“Taking hold of a company whose bread and butter is made of theatrical exclusivity windows and then changing it just before two major years in cinema finally arrive, which would generate huge cash flows for the sector, would be detrimental,” Kippers added.
The US box office is expected to grow in 2026, propelled by popular franchises and much-anticipated sequels including Super Mario, Toy Story 5, Avengers: Doomsday, and Dune: Part Three. Revenue could increase 12% to $9.7 billion, according to estimates by Macquarie analyst Chad Beynon.
This anticipated recovery would potentially be derailed by the creation of a movie-making behemoth with the heft to reshape how films are made and distributed.
Netflix, whose bid is still backed by Warner Bros. despite the studio reopening deal talks with Paramount Skydance Corp., has vowed to keep films in theaters for 45 days. This promise is an effort to reassure the struggling theater industry and more conciliatory than the tone struck last year, when co-Chief Executive Officer Ted Sarandos said going to the movies was “outmoded.”
Still, the commentary from Netflix “says nothing about a meaningful commitment to theatrical exhibition,” Michael O’Leary, CEO of lobby group Cinema United, said in a statement last year. Trade groups on both sides of the Atlantic have warned European and US officials that a takeover of Warner Bros. by either Netflix or Paramount could stymie the release of blockbuster movies.
Whether Netflix keeps its promises will have far-reaching consequences for the studio behind Harry Potter and Barbie, as well as the wider industry.
Warner Bros. generally releases 15 to 20 big movies per year, with around half of those making more than $100 million at the box office, Macquarie’s Beynon estimated. “So if Netflix decides to cut that theatrical window, that affects 10% to 20% of the big movies that really matter for Odeon, for Cineplex, for Cineworld,” he said.
Beyond Netflix potentially shortening the theatrical window, the way movies move to streaming services also has an impact, according to Bloomberg Intelligence analyst Kevin Near. Netflix hasn’t clarified whether it would opt for a premium video on demand model — where it costs money to watch at home too — or go right to subscription streaming.
“There could be a significant disruption if audiences are being trained to just wait until movies are hitting streaming,” Near said in an interview.
The industry is only slowly returning to normal. Attendance is down 30% since the pandemic and prices have gone up 10%, while inflation, rent and labor costs have increased, pressuring margins, according to Beynon.
The pandemic’s impact on behavior also endures. Younger people, previously the most enthusiastic moviegoing demographic, are increasingly shunning cinemas, according to Degroof Petercam’s Kippers. Shorter attention spans and squeezed wallets also don’t encourage movie trips, Beynon said.
Going Premium
Theaters have adapted to protect revenue in a difficult environment.
Premiumization — which started with reclining seats a few years ago and now includes 4D sensory experiences with squirting water and air blasts — is diffentiating theaters from the couch and helping drive higher spending per patron.
Some Kinepolis-operated theaters have also started using the real estate itself for other purposes, renting out the space for corporate events or offering alternative content like live-streamed opera, said Degroof Petercam’s Kippers.
Increasingly, theater operators might have to combine to survive. “In terms of negotiating power, consolidating exhibitors would be kind of a logical response to consolidating studios,” BI’s Near said.
While the slate of blockbusters for this year is encouraging, the current dynamic of tepid demand, the risk of shorter theatrical windows and changes in streaming models may prove to be a pivotal moment for theater operators.
“We’re finally at the level where there’s enough widely released movies,” Macquarie’s Beynon said. “So if this year ends up being a flop, there would be major questions about these studios pushing more toward the business model of streaming.”