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As theaters nosedive, viewers are increasingly paying to rent or purchase movies digitally
The pandemic may have irreparably damaged physical theaters; Interpret data shows more consumers renting or purchasing full-length movies at home.

October 2020 may go down in history as a turning point for traditional movie theaters after more than a century of operation. Cineworld, which operates the biggest theaters in the UK and Ireland and the second-biggest (Regal Cinemas) in the US, announced it would consider shutting down all its theaters. Likewise, America’s biggest movie theater chain, AMC, said recently that its cash resources would be all but gone by early 2021, and its future is uncertain.

The combination of most movie-goers staying home during the pandemic and Hollywood studios pushing back major releases like James Bond film No Time to Die has put the theater industry in a very precarious position. At the same time, most viewers have turned their attention to streaming platforms like Netflix, Hulu, Disney+ and others.

In light of massive COVID-driven disruptions to its parks and theatrical businesses, Disney, in particular, has announced a restructuring around its burgeoning SVOD business. The new Media and Entertainment Distribution division will focus on original content for streaming and how to best monetize the at-home audience.  “Given the incredible success of Disney+ and our plans to accelerate our direct-to-consumer business, we are strategically positioning our Company to more effectively support our growth strategy and increase shareholder value,” Disney CEO Bob Chapek said.

After testing the direct-to-digital waters with the premium release of Mulan on Disney+ in September, Disney intends to forego cinemas with its upcoming animated flick Soul, which it will bring directly to Disney+ on Christmas Day – this decision “shocked” the International Union of Cinemas (UNIC), representing European cinema operators.

“Theaters will return when movies begin to flow again out of Hollywood, but the business of movie distribution will likely be very different,” said Brett Sappington, Vice President at Interpret. “Studios will have significantly more negotiating power over theaters and control over distribution options with direct-to-consumer streaming. Theaters, one of the last bastions of traditional distribution, will now have to find a new place and role in order to survive.”

While cinemas are grappling with a crisis, it makes sense for big studios to go direct to digital. Interpret’s New Media Measure® shows that year-over-year from Q2 2019 to Q2 2020, the number of movies seen in a theater fell about 65%. Meanwhile, from Q1 to Q2 2020, there was a more than 70% jump in US viewers renting movies on streaming services, and an increase of more than 60% for digital movie purchases. Always a strong studio revenue driver in pre-pandemic times, the home entertainment experience is for now the only show in town.

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