The new economics of blockbusters


BEFORE COVID-19 Hollywood was alight with franchise fever. All ten of 2019’s top-grossing films globally came from big studios and featured characters returning to the big screen. Directors such as Martin Scorsese fretted that Marvel’s superheroes would be the death of cinema. Cinema-owners would beg to differ. On March 10th AMC, the world’s biggest chain, which has recently become a darling of retail investors, reported a 77% fall in revenues last year, and a net loss of $4.6bn, in large part because Marvel and others have postponed releases until audiences come back.

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The dearth of blockbusters is reshaping box-office economics. Six of last year’s top-ten money-makers worldwide were not in English. Five were Chinese and one was Japanese. This reflects Asian countries’ ability to contain outbreaks more successfully than most of the West. It also points to another twist. As big productions have retreated, smaller ones have stepped in.

At least five of the ten highest-grossing films of 2020 had budgets under $100m, compared with one in 2019. Many of those lower down the charts did much better than their producers had hoped. In December IFC Films, an independent American studio, predicted that last year would be its most profitable ever. Its films, including “The Rental”, a horror flick, had longer theatrical runs in more cinemas than they would have had they been competing for screens with the Avengers. “After We Collided”, a romance distributed by Open Road Films, another indie studio, made $5m in Britain, ten times its expected haul (and nearly $50m worldwide).

The economics are changing for big studios, too. The handful of blockbusters released in the pandemic busted few blocks. Warner Bros’ “Wonder Woman 1984” had the best opening weekend in America last year, taking $17m, compared with the $103m that the earlier “Wonder Woman” earned in a comparable period four years ago. Warner’s parent firm, WarnerMedia (part of the AT&T telecoms group) plugged some of the gap with revenues from streaming the superheroine’s antics. According to Antenna, an analytics firm, WarnerMedia’s newish HBO Max platform gained more subscribers in the film’s first three days than any other streaming service gained in any three days of 2020.

Going straight to streaming could increase profits by cutting out cinema owners, who typically receive half the price of a ticket. It may also trim costs. With a quicker turnaround from big screen to small, studios save on marketing. Explosions and other special effects, a big reason why tentpole films cost between $100m and $200m to produce these days, lose some appeal when viewed in the living room. Sadly for Mr Scorsese, franchises are here to stay. Disney is planning more spin-offs for its Marvel and Star Wars characters—even if many never grace the silver screen.

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This article appeared in the Business section of the print edition under the headline “Go small”

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