it can continue pulling in ticket sales. As soon as their screening permit expires, local films usually head straight online.
But the devastation wrought by the coronavirus on the country’s cinema industry — as of May 8, China’s total box office revenue for the year to date was RMB 2.2 billion ($310.9 million) down from $3.6 billion during the same period in 2019, according to data from exhibition industry consultancy Artisan Gateway — is fueling speculation that Beijing will step in to prop up theaters. Government support, sources tell The Hollywood Reporter, is likely to include an enforced theatrical window for all releases in China.
On April 29, Wang Xiaohui, chief of China’s Film Bureau and deputy director of the Communist Party’s Propaganda Department, addressed a government meeting in Beijing about the how the film industry has been affected by the pandemic. According to local reports, Wang suggested that reforms related to windowing are likely on the way. “It is necessary to enforce the rule of the release window and follow the spirit of contracts,” he said.
Artisan Gateway president Rance Pow interprets those remarks as reinforcing the view that Beijing will do whatever is deemed necessary to prop up the theatrical sector over the long term, including ensuring a generous theatrical window. “There is little incentive to allow the cinema industry to founder given the commercial, cultural and social values to China,” Pow says.
The Chinese theatrical market also plays a key propaganda role for Beijing. “Our government is still after having 80,000 screens and becoming the number one market [in the world],” says one Chinese buyer. “Cinemas will have to be alive for that to happen, hence the talk of the new [windowing] rule.”
In Europe, the argument for keeping theatrical windows intact is more commercial than ideological.
After COVID-19 shut down theaters across Germany, Leila Hamid, head of Berlin-based distributor X Verleih, got a special dispensation to break the theatrical window for The Kangaroo Chronicles and immediately release the hit German comedy on VOD. The results were sobering.
“It was the most successful VOD release we’ve ever had,” says Hamid, “but the figures don’t make up for what we expect we would have earned in theaters.” Kangaroo Chronicles, which was No. 1 in Germany when the pandemic hit, was projected to earn upwards of $20 million at the box office. “It goes to show that nothing really replaces the theatrical experience,” says Hamid. Instead of counting on VOD, X Verleih plans to bring Kangaroo Chronicles back to theaters as soon it can. “We’ve done a new edit to the film, and added new scenes,” she says. “Kangaroo Reloaded will be back in cinemas as soon as they reopen.”
Exhibitors, predictably, have railed against attempts to collapse the theatrical window. The UNIC, which represents major theater chains across Europe, has warned distributors not to use the unique circumstances created by the coronavirus crisis “as a reference to redesign a long-standing and proven release business model. … Those who will depend on the success of the film industry should refrain from hastily altering key practices for short-term gains,” the group said in a statement.
“A theatrical release increases the value of a film, throughout the value chain,” adds Christian Bräuer, president of European art house cinemas group CICAE. “We know that the only films that work online are those that were in theaters and had the benefit of that exposure. The only exceptions are films where a crazy amount of marketing expense was done for the online release, like with some Netflix films.”
Coming out of the crisis, Braüer thinks the argument for theatrical windows is likely to be even stronger. “We only have a theatrical market because we have the windows, and if a film [post-crisis] doesn’t abide by the windows, we won’t program it in our theaters,” he says. “I’m not naive: I know at the other end of this, competition will be tougher and, as an industry, cinemas will have to get better. But we form the spine of this business. If the cinemas survive this crisis, they will become more important than ever.”
Sign up for THR news straight to your inbox every day