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For those new here, I’m Matt Belloni, a former entertainment lawyer and editor of The Hollywood Reporter. This email is part of Puck, our new journalist-owned media company focusing on the power centers of Hollywood, Silicon Valley, Washington, and Wall Street.
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But first ...
Thursday Thoughts… Three hot-topic predictions today:
Today I’m starting an occasional series looking at the future of movies. First up...
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Most Wall Street analysts believe that theater revenue in 2022 will drop below even pre-pandemic levels, with trickle-down impacts across the entire movie industry. It’s been a rough few weeks for Emma Watts. First, the veteran film executive was swiftly bounced from Paramount, just days after Brian Robbins took over for Jim Gianopulos as studio chairman. Then, this past weekend, The Last Duel, a $100 million medieval drama that Watts put together and championed when she ran production at Fox, laid an egg the size of Matt Damon’s head when it finally hit theaters. A $4.8 million domestic debut? No, the flop of the year is not a great talking point as she is taking meetings for her next job.
I’ve never been a fan of those Monday morning quarterback stories about What Went Wrong when a movie doesn’t work. Most movies don’t work. The hits pay for the bombs. Nobody knows anything, yadda yadda. But… The Last Duel feels like it was made in another era of Hollywood, and in many ways it was. Way back in the year 2019, I almost understand why Watts was enamored with the package, and why Disney, which had just taken over Fox, would let her roll the dice: Three “names” (Damon, Adam Driver, Ben Affleck); Ridley Scott directing something that, at least on a one-sheet, feels Gladiator-adjacent; and a rising star in Jodie Comer at the center of it all. Used to be you could assemble those elements, throw $30 million of Disney marketing president Asad Ayaz’s money at the wall, and at least generate a decent opening, especially overseas.
But even before the pandemic, that just wasn’t good enough anymore. Stars guarantee nothing without I.P., so a full-freight, original studio movie like Last Duel had to hit the bullseye. Now?? The entire dartboard has been shrunk, thanks to Covid and the accelerated shift to streaming. Kids think theaters are for old people, and now old people think theaters are dangerous (and they’re finally figuring out how to use the Netflix their kids hooked up for them). Marvel and horror? Still fine. But sending an adult-targeted, non-branded movie like Last Duel into theaters isn’t just a longshot, it now feels like a fool’s errand.
That’s not just the anxiety on studio lots. Most Wall Street analysts believe that in 2022, theater revenue will drop 10-20 percent from 2019 levels, even with a strong slate of delayed films and expected ticket price hikes. That’s a generous assessment, in my view, given the record-shattering grosses of that bygone year and the reality that Covid fears aren’t going away. A slight rebound is predicted in North America for 2023, then moderate declines. (Foreign is harder to predict, especially with all the craziness in China.) Most troubling, a new Morgan Stanley study predicts that “occasional moviegoers,” who make up 50 percent of the domestic market and include a big chunk of the older audience, will eventually return to only 60 percent of pre-Covid numbers. Think about the ramifications if that happens.
The business model of the movie business—theatrical movies, not the booming business of churning out product for streamers—is now a big, fat T.B.D. And while everyone sits around with their strategy teams trying to figure it out, the flops have become superflops, and the release slates often feel like pirate prisoners lining up to walk the plank. The Monday morning question surrounding bombs like The Last Duel has shifted from What went wrong? to Why the hell was this movie in theaters in the first place?
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We hear this a lot these days: What is theatrical? We know what it used to mean, pre-pandemic. It was the mantra of Alan Horn, the retiring executive who turned around Disney’s film unit by asking two questions before giving a greenlight: Do I have to see it now, and Do I have to see it on the big screen? That was the layman’s translation of his Harvard Business School justification for relying on pre-branded I.P. and spectacle—and nothing else. It worked great for Disney, which does I.P. and spectacle really well. The other studios? Hit and miss.
Then the Fox movies dropped in Horn’s lap, essentially proving his thesis yet again. Let’s take a look at how The Last Duel fits in with what the rest of the slate has grossed globally (not including Searchlight titles) since the acquisition closed. Remember, thanks to Fox’s pay TV deal with HBO, the entire slate was guaranteed exclusive theatrical releases:
Breakthrough (4/17/19) $50M
Yikes. Not a billion-dollar grosser among them (or half a billion … or even a third of a billion). Even before the pandemic, how many of the Fox titles would Disney have put in theaters exclusively if it had a choice? Ryan Reynolds’ Free Guy and the X-Men stuff, probably. Let’s be generous and include that weird Harrison Ford C.G.I. dog movie. The rest? Now, post-pandemic, most either wouldn’t be made, or, if you’re Kareem Daniel, the Disney executive with no experience making movies who now decides which movies get theatrical releases, you see that none has $1 billion potential, then you pick up your mallet, hit the giant red “streaming” gong in your office, and a trap door opens to send the projects directly to Disney+ or Hulu.
It’s pretty simple: The pandemic altered the fundamentals behind Horn’s mantra, which seemed quaint after Disney started prioritizing D+ for films that clearly met his criteria, like the Pixar features and summer 2020 titles like Black Widow and Jungle Cruise. There’s just a higher bar for “theatricality” than there was in 2019, and everyone can feel it. The walls are closing in on theaters, and the trickle-down impact is hitting everything from greenlights to budgets to the pedigrees of the executives running the studios. (See Robbins, the low-cost, streaming-first guy, replacing Gianopulos.)
Disney’s “premiere access” strategy may be ending for 2021, and WarnerMedia’s outgoing C.E.O. Jason Kilar said today that theaters will “matter for decades to come,” but look beyond that grandstanding: Disney’s Bob Chapek is directing almost everything new to streaming; Kilar, this morning, also touted plans for 10 made-for-HBOMax titles while making no promises about theatrical releases past 2022. (That will be Discovery C.E.O. David Zaslav’s decision after the WarnerMedia deal closes and Kilar is gone.) The others are falling in line: Post-pandemic, most studios will offer a 45 day window (less for Universal) for certain A+ titles, with a day-and-date or streaming-only plan for the rest. That’s the new normal.
So, who gets one of those coveted theatrical exclusives? Superheroes, horror, Star Wars, Chris Nolan, Jim Cameron, and … what else? The Morgan Stanley report has an interesting survey of what moviegoers want to see in theaters and at home: 
Note the numbers on comedy, which was once considered an “experiential” genre that could still work on the big screen. No longer, it seems. Agents are already complaining about the reluctance to commit to theaters for comedic projects, even with stars and big concepts. As one fun example, Danny DeVito is developing Throw Poppa From the Train, a sequel to his 1987 hit Throw Momma From the Train, which will co-star younger comedy names. The project hasn’t been reported on yet, but I’m told their goal is a theatrical release. Good luck. To me, this now sounds like a streaming play, even with I.P. (albeit 35 year old I.P.) and stars. Same with the Wedding Crashers sequel, if it ever happens. Pre-pandemic, the older audience would have been a plus for theaters, but now? Amazon or Netflix for the former, most likely, and HBO Max for the latter.
How about a pre-branded sci-fi spectacle: is that enough? We’ll see with Dune this weekend, though that one’s also on HBOMax, where I’ll be watching it. (Sorry, Denis.) Warners insiders think Dune can get to $250 million or even $275 million worldwide on a $160 million production budget, nowhere near the number they wanted back in the Before Times, but fine when the real goal is to boost streaming subscribers. (Remember that Legendary Pictures, which ponied up about 80 percent of the budget, was already paid out as part of Kilar’s settlements with partners for the day-and-date strategy.) Kilar, Warners chair Ann Sarnoff and digital guru Andy Forsell did a round of spin meetings with the trade press on the lot this week, with the goal of heralding the success of the day-and-date strategy and heading off negative headlines about HBOMax losing domestic subscribers this quarter. The company cut ties with about 4.5 million subs who came in through Amazon channels in an attempt to “own” those relationships, but globally the service gained 1.9 million subs, and WarnerMedia is projecting HBOMax sub growth for the next few quarters, so the movie strategy, in their eyes, is working. Of course the company will pursue some version of the same thing in the future, likely winnowing the lane for theatrical exclusives.
That will probably be true for horror movies too, given the results of Universal’s experiment with Halloween Kills last weekend. It opened to $50 million, but the true flex was that it shot the Peacock app to the top of the Apple and Google charts. Anything that sparks interest in “The ‘Cock,” as my colleague Peter Hamby calls it, will be rewarded by Comcast. But again, that will lead to a smaller horror haul in theaters.
What’s left? Animated movies can still do hundreds of millions of dollars in theaters, so they likely have a future once kids can get vaccinated. But studios are learning that the kids’ stuff will often perform okay in theaters while over-indexing on streaming, as Paramount learned with Paw Patrol: The Movie ($124 million worldwide) debuting day and date. When forced to choose between a theatrical exclusive and juicing those streaming numbers, you know what’s going to happen. Just ask anyone who works at Pixar.
Even pre-pandemic, the odd ones out were the mid-budget studio dramas that didn’t carry awards potential. Now it seems all dramas may be better for streaming, awards-focused or not. Or at least those with budgets above, say, $10 million that, without streaming, would need to gross $20 million to $30 million to crawl into the black. Many executives are nervously awaiting the results for this year’s crop of Oscar movies. If nobody shows up in theaters for Focus’ Belfast or Searchlight’s The French Dispatch or Warners’ King Richard (also on HBOMax), the model for an awards roll-out could end up shifting to a tiny release in a few theaters for consideration and buzz, followed by a quick debut on streaming. That would fundamentally alter the awards season calculus.
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Despite all those red flags, the Morgan Stanley report is actually pretty bullish on movies, and even on theaters, with stocks like Cinemark representing “one of the last reopening opportunities.” Even with a dip in attendance and revenue, that’s still a projected $10 billion market, in North America alone, with the global numbers in question but likely still growing. Some theatrical film companies, like IMAX, are having a great year, and are poised to ride the transition of moviegoing to a more premium, boutique experience. With nearly everything going to streaming, the “event” movies will become bigger events, simply because they are theatrical exclusives. Even the doomsday analysts predicting the shrinking of theaters acknowledge they will still be a force in the culture, especially when it comes to creating lasting franchises.
But it’s clear that the theatrical pie will be devoured by fewer and fewer eaters. Movie studios have always struggled to predict what will be relevant and appealing in the two to three years between greenlight and release. And that’s nearly impossible now, as The Last Duel shows. I don’t envy the film executives trying to figure out what to make now that will be released in theaters in 2023 or 2024. The customer’s willingness to see certain kinds of movies in theaters is changing; can the movies change with them?
See you Sunday, Matt
Corrections: Maverick Carter is 40, not 41, as I said on Sunday. Also, yes I know there was a great James Bond GoldenEye video game in the 90s. But I didn’t know when I criticized the lack of current Bond games last week that MGM and the Broccolis are developing a couple game projects—thanks to those that let me know.
Got a question, comment, complaint, or a pillow for me to scream into after tonight’s Dodgers elimination game? Email me at Matt@puck.news or call/text me at 310-804-3198.
FOUR STORIES WE'RE TALKING ABOUT 
Bob Iger's successor, C.E.O. Bob Chapek, is exploring the industrial logic for spinning out ESPN from the House of Mouse. DYLAN BYERS 
Members of the intelligence community are increasingly convinced that the Russian government is behind the "Havana Syndrome." JULIA IOFFE 
The old Third Way dream is alive and well in Silicon Valley, where a small band of mega-donors have concocted an ambitious plan to disrupt party primaries—and elect more Kyrsten Sinemas. TEDDY SCHLEIFER 
A decade ago, Congress and the vox populi banded together to try to chasten Wall Street for a generation. How’d that go? Re-regulation made the industry stronger and richer than ever. WILLIAM D. COHAN 
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