WarnerMedia (“WM”) and AT&T (tkr: T), leadership teams should take note. WM/AT&T completely botched its summer movie release schedule, failing to adapt to the post-COVID reality. The company took the “wait-and-see” approach rather than controlling that which it could. The result? Market share lost to Netflix and DisneyPlus.
WarnerMedia’s summer tentpole film – Tenet – was to be released in theaters in early July. COVID had other plans. Tenet had a limited release this week and opens more broadly in Europe today. September 3rd and 4th will mark the release in U.S. and China-based theaters respectively. Netflix (tkr: NFLX) taught us that a hundred million-plus consumers enjoy watching content at home. Had WarnerMedia released Tenet online via its HBOMax platform in July (or earlier) it would have benefited from limited competition – namely Endeavor‘s UFC asset. Now WM will have to compete with other films, the NBA, Major League Baseball and more.
Disney (tkr: DIS) scrapped traditional theater windowing and decided to release one of its major summer releases – Mulan – on its DisneyPlus streaming platform.
We appreciate that the economics associated with traditional theater windowing help production studios recoup more of their investment in a shorter period of time than does the subscription revenue model associated with streaming services (not dissimilar to subscription revenue software models vs. upfront perpetual license software models). Nonetheless, the writing has been on the wall for some years that the theater business is going away. Heck, why did AT&T invest in a content streaming business – HBOMax – if it didn’t believe the value proposition?