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In major break from tradition, Warner Bros. moves to debut all its 2021 movies simultaneously on HBO Max and in theaters

Long-term impact on theaters is debated as owners voice disappointment

Warner Bros. on Dec. 3 announced it would put all of its 2021 movies on HBO Max at the same time they play in theaters. (Video: Reuters)
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Warner Bros. on Thursday shocked the entertainment world by saying it would put all of its 2021 movies — a 17-title list that includes such highly awaited films as “Dune,” “In the Heights” and “The Matrix 4” — on HBO Max at the same time they play in theaters, upending a well-established business model in the hope of redeeming a flagging streaming service.

The shift stretches well beyond the next few uncertain shutdown months to include films scheduled for the second half of 2021. “Dune” is slated for release in October, for instance, while “Matrix 4” won’t arrive until December 2021.

The moves suggest that Warner Bros. and corporate parent AT&T are not simply reacting to the pandemic but seeking to boost HBO Max at the expense of theaters.

By at least temporarily undoing the time-honored practice of “windowing” — bringing movies exclusively to theaters first — they could create long-lasting consumer implications. The changes might limit revenue for theaters even after people are able to return to them. In the longer term, it could further habituate Americans to receive their entertainment primarily at home.

Still, some experts were inclined to see the effects as circumscribed, in part because the move was born of Warner’s very particular need to boost its streaming service and wouldn’t apply to other companies. And Warner Bros. movies, while lucrative, are far from the most popular; the top five grossing movies in the United States last year came from Disney. (The move would affect just U.S. releases; HBO Max is not available overseas.)

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Pandemic restrictions have taken a heavy toll on theatrical movies. In response, some studios have chosen to put individual movies on digital platforms. Disney is about to debut Pixar’s “Soul” on Disney Plus, while Warner Bros. itself announced last month it would bring “Wonder Woman 1984” to HBO Max at the same time as it will theaters.

But Thursday’s action goes much further, sweeping up a long list of titles: in addition to “Matrix” and “Dune,” they include new installments in the Space Jam, Godzilla and Conjuring franchises; an adaptation of the “Mortal Kombat” video game; the Richard Williams story “King Richard”; a new take on the DC Comics title “The Suicide Squad”; and the “Sopranos” prequel “The Many Saints of Newark.”

The announcement also one-ups deals Universal Pictures made with top chains AMC and Cinemark that allow for the biggest films to play exclusively in theaters for at least three weekends before moving to streaming.

Like all studios, Warner Bros. has spent decades raking in dollars from theaters, a pattern that held up until the pandemic. In 2019, hits such as “The Joker” and “It: Chapter Two” were part of a roster that generated more than $1 billion at the U.S. box office. (A studio typically retains about 60 percent of domestic receipts.)

But both AT&T and Wall Street have been eager to see HBO Max grow. The service has struggled to attract customers to pay the $15 monthly fee since launching it in May, and also failed to convert about three-quarters of the current HBO subscribers, who do not even need to pay more for Max.

HBO Max was also initially hampered by a lack of carriage deals with Amazon and Roku, two primary streaming gatekeepers. A deal with Amazon has since been worked out, but a pact with Roku remains elusive. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.) Some consumer confusion also exists over the difference between HBO and HBO Max.

Last month, AT&T said the service was “available” to about 29 million subscribers — either those who signed up or those who could get it free as existing HBO subscribers. That ranks well below Disney Plus’s 74 million subscribers (though Disney’s figure includes tens of millions of overseas subscribers).

Experts think the film moves could help draw a significant number of new subscribers.

“Our research says that exclusive access to new movies is what makes people a lot more likely to subscribe or stay subscribed to a platform,” said Kevin Westcott, a vice chairman at Deloitte who leads the firm’s U.S. technology, media and telecommunications practice. A survey the firm conducted in October found that a new desirable movie would stop 27 percent of respondents from plans to drop a streaming service.

It remains to be seen, however, if Warner can attract new customers who are already loyal to other services or have eschewed streaming entirely.

In its announcement, the company positioned the move as a function of coronavirus, not HBO Max, and sought to say it was temporary.

“We’re living in unprecedented times which call for creative solutions, including this new initiative for the Warner Bros. Pictures Group,” said Ann Sarnoff, chair and CEO of WarnerMedia Studios and Networks. “No one wants films back on the big screen more than we do. We know new content is the lifeblood of theatrical exhibition, but we have to balance this with the reality that most theaters in the U.S. will likely operate at reduced capacity throughout 2021.”

The news — which basically eliminates theaters’ shot at exclusive rights to major Warner Bros. movies in 2021 after the pandemic already gutted their 2020 — created an instant backlash among theater owners.

“I think it’s ridiculous and short-sighted,” said Chris Johnson, CEO of Classic Cinemas, which operates more than 100 screens at theaters in Illinois and Wisconsin. “You don’t have to throw out every model that worked in the past to try something that may not.”

Calling it “kicking theater owners when they’re down,” he said he’d be less likely to play movies if they’re available in his customers’ homes.

Adam Aron, CEO and president of AMC, the country’s largest theater chain, expressed his disappointment with the move. “These coronavirus-impacted times are uncharted waters for all of us, which is why AMC signed on to an HBO Max exception to customary practices for one film only, ‘Wonder Woman 1984,’” Aron said in a statement provided to The Post.

“However, Warner now hopes to do this for all their 2021 theatrical movies, despite the likelihood that with vaccines right around the corner, the theatre business is expected to recover. Clearly, Warner Media intends to sacrifice a considerable portion of the profitability of its movie studio division, and that of its production partners and filmmakers, to subsidize its HBO Max start up. We will do all in our power to ensure that Warner does not do so at our expense.”

He said AMC would negotiate for a greater share of theater revenue to offset the loss, as theaters are already getting for "Wonder Woman."

The news was startling because Warner Bros. has long been theater-friendly. As other studios largely sat out the summer, the company released Christopher Nolan’s “Tenet” in U.S. theaters on Sept. 3 — mainly to “protect the model” and give hurting theaters at least some revenue.

Its theater-friendliness also has helped cement Warner Bros.’ relationships with filmmakers, including with the likes of Nolan and Clint Eastwood. It remains unclear what impact the decision to convert to a streaming service, at least for the foreseeable future, will have on those relationships.

The lack of theater-first release also could hurt the movies’ consumer awareness. A typical theatrical rollout comes with a major marketing campaign; a streaming release does not. WB Pictures Group chairman Toby Emmerich said the movies would still be given “robust marketing campaigns.”

So far, other studios appear eager to preserve the theatrical business. U.S. ticket sales totaled $11.4 billion in 2019 and, even as studios ease into an at-home digital future, they are reluctant to endanger that number. Nearly all would-be rival blockbusters scheduled for 2021 remain on the theatrical release calendar.

And while social media Thursday was awash in talk of others potentially following suit — “Black Widow” was trending as fans called for Disney to put the movie on Disney Plus — experts say a shift of this scale was unlikely. Other companies, they note, don’t need digital subscribers the way Warner Media and AT&T do.

A shift to at-home releases would also not fit with the economics of event movies, the franchise titles that cost at least $200 million to produce. Studios need the hundreds of millions of dollars in theatrical revenue to afford making those movies; streaming services usually traffic in lower-budget films, banking on volume to attract subscribers.

Warner Bros. has itself sent mixed signals on this issue. Even as it moves its 2021 titles to HBO Max, it is shooting “The Batman,” an expensive movie with star Robert Pattinson, and a film whose budget can be recouped only with a major theatrical release.

The HBO Max move is one of the biggest since Warner Media was given a new chief executive, Jason Kilar, in the spring. Kilar comes from Hulu, which was one of the first to offer digital subscriptions to legacy content.

Kilar on Thursday sought to position the move as a win for everyone, including theaters. “We believe this approach serves our fans, supports exhibitors and filmmakers," he said, using the industry term for theaters, “and enhances the HBO Max experience, creating value for all.”