Why Movie Studios Stick to the Theatrical Model Over Streaming

Despite the rise of streaming services, major film studios continue to prioritize theatrical releases over direct streaming. This article explores the key reasons behind this decision, backed by recent data and expert insights.

Revenue Maximization Through Theatrical Releases

Release strategies dictated by financial goals, movie studios like Sony, Universal, and Disney are heavily invested in theatrical distributions. Figures such as Spider-Man: No Way Home ($1.89 billion), No Time to Die ($774 million), and F9: The Fast Saga ($726 million) reflect the substantial revenues garnered from theatrical screenings.

Figure 1: Recent box office revenues from major releases. | Movie | Streaming Platform | Box Office Revenues | |--------------------------|-------------------|---------------------------| | Spider-Man: No Way Home | N/A | $1,890,983,275 | | No Time to Die | United Artists/Universal | $774,153,007 | | F9: The Fast Saga | Universal | $726,229,501 | | Venom: Let There Be Carnage | Sony | $502,050,366 | | Godzilla vs. Kong | Universal | $468,216,094 | | Shang-Chi and the Legend of the Ten Rings | Disney | $432,243,292 | | Eternals | Disney | $402,064,899 | | Dune | Warner Bros. | $400,669,416 | | Uncharted | Sony | $373,874,056 | | The Batman | Warner Bros. | $362,700,000 |

Adaptation to New Technology

Much of the resistance to streaming is rooted in inertia and a preference for the familiar. In the absence of the Covid-19 pandemic, it is unlikely that studios would have shifted their focus so swiftly to streaming. This caution is driven by the need to maintain traditional revenue streams and box office prestige.

Studios, controlled by major conglomerates like Disney, Warner Bros., and Paramount, view streaming as a supplementary or future-focused venture. Exclusive releases on streaming platforms, such as Disney or HBO Max, are often limited to a subset of films, driven by marketing strategies and the desire to enhance subscriber growth.

Technical and Business Barriers

Several technical, contractual, and economic factors contribute to the persistent reliance on theatrical distributions:

The Oscars: Compliance with Theatrical Distribution: The rules of the Academy Awards mandate that films screened in theaters qualify for awards, underscoring the importance of theatrical release for industry recognition and prestige. Contractual Obligations: Long-term contracts with actors and studios often stipulate theatrical release as a condition for contract fulfillment. Recent cases, such as Black Widow, highlight the enforceability of these agreements. Infrastructure and Investments: Theatrical infrastructure, including theater owners and projection equipment, represents significant investments. Shifting to streaming too quickly could destabilize the existing business model, potentially disrupting the financial stability of theater owners and potentially affecting their stock performance. Consumer Preferences: Although streaming is becoming more popular, many consumers still enjoy the social experience of attending movie theaters. The theater environment offers a unique, immersive viewing experience that consumers value.

Conclusion

While streaming services offer alternative avenues for distribution, the existing theaters remain a critical part of the entertainment landscape. The success of theatrical models over streaming can be attributed to a combination of financial incentives, risk aversion, and consumer preferences. As the industry continues to evolve, the balance between theatrical and streaming releases will remain an ongoing challenge.