Why do the new Star Wars movies suck so much? Oligopoly in the film industry.
The last movie I watched in theaters was Joker. It was a great movie with an awesome performance by Joaquin Phoenix. But I felt like I…
Photo by Peter Lewicki on Unsplash
The last movie I watched in theaters was Joker. It was a great movie with an awesome performance by Joaquin Phoenix. But I felt like I couldn’t focus because there was some kid who looked like he was 7-years old sitting behind me who wouldn’t stop talking during the movie. I don’t know why the theater sold him a ticket to a Rated-R movie and I don’t why his mom thought it would be smart to take her son to a movie that illustrates a mental person’s slow descent into a murderous rage. They stayed for the whole movie too. I really don’t know why they didn’t just choose to go to some Pixar movie instead.
Anyway, the point of this story is maybe I didn’t need to watch Joker in that kind of environment. Maybe it would have been better if I could’ve just watched it home. It’s true that theaters make watching a movie more of an experience, but I could’ve called a couple of friends over to make it more of a social thing.
Because of COVID-19, it’s possible that this option will be widely available in the future. It’s also looking pretty likely that increased concentration in the film industry will lead to widespread creative stagnation.
The current state of theaters
Right now, theaters are in trouble. While they were already facing a downward trend in ticket sales before COVID-19, theaters across the country are now closed and big releases like Mulan have been pushed back several months.
Things aren’t going back to normal anytime soon. Audiences don’t seem interested in going back to theaters. A recent study showed that 70% of people would rather watch a movie at home. Plus, there’s no way that they can sell out auditoriums to full capacity with social distancing and they will need to spend more money on cleaning costs.
Already, theater companies have been forced to take on more debt than they already had. AMC Theaters had to raise $500 million in debt. That’s in addition to the $5 billion in debt that they had at the end of 2019.
Studios are going direct to consumers
Theaters being in trouble means that studios have the opportunity to try something they’ve always wanted to try: releasing new movies online. Back in 2011, Universal Studios tried releasing the movie “Tower Heights” digitally at $59.99 in select markets.
The theaters did the smart thing and banded together to prevent the studios from possibly destroying their entire business. It worked. Universal Studios decided not to go through with the test.
But things have changed. Right now, the theaters have absolutely zero leverage. Universal Studios released Trolls 2 direct-to-consumers and made more than $100 million from rentals. Since the studio didn’t have to share the profits with theaters, it got a bigger portion of this money than if it had a normal release.
Of course, we don’t know if this success could have happened during normal times. According to the Wall Street Journal, 51% of the consumers who paid for the Trolls 2 digital rental said they would have seen it in theaters.
Still, the theaters are taking this as an existential threat. AMC said they would no longer show movies from Universal Studios. We’ll see what happens with this. With AMC’s debt load, it looks like they need Universal more than Universal needs them.
So maybe the theaters are going to give in and studios will release movies to consumers in theaters and online simultaneously. That might be good for the consumer in the short-term, but it’s only going to make the theaters even weaker and lead to bad movies in the long-run.
The Paramount decrees and concentration of power
I’m going to talk a little bit about the relationship between theaters and studios, but first I should mention a topic that everyone is discussing. Recently, there’s been a lot of rumors about Amazon buying AMC. While it seems like a lot of this speculation is baseless, it does seem pretty unlikely that theaters are going to be able to survive on their own. Maybe Amazon isn’t going to buy AMC, but chances are that a studio like Disney will. Why wouldn’t they want to control the distribution of their movies if AMC goes bankrupt?
There’s a reason why we’re able to talk about this at all. Last year, the Justice Department announced that they were filing a motion to end the Paramount Decrees, which was enacted back in 1948 to force studios to stop owning theaters and controlling the film distribution process.
This article by Matt Stoller does a great job of showing why the Paramount Decrees were good for the film industry. In the past, movies like Back to the Future didn’t make a ton of money in its opening weekend and didn’t have a massive marketing budget like today’s movies. Instead, theater owners told studios that they wanted to play it as it got hype from moviegoers, and the movie got wider distribution over time. Eventually, it went on to gross more than $380 million.
The article goes on to argue that this kind of success only could happen in a decentralized marketplace where theater operators had more power. Theaters could use their voice to demand that studios widely distribute films that were getting more hype from local audiences.
Those days are over. Now a few big studios like Disney hold all the power in the film marketplace. That means unlikely success stories like Back to the Future are even less likely to happen.
Even before the repeal of the Paramount Decrees, Disney had disproportionate power in the marketplace. Mergers with other studios like Marvel, Lucasfilm, and Pixar meant that Disney owned all the best IP. Disney was able to force theaters to give the studio a bigger share of profits and play its movies in its biggest auditorium for 4 weeks. If a theater broke these terms, they would have to pay an even bigger share of ticket sales to Disney.
Why does the new Star Wars suck so much? It’s simple: It doesn’t have to be great. The theaters had no choice but to do what Disney told them or else they might miss out on the next Avengers movie. If audiences want to watch a big-budget adventure movie, their choices are usually Star Wars or another property owned by Disney.
Aren’t we living in a golden age for TV/movies?
Some of you might be thinking that I’m completely wrong and that now is actually a great time for content. After all, last year Netflix, Amazon, and Apple spent a combined $24 billion on new content. Of course, we’re still in the midst of the streaming wars, when different companies are trying to gain market share in an industry that’s projected to be worth $149 billion by 2026.
When the smaller players like Quibi and Peacock die out, we’ll just be left with an oligopoly with a few big players who are able to coast on mediocrity because they own distribution.
Consider this example: Back to the Future is a great movie that people still come back to decades later, and it only cost around $45 million in today’s dollars to make. I sincerely doubt people will be coming back to The Morning Show (which costs $25 million per episode) many years from now. While the show has big names like Steve Carrell and Jennifer Aniston, it’s pretty forgettable.
But it doesn’t really matter. Apple, the company that produces The Morning Show, owns the means of distribution. Apple TV+ automatically is on the home screen of 1.4 billion devices. So The Morning Show doesn’t have to be great, it just has to be good enough.
In a decentralized marketplace, smaller players are forced to rely on creativity in order to make great movies. When a few players dominate the ecosystem, they can rely on their control of distribution and simply offer audiences big-name actors, beloved characters like Spiderman and Luke Skywalker, and mediocre scripts.
In conclusion
With reduced cash flow from social distancing and increased costs from cleaning, it’s looking pretty unlikely that theaters will be able to stand as independent entities.
That means there’s a greater likelihood that these theaters will be taken over by a few players who will then own the entire process of creating and distributing films. While it’s probably good for companies like Disney and Netflix. Consumers probably will get the choice to either go to theaters or watch movies at home. But chances are that it’s also going to lead to tons of mediocre movies being shoved down our throats.
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