When Lulu Wang turned down a streaming platform’s eight-digit bid last year for her Sundance hit The Farewell, agreeing instead to an offer half the size from prestigious independent studio A24, her backers protested.
“The producers and financiers were like, are you crazy? We have to take this bigger deal,” the film-maker said this month. “I know for a fact that if I took the bigger money, [the streaming company] wouldn’t have the energy to put behind someone like me, to build my brand.”
Ms Wang’s dilemma is increasingly familiar as streamers such as Netflix snap up hundreds of films to boost their vast catalogues, often with no intention of screening the movies in cinemas or using much marketing muscle to promote them.
That has left the cinema business in transition, and Hollywood executives are bracing for a brutal year ahead.
North American box-office sales dropped nearly 4 per cent last year to $11.4bn, the steepest decline since 2014, with ticket volumes at their second-lowest level in 25 years. That was despite Disney releasing blockbuster after blockbuster, beating its own record for the biggest US box office take by a single studio.
Now concerns are rowing over the prospects for this year, when the company has no Star Wars, The Lion King or Avengers sequels to offer.
“2020 is going to look like a nightmare compared to 2019,” said Jeff Bock, a box office analyst at Exhibitor Relations.
Disney released seven movies with global box office takes surpassing $1bn last year and captured almost 40 cents of every dollar spent on US cinema tickets. It was “Disney’s greatest hits album — everything was firing”, said Mr Bock. “We haven’t seen a monopoly like this at the box office, ever.”
But with a weaker slate in 2020, “there’s going to be a huge downtick”.
Cowen & Co’s Doug Creutz expects Disney’s movie sales to decline by about 30 per cent from last year. “You could be looking at over a billion-dollar drop in Disney’s box office [sales],” he said. “Some of that will go to other studios. But not all of it. It will be a tough year for theatres.”
One former head of a major film studio made an even grimmer assessment. “Give it two years and the exhibition business will be over,” he said. “It is like a vigil. And it is all down to Disney to decide when it ends. Right now the business is propped up by Disney and the four big movies they bring out a year.”
Cinema owners have taken a hit as pessimism surrounds their future. Cineworld shares have dropped more than 25 per cent in the past six months, Cinemark has lost more than 15 per cent and AMC Entertainment more than 20 per cent.
The industry is responding to the streaming threat by consolidating. Cineworld last month agreed to buy Canada’s Cineplex after acquiring US chain Regal Cinemas in 2018.
Adding to the tension is Netflix, which made a name for itself through its TV shows but has now stormed into film. The streaming company released almost 60 feature films in 2019, dwarfing other studios and earning it more Oscar nominations than any other thanks to hits such as The Irishman and Marriage Story.
But Netflix is in a years-long stand-off with the large cinema owners, who refuse to show its movies because the company typically releases its films online at the same time — in the rare instances when they get big-screen projections at all. Netflix has made concessions, leaving The Irishman in small cinemas for nearly a month before streaming it, for example, but that timeframe was not lengthy enough to appease chains such as AMC.
Directors are increasingly facing the choice of either taking a chance on releasing their movie in theatres, where more and more midsized films languish, or accepting cash from a streamer, where their film could get lost in a sea of options.
“I can’t count more than 10 filmmakers who walk out of Netflix and say: I had an amazing experience,” said the chief executive of one indie film studio.
However, others say the pessimism is overblown and that the industry has always been volatile. “What everyone is pegging their dim outlook for 2020 on is the fact that there aren’t as many readily apparent sequels, franchises, reboots and familiar IP,” said Paul Dergarabedian, senior analyst at ComScore. “That doesn’t mean we can’t be surprised.”
Mr Dergarabedian cites Joker, Warner Bros’s dark take on the Batman villain, which made more than $1bn at the box office to become the highest-selling R-rated film in history. “I don’t think anyone could have predicted Joker was going to be the mega hit that it was,” he said. He predicts that North American movie ticket sales will still reach $11bn this year.
Jason Cloth, founder of Bron Studios, which co-financed Joker, said “most films nowadays should never be shown in theatres”.
But every so often, a surprise like Joker comes along.
“Film is hit-based. Loss, loss, loss, loss and then you hit it out of the stratosphere,” Mr Cloth said. “Get Out cost $5m to make and did $300m in the box office. Imagine if you had sold it to Netflix for $10m?”
Additional reporting by Alex Barker