Smith Brain Trust / August 2, 2021

Coming Soon: New Go-to-Market Strategies for New Films

Coming Soon: New Go-to-Market Strategies for New Films

If there’s one thing that can be said about Scarlett Johansson’s decision to sue Disney for releasing her latest film, “Black Widow,” simultaneously on streaming and in movie theaters, perhaps it’s this: Watch for sequels.

And as the industry enters its new era, watch for spinoff effects, too, as movie marketing evolves, says P.K. Kannan, the Dean’s Chair in Marketing Science at the University of Maryland’s Robert H. Smith School of Business.

“While streaming is a good strategy when other options are limited, releasing blockbuster movies simultaneously in theatres as well as in streaming is a first – and it’s not clear what the overall box office revenue implications are,” says Kannan.

When public spaces were closed amid COVID-19 restrictions, studios looked to streaming services like Netflix and Disney+ as the central channels for new releases. “Black Widow” originally was scheduled for its box office debut in May of 2020, but that date was pushed back, multiple times, amid COVID-19 restrictions, and ultimately the studio announced it would release the film simultaneously in theaters and on its Disney+ channel. Warner Brothers, meanwhile, has released films simultaneously in theaters and on HBOMax, and will do so again, in October, with the release of the long-awaited sci-fi epic “Dune.”

At the center of Johansson’s lawsuit is a contract in which Disney specified that a percentage of the box office revenues would go to the actress.

Johansson’s agents reportedly sought to revise the contract in light of the company’s decision to offer simultaneous in-home streaming. “The lawsuit implies that Johansson and her team expect the simultaneous streaming to cannibalize the box office revenues and reduce her payout from what it could have been had the movie been released exclusively in the theatres,” he says. “There is a good reason to believe this.”

Although the movie generated strong box office revenue in its first week ($80 million in the United States), the theatrical revenues declined sharply in subsequent days, relative to its Marvel peers. The dip, Kannan says, may hint at cannibalization. But it also hints at a fundamental shift in consumer preference – one with which the industry is racing to keep pace.

“With COVID still lingering and the Delta variant gaining strength, watching movies in theatres could still be deemed risky behavior by a good portion of the market and for these customers in-home streaming could be the most desired option. These customers would not have watched the new release in the theatres anyway.”

“Regardless,” he adds, “we can expect simultaneous releases of new movie releases to be more common in the future.”

And that’s likely to mean changes for how new releases are advertised.

The promotional campaigns for a new release can benefit box office revenues as well as in-home streaming revenue, Kannan says.

That isn’t the case when films are released in theaters and then move to streaming platforms “much later” as a temporal price discrimination move. Temporal price discrimination, in fact, is less of a factor with premium, new-release streaming, since those prices tend to hover in the $30-$35 range, about double the box-office ticket.

But do buzzy new releases lose cache when they are released simultaneously across all platforms? And will those big franchise brands become tarnished when cinemas no longer get the “exclusive” access? “Such concerns are similar to ones about selling luxury brands online instead of making them available exclusively in upscale offline stores,” Kannan says.

He says those worries are already beginning to abate, as luxury brands increasingly reach the market through online channels and as studios lean into theatrical releases and simultaneous in-home streaming releases with promotional spillovers.

“The market environment for movies is changing fast with streaming technologies and changing customer preferences – and so conventional wisdom no longer holds,” he says. “It will be an interesting next few years as these changes play out.”

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