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Thursday May 07, 2020 |Notes

Direct to consumer entertainment

Over the past 2 months, there's been a 'forced adoption' of many new products and services in response to the pandemic and ensuing societal shifts. The Wall Street Journal recently featured a story on The Journal podcast about the success of a kids movie, Trolls World Tour, which was released as a rental to consumers after plans to release theaters due to mass closings nationwide.

After acknowledging how unlikely it seems that a Trolls movie would be a topic of discusson on the WSJ podcast, the host explained the movie was scheduled to be released in theaters in March. The marketing campaign was already underway when theateres closed. Rather than delaying the release, as many major films have done, the studio decided to release the movie as a rental directly to consumers at $20 per rental. As of the podcast release, it had been rented over 5 million times, grossing over $100 million.

This would be considered an impressive number in the theaters - and it's significantly better for the studio due to the econoimics of the split. Rather than netting ~50% of box office sales, Universal gets an 80% cut of the gross sales via direct-to-consuemr rentals. Typically, there are contracts in place between studios and major theaters. The situation was changed by outside effects - and it seems unlikely to disappear.

Other studios are watching this with anticipation of doing the same. Theateres were already hurting before the pandemic, as the gap between the theater and at-home experience has narrowed. Netflix began breaking these borders years ago. The shift is in response to an unusual situation - and follows the trend of cutting out layers between producers and consumers.

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