By Drew FitzGerald and Joe Flint
AT&T Inc. T 2.11% Chief Executive John Stankey defended the decision to release all Warner Bros. movies online the same day they hit theaters next year, arguing that the film producer had to tweak a 2020 playbook that wasn’t working during the coronavirus pandemic.
The telecom company’s Warner Bros. unit said last week that it will release its entire 2021 film slate on HBO Max, a new film and television library designed to compete with online services such as Netflix and Disney+. The plan covers 17 movies from the science-fiction epic “Dune” to another installment of the “Matrix” franchise.
The choice shocked a film industry accustomed to releasing big-budget films in stages, with cinema owners getting the first bite. But U.S. box-office ticket sales have cratered since coronavirus-related restrictions shut down many venues. Those that reopened are struggling to attract large audiences.
‘We were going to be in a situation where the psyche of the population and people’s willingness to go back into large venues—that’s going to be a little bit of a prolonged recovery.’— John Stankey, AT&T chief executive
“We know we probably needed to try something different,” Mr. Stankey said Tuesday during a virtual investor conference hosted by investment bank UBS Group AG. “Our feeling was, in the theatrical business, based on our best discussion with experts, we were going to be in a situation where the psyche of the population and people’s willingness to go back into large venues—that’s going to be a little bit of a prolonged recovery.”
Hollywood and much of the creative community has reacted angrily both to Warner Bros.’s strategy and to the short notice its executives gave their business partners. Theater owners fear that releasing the movies simultaneously on HBO Max and the big screen will drive a stake through their business.
Warner Bros. has countered that this is a short-term move for 2021 as the coronavirus keeps many would-be moviegoers at home and theaters in big cities shut. HBO Max will host the movies for only their first month of theatrical release before the films follow their usual distribution pattern.
Director Christopher Nolan, whose credits include “Tenet” and “The Dark Knight,” criticized the Warner Bros. strategy, telling the TV show “Entertainment Tonight” that the company is using movies “as a loss-leader for the streaming service.” He added: “It’s not the way to do business and it’s not the best thing for the health of our industry.”
“Tenet” is among the movies that Warner Bros. released in theaters this year after several pandemic-related delays. The strategy yielded some box-office revenue abroad but underperformed in the U.S.
Over the summer, Universal Studios and AMC Entertainment Holdings Inc. agreed to shorten the theatrical window before movies appear online. The deal ended a dispute after Comcast Corp.’s Universal made “Trolls World Tour” available as a $20 online rental on April 10, the day it had been scheduled to open in theaters.
Walt Disney Co. offered “Mulan” on Disney+ in September for an extra $30 fee and later made the film available free on its streaming service.
There are also financial concerns for talent who have deals that tie their compensation to a film’s theatrical performance. Warner Bros. has said talent with such agreements will be compensated from the license fees HBO Max will pay to carry the films during their first month of release. However, talent agents are concerned that actors and producers could be hurt by self-dealing between the studio and HBO Max.
Mr. Stankey, who ran WarnerMedia for nearly two years and took the top AT&T job in July, brushed aside those complaints as chatter that often follows a market-disruptive innovation.
“Any time you’re going to change a model, I know it creates a degree of noise,” he said Tuesday. “Ultimately, rational parties will step back and look at this and say, giving theater owners a predictable release of content over the next several months that they can plan around and start to work their business around is a good thing for them.”
The investment community has reacted less dramatically to a decision that threatened theatrical revenues that were already at risk because of the pandemic. AT&T shares have climbed about 3% since the company announced the new strategy. Many Wall Street analysts are focused on the success of HBO Max, which was launched in late May.
Mr. Stankey said Tuesday that HBO Max will count about 12.6 million activated accounts by Wednesday, after ending September with 8.6 million. It had previously set plans to debut “Wonder Woman 1984” on the service when it hits theaters on Christmas Day. The service has also benefited from a deal with Amazon.com Inc. giving customers direct HBO Max access through the e-commerce company’s platforms.
“The market has shown a clear preference for go-big-or-go-home digital strategies,” media-research firm MoffettNathanson wrote in a recent note to clients called “AT&T & U.S. Theaters: Suicide Squad?” a reference to another Warner Bros. title. “AT&T is, come hell or high water, going to drive traffic to HBO Max.”
SOURCE : WALL STREET JOURNAL