Hollywood studio Warner Bros launched a research project last year, aiming to better understand where it fit in a chaotic entertainment landscape. The studio, which plans to roll out its own video-streaming service this year, wanted to know just what the influx of entertainment options was doing to consumers’ brains.
As it ran tests with audiences, a counterintuitive pattern began to emerge. When presented with a dizzying array of hundreds of new movies and TV shows to watch, viewers tended to retreat to the programs that were most familiar to them. It’s an experience any Netflix user can identify with: Sitting down to pick out a movie, scrolling through choices for an hour — only to settle, finally, on an old episode of “Friends.”
Today, viewers have more choices than ever before, and for Hollywood studios, cable giants—and even the streaming services that increasingly rule in entertainment — that’s a dangerous thing.
Just under 500 new TV series premiered last year — compared to 182 new shows in 2002, according to an annual report released by cable network FX. Netflix plans to release nearly 100 original movies and documentaries this year.
Nearly three-quarters of US households already have more than one streaming service like Netflix or Hulu, up from 59 per cent two years ago, according to market-research firm Ampere Analysis; of these households, nearly 42 per cent subscribe to three separate streaming services. And the two biggest Hollywood studios, Walt Disney Co and AT&T Inc’s Warner Bros, are preparing their own streaming services, set to launch by the end of this year.
Meanwhile, it’s getting harder and harder to focus audiences’ attention on the movies that Hollywood deems most important. On Sunday night, Hollywood will gather to honor the most prestigious movies of the year at the 91st Academy Awards. On Monday morning, executives in Hollywood will likely wake up yet again to the news that fewer people cared to tune in to their big night — just as they did last year, when the telecast lost 6.4 million viewers, or about the population of Indiana.
To succeed in a landscape of infinite choices, entertainment companies are faced with tough choices of their own.
Disney divides and conquers
Disney, which currently dominates the box office, is making a dramatic pivot. The biggest box-office titan of them all is tying its success in the next decade less to opening-weekend hauls in theaters and more to year-round subscription fees.
Disney theatrical releases collected $3 billion in domestic grosses last year—nearly $1.2 billion more than the next-highest studio. But the company’s streaming service, Disney+, launching this year, “remains our No. 1 priority,” said Chief Executive Robert Iger on a conference call with analysts earlier this month.
The studio is pursuing a bifurcated strategy. It will keep opening its biggest movies, like its hits from Pixar Animation and Marvel Studios, in movie theaters, letting them run on the big screen before releasing them on Disney+.
But some of its midsized movies will go straight to streaming: Executives have already moved some upcoming movies like “Noelle,” a comedy starring Anna Kendrick as the daughter of Santa Claus, from the theatrical slate to the streaming service. The divided release strategy reflects a widespread change in people’s viewing habits in recent years, with a growing concentration of box-office ticket sales going to the biggest releases.
In 2018, three Disney movies — Black Panther, Avengers: Infinity War and The Incredibles 2 —accounted for nearly $2 billion of the year’s $11.8 billion box office.
All Disney movies shown on the big screen will eventually run on the streaming service as well, making the theatrical experience merely a precursor to the real goal: Subscription fees.
“Your theatrical release becomes a marketing tool for your streaming service,” said Steve Mosko, CEO of Village Roadshow Entertainment Group, a film production and finance company that largely works on major releases like Steven Spielberg’s Ready Player One.
Ultimately, Disney plans to run three separate video-streaming services, and has begun to pull Disney movies and shows from Netflix, to preserve them for Disney+. Disney already operates ESPN+, a sports streaming service, which it launched last April. A third streaming service, Hulu, will come under majority control at Disney after the studio completes a $71 billion deal to acquire major assets of 21st Century Fox . Hulu will likely host Fox programming that isn’t as family-friendly as that of the Disney brand.
Warner Calls a Psychologist
When researchers at Warner Bros. discovered that audiences seemed overwhelmed by too many choices, they had a guess at a diagnosis. Albert Einstein had called it “option paralysis,” indecision in the face of too many choices. (It’s why Einstein opted to wear the same sport coat and trousers every day.) For advice, the studio brought in Brian Schwartz, an emeritus professor of psychology at Swarthmore College and the author of The Paradox of Choice. Striking a just-right balance—enough new choices to excite, but not too many to overwhelm—will be crucial to studios getting into the streaming game, said Dr. Schwartz. If studios end up spending millions of dollars producing too much new programming, he said, they could end up in a situation where “you give people everything under the sun and they end up watching what they watched before.”
According to Dr. Schwartz’s research, an influx of options also makes the ultimate choice more an expression of personal identity. When there are only five movies to choose from—for instance, at a multiplex—consumers do not put much stock in their decision, he said. But when there are 30 choices, it becomes a question of, “Am I the kind of person who would watch this kind of movie?”
“Even when you’re sitting at home and no one knows what you’re watching, the stakes go up, which just increases the paralysis because it’s now a big deal,” he said.
AT&T Inc., which bought Time Warner Inc. last year, already has a successful direct-to-consumer offering in HBO Go. The company is planning a three-tiered offering for the unnamed new service, one that starts with a basic movie offering and then adds original programming and children’s programming as the price goes up. Like Disney, AT&T is planning to pull some Warner shows and movies from rivals like Netflix to boost its own offering. “Some of the incumbents should expect that their libraries are going to become a lot thinner,” said WarnerMedia chief John Stankey in November.
Netflix Isn’t Immune
Netflix Inc. has been hugely successful at disrupting the ecosystem of the major movie and TV studios, but the coming threat from Disney and WarnerMedia has forced the company to spend even more money to try to maintain that dominance. It spent $12 billion on programming last year, and has shelled out out hundreds of millions of dollars for deals with top showrunners like Ryan Murphy, creator of “Glee” and “American Horror Story,” and Shonda Rhimes, creator of “Grey’s Anatomy” and “Scandal.”
But the company isn’t primarily worried about rival studios and cable giants. In a January letter to shareholders about its fourth-quarter earnings, Netflix wrote, “We compete with (and lose to) ‘Fortnite’ more than HBO,” referring to the popular videogame.
“There are thousands of competitors in this highly fragmented market vying to entertain consumers and low barriers to entry for those great experiences,” the letter noted. Chief Executive Reed Hastings has also cited sleep as one of the company’s many rivals for viewers’ attention and time.
Now, as it pursues top directors and audiences looking for “event movies,” the company has started to turn more of its attention to the big screen—an avenue of distribution that Netflix has mostly avoided in the past. Major theater chains have shunned Netflix offerings, refusing to show high-profile releases like the Oscar-nominated “Roma” if it means supporting the company’s insistence that the movies premiere on the service simultaneously or soon after.
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But Netflix is making more overtures. The company, along with some other streaming services, have approached IMAX Corp. about releasing their movies in their large-format auditoriums, said IMAX CEO Richard Gelfond.
Amazon Fights Endless Scroll
Amazon Studios, the production arm of the e-commerce giant, is building a slate that combines theatrical releases with movies that premiere on its Prime Video streaming service. Amazon spent nearly $50 million on distribution rights to four films at this year’s Sundance Film Festival, planning to give each of them a theatrical release. The company has had success with that model in the past, such as 2017’s “The Big Sick” and 2016’s “Manchester by the Sea,” which won two Oscars. But the company has more recently experienced a number of duds like “Beautiful Boy” and “Suspiria.”
Once known for more independent fare, Amazon is building a slate of about a dozen films that will include awards prospects like “The Report,” starring Annette Bening as California Sen. Dianne Feinstein, and action-adventure features like “The Aeronauts,” starring Eddie Redmayne as a scientist determined to hit record heights in a hot-air balloon. To distinguish the original films that premiere on Prime Video, said Amazon Studios chief Jennifer Salke, the company will explore new ways to package them. One strategy: separating the films into subgenres like “sexy date night” or horror features that customers will start to associate with Amazon.
The key: Making sure the selection is “not an endless scroll,” she said. “You’re programming for an audience. . . not in the volume game,” said Ms. Salke.
Justin Guthrie, a 42-year-old videogame developer from Anaheim, Calif., at one point went to see movies three times a month. But he and his girlfriend, Belle Chuaypanya, have seen two in theaters in the past five months: “Halloween” and “A Star Is Born.”
“We could have waited for those [to come on streaming], too,” said Mr. Guthrie. Instead, the pair opt for Netflix and old episodes of “The Office” or “Parks and Recreation.”
After leaving a restaurant on a recent Saturday evening, Mr. Guthrie and Ms. Chuaypanya found themselves standing outside a movie theater, wondering what to do with the rest of their evening.
“I don’t know what’s playing,” he said. And even though one of his recent movies—“A Star Is Born”—is nominated for seven Academy Awards, Mr. Guthrie has no plans to tune in on Sunday.
“I used to,” he said.
Source: The Wall Street Journal