WarnerMedia CEO Jason Kilar jumped on the phone today to talk more about the groundbreaking theatrical-HBO Max window for the studio’s 2021 slate. That big decision comes strictly down to the pandemic, and the studio aiming to maximize their movies as revenue events on its new streaming service HBO Max, and those theaters which are opting to weather the current storm. As Kilar explains here, he’s a big believer in the theatrical experience and firmly believes it will survive for decades to come.
“We’re here for the long term, in terms of theatrical exhibition and obviously in investing heavily in motion pictures and also investing heavily in the marketing of those motion pictures,” Kilar tells Deadline.
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“Tenet was a great example of how we went the distance in ways others haven’t. And that was very important to use in terms of theatrical exhibition. We do believe, and others might have a different opinion, this is the way to do the most important thing we can for the theatrical exhibition community which is to provide them a steady stream of new and fresh movies and motion pictures that they can count on, and consumers can count on. It’s something we’re vested in and will continue to be vested in,” says Kilar.
This is a huge announcement today. The town has typically justified the investment in a movie by a theatrical window downstream model. Will the growth in HBO Max subscriptions make up for an entire year’s theatrical production costs and P&A spends? It looked like Wonder Woman 1984 was an experiment, but this is a completely new way of doing things. Provide us with the overview of the financial philosophy of this.
Sure, I’m going to start by stating the obvious: We’re in the middle of a pandemic, despite all of us wishing that the pandemic goes away extremely quickly, like a Band-Aid being ripped off. Everyone we talked to in the medical community suggests that this will persist in terms of consumer behavior and the medical situation for a bit of 2021, if not all of 2021. That’s the first and most important context to say. The reason why, is that’s what has absolutely what has shaped this decision. And to get to your question about the financials, our belief is that in the current situation which is highly unusual, by having this release model, which is a hybrid model of theatrical and on HBO Max for the first month of the film’s release, we believe economically first and most importantly, it’s the right thing to do for fans, it’s the right thing to do for exhibition, and the right thing to do for talent, considering the circumstances. With that in mind, we believe that which we announced today is going to optimize the economics. And the reason why is two fold: The revenues that are generated by the box office of course, and the other is the value of the consumption on HBO Max from existing subscribers and what we anticipate to be more subscribers coming into HBO Max who choose to do so because of the presence of these films. So, that’s the why we think about the economics which is way of obviously different from the way historically it has been done in Hollywood, which was largely focused on theatrical for the first x number of weeks for a film’s life.
You bring up the interesting point here — the film going in its first 30 days on HBO Max with theaters. Why not delay it? Why not flip that where the film is exclusive initially in theaters, and then HBO Max thereafter?
The headline answer is because of the pandemic. Because of the situation we’re in and the fact that we’re going to invest a considerable amount in marketing, which is unusual to do in the middle of a pandemic, and by marketing, I mean money which benefits the theatrical experience; a considerable marketing budget for each and every film that will be coming out over the next 13 months, and we believe that the marketing investment works better if eyes were out there talking about these great films title-by-title-by title, that that marketing can benefit not just the theatrical experience, which of course is depressed during the pandemic, but also benefit at the same time the HBO Max period of time that the films are available there. That element is an important one to highlight in this as well.
HBO Max is going to launch next year in Europe and Latin America. This plan of debuting films on HBO Max and in theaters will also take place in offshore territories?
What we announced today is just for the United States. So, we have not announced anything in terms of outside the United States other than these films will have a traditional release outside the U.S.
Given the binge nature of streaming, aren’t series the stronger asset than films for a streamer?
Great question. It depends on the quality of the series and the quality of the films. I’ll use one example from this summer, which based on all indications from the data I saw did quite well, which is a movie, or a movie format and that’s Hamilton on Disney+. So that was 2 hour plus piece of content which fit the time format of a movie. It wasn’t a series. Based on what I saw that drew quite a number of subscriptions for Disney+. Now conversely you can look at something like The Undoing, which is a series and that drove a lot of subscriptions for HBO Max. It depends on the quality of the content and I bring it back to the fans. There are many evenings when people open up HBO Max and they’re in the mood to dive into something that can sustain them for weeks and sometimes months. That is, call it ‘the series mode of life’. We really want to dive in and know characters like The Flight Attendant and enjoy the series through the month of December. There are many other situations where someone sits down and opens up HBO Max and says, ‘I want to be entertained for this evening, and that’s what I’m willing to commit to and I really don’t want to have a commitment beyond this evening’. And that’s when people choose documentary or a movie title perhaps. It depends on the quality of content and the story and what frame of mind that that the consumer is in. You should expect to see in the next several decades investing aggressively in the motion picture format and the series format.
Do you still believe in theatrical marketplace? Is this the new order of doing things? Or when 2022 opens up, we go back to the old ways of doing things? Is this an experiment? The short answer to your first question is I absolutely believe in the theatrical marketplace. I say that with conviction because I know fans care about. I know I count myself as one of the more ardent fans of the theatrical experience. I believe ten years from now, 20 years from now, 50 years from now, there is going to be a robust theatrical marketplace and I say that because there are very few things that can compete on a Friday night when you’re going out with someone that you love, to a cinema, and being told a great story on a gigantic screen, in a communal setting and in an environment that is new and interesting to you. And I just think that’s going to persist for decades and beyond that. That’s the quick answer to your first question.
As to what the world looks like after 2021, I have no grand proclamations to make. Our focus, candidly, is on the here and now. We’re focused on getting through this pandemic like any business is, and we’re putting a lot of brain cells against what the right thing is to do to serve fans and to serve partners and to server ourselves. And all those things are important to do and that’s what our focus is, obviously that is what we announced today.
Any update on staff reductions? There were some note about cutting expenses up to 20% recently?
I don’t think so. There’s nothing else that I’m aware of. We did have staff reductions a bit ago in early November and that was a difficult period for us in terms of the follow-up on the changes I announced on Aug. 7 which were at the senior levels. In that note on Aug. 7, I let the team know and the outside world, we were going to let that new senior leadership made the decisions that they thought best in regards to how to organize and best serve customers. That resulted in staff reductions in early November. For the most part, with the exception of a couple of outside U.S. territories, those things are completed and were completed in early November.