A Streaming Report Card – HBO Max’s Performance and Other Lessons from 2021’s Big Gambles

So, the year of 2021 gave us a few answers about the direction that a post pandemic world would take in the world of cinema, but it also ignited a few new questions as well.  We do know for a fact that the movie theater industry, though heavily bruised, will endure for at least the foreseeable future.  They may not be near where they were at pre-pandemic levels, but they have at least rebounded a bit enough from the lockdowns to keep their doors open.  And I’m sure that many experts didn’t expect that the year of 2021 would close out with a billion dollar grosser with Spider-Man: No Way Home (2021), a movie that is defying all expectations in the face of a pandemic surge.  But, even though the darkest days for the theater industry may be over with the regards to the pandemic, they still have an existential threat that has persisted from even before the pandemic to now.  That is the growing streaming market, which had a major period of growth over the months of the pandemic.  Not only do movie theaters have to contend with one streaming giant like Netflix; now they have to deal with about 5 more, many of whom have recently launched amidst a lot of advance hype.  Disney+ and Apple TV+ both launched mere months before the pandemic turned into a global catastrophe, while Universal’s Peacock and Warner Brothers’ HBO Max took off right in the middle of the lockdown period.  And then last year, CBS All Access rebranded into Paramount+, making it the fourth of the 5 major to launch it’s own streaming service. In all their own ways, each streamer wanted to leave an impression that would define them in the marketplace, which became even more interesting after the theater industry went into lockdown.  While each of them pushed for a variety of different exclusive perks to boost their subscriber base, it was HBO Max that perhaps made the boldest move in response to the pandemic effected market.  And it’s their gamble that in many ways clues us into the state of where the movie industry might be headed.

Like all the other studios, Warner Brothers had their film calendar shaken up by the COVID-19 pandemic.  The closure of theaters worldwide forced many movies to delay their releases, most of them into the next year.  But, by doing so, it created a backlog of movies that if not released soon would cause productions to be delayed for other films down the pipeline, and that would endanger the careers of those who work within the industry who depend on a steady work flow to earn a living off of.  So, in order to not disrupt the movie production pipeline any more, many of the studios had to consider whether it served them well to release their film on streaming instead.  It’s certainly not an easy decision to make, especially when some of the movies in the pipeline cost anywhere from 50, to 100, to even 200 million dollars to produce.  A lot of those more expensive movies are especially dependent of a robust theatrical market to help them earn back their production and marketing costs, and that becomes a major problem when there is no box office revenue.  So, many within the accounting firms at the major studios had to take a look at if it was possible for studios to offset box office dollars with the money that would be generated through new monthly subscriptions.  It seems from the outside that this is not a 1:1 equivalent benefit, but to many of the studios had the success of Netflix to look at as an example of the gamble paying off.  Netflix has put billions of dollars into exclusive content for their platform, including some films that do cost in the same range as other Hollywood blockbusters. And as a result, the industry has seen Netflix grow to almost half a billion subscribers worldwide, which generates for them many more billions in revenue off of their monthly subscriptions.  In the end, that’s what mattered to the movie studios; that there was a model that guaranteed billions in revenue each month, something that especially appeals to stockholders.  For the movie theater industry, box office sales are an uneven generator of profit, because every film performs differently.  Thus it became a more logical prospect to release movies on streaming during the pandemic, as long as it boosted subscriber growth.  And that became the big threat to the theatrical industry in the face of the pandemic.  How would they bounce back when there was a proven alternative.

As much as many of the streaming platforms made a big deal about their arrivals in the marketplace; the outcome was not as evenly spread out amongst the other studios. Disney+ certainly made the biggest splash right off the bat thanks to their catalog of popular IP like Star Wars and Marvel.  Apple TV+ and Peacock struggled a bit at first, but managed to find their way with critically acclaimed titles that were available exclusive to their platforms.  And then there was HBO Max, which had probably the roughest of starts.  The big anchor around their waist was their questionable starting subscription price of $14.99 per month, which is nearly double what their competitors charge.  Not only that, but their exclusive content seemed a little thin at the start and their user interface was heavily criticized for being hard to navigate.  The only appeal it had was being a place to watch back catalog material from the Warner Brothers library as well as having content curated by HBO and TCM, both of which are part of the Warner Media entertainment portfolio.  There was interesting stuff to watch on there to be sure, but nothing that demanded the eyes of a broad audience, and certainly not worth the exorbitant high price tag.  So, with a pandemic affected backlog of movies affecting their release schedule and a struggling streaming platform affecting their bottom line, the WarnerMedia executives made a bold but also controversial decision at the end of 2020.  Starting with the release of Wonder Woman 1984 (2020), all of their movies in the next year would be available both theatrically wherever possible as well as on HBO Max at no extra cost on the same day.  This was a move that enabled them to relieve the pressure on their movie backlog as well as generate a renewed interest in their streaming platform, which certainly grabbed the attention of the industry as a whole.  Now, with 2021 behind us, and the entire Warner Brothers release calendar more or less back to normal, we have some answers as to if this gamble paid off.

Initially the move was met with mixed to negative reception from the film community.  One longtime Warner Brothers staple, Christopher Nolan, saw it as a betrayal of the theatrical experience and he left the studio that had been his home for the last 20 years, choosing to take his next film, Oppenheimer, to rival Universal instead.  He also famously labeled HBO Max as the “worst streaming platform” as well.  The movie theater industry was also not very happy with the news, but they were also in a sticky situation at the time.  None of them wanted to refuse to play a Warner Bros. movie, so they had to begrudgingly agree to the plan.  No one would argue that it was the necessary venue to take for Wonder Woman 1984, because it was coming out on Christmas Day 2020, when most of the theaters across the country were still closed due to the pandemic.  But, as situations changed going into 2021, this one size fits all approach to releasing all these movies would be tested to varying degrees.  In total, Warner Brothers had 17 films slated to be released under this 2021 plan, including a few that were pushed back from the year before in addition to those already planned originally for that year.  It’s a lot for one studio to put out in one year, and the backlog created is probably why Warner Bros. made the choice that they did.  Overall, the collection of movies spanned a wide range, from small dramas to big tentpoles, and some of the movies made far better sense as a small screen release than a big screen premiere.  But, it was the outcome of all the films in total that mattered to the WarnerMedia bottom line.  Would the subscription boost make the difference, or were they better off relying on the box office numbers, inconsistent as they may be.

A few things became pretty clear over the course of 2021 for the HBO Max gamble.  The big one overall is that despite having everything available theatrically, the measure of success could not determined by box office alone.  For a year filled with 17 individual releases, Warner Brothers only managed to crack the $100 million threshold twice, and even then just barely.  The highly anticipated Dune (2021) grossed a little over $106 million while Godzilla vs. Kong (2021) just barely managed to eek out past the 100 million mark.  Any other year beforehand, both of these movies might have managed to gross maybe twice as much.  In the case of Godzilla vs. Kong, it could be argued that the box office was still being hampered by the pandemic, as vaccines were only just being rolled out wide at that point, and getting to the $100 million mark in that environment is in itself a sign of huge success.  Dune is a different story, as it came out later in the year with the theatrical industry more or less in rebound mode.  At this point, it could be said that it had it’s box office depressed not by the pandemic, but by the availability on HBO Max.  With that being the case, we’d have to look at the numbers of viewers on streaming to determine if it was more of a hit on HBO Max, which unfortunately remains a closely guarded secret at the WarnerMedia corporate office.  We can only assume how it performed there based on subscriber growth, which is a publicly discussed metric, and while HBO Max did see some growth, it was not at the pace of it’s competitors.  Even old timer Netflix saw bigger growth in the last year.  It doesn’t initially appear that movies like Dune mattered that much at all, and may have had it’s box office potentially cannibalized for not much gain.  Even still,  Warner Brothers determined by what they saw from Dune’s performance based on their internal numbers, did greenlight a sequel, so maybe the private data proved more encouraging than what we’ve seen publicly.

But the overall question remains inconclusive with regards to how all the other films from Warner Brothers performed over the last year under this release plan.  For a lot of the smaller films, not much of a difference would’ve mattered.  Something minor like The Little Things (2021) or Cry Macho (2021) would have underperformed at the box office anyway, and it’s impact on streaming may have been very inconsequential to the overall subscriber growth.  But there was some noticeable issue with the box office performance with some of Warner Bros. more high profile films.  Case in point, the performances of In the HeightsThe Suicide Squad, and The Matrix Resurrections.  Each of these movies were highly anticipated and in any other year could have been big hits for the studios.  But, they all fell flat upon their releases, not even gaining much more than a fraction of box office that movies of their ilk usually do.  In the Heights, a big screen adaptation of a popular Lin-Manuel Miranda Broadway hit had a prime summer release date, but disappeared within a matter of weeks, barely making a splash.  The Suicide Squad couldn’t muster any box office excitement despite critical acclaim, the prestige of director James Gunn’s name, and the popular DC brand.  And The Matrix Resurrections  put an extra nail in the coffin of a long dormant franchise.  While Dune and Godzilla vs. Kong defied the odds with their box office performance, these films indicated a sign that the best hopes for the HBO Max plan to be the best for all camps turned out to not be the case.  In all, out of the 17 films, getting only 2 to be a box office hit is not an ideal track record, especially when your streaming numbers don’t indicate a phenomenal amount of growth.  The only conclusion we can draw looking from the outside is that Warner Brothers left a lot of money on the table by splitting their release schedule across two markets, and not ensuring that they would get the maximum out of both alternatives.

Here’s where the problem lies with the HBO plan as opposed to all the other ones offered by their competitors; the danger of piracy.  People who stream content have the ability to also download that content for viewing later, whether offline or on the go.  HBO Max has that as a feature too.  Unfortunately for them, it makes it easier for their content to be downloaded and dubbed much easier to be exchanged person to person, or even worse, sold on the black market without Warner Brothers benefiting from that circulation.  When everyone can share their log in password to multiple people, it depresses subscriber growth, and yet the same number of people who would’ve bought individual tickets to a movie in a theater can just rely on that one generous subscriber to give them access to the same film at home.  The big problem is that HBO Max only relied on that upfront subscriber cost, and didn’t charge any extra on top of that.  It may seem like a generous trade off, having first run films at no extra cost, but it financially puts Warner Brothers at a disadvantage.  Their only hope was put into the overall subscriber growth, and nothing else.  Compare this with Disney, which also put their movies out on streaming during the summer in addition to theaters, but with an additional paywall for access.  The Premiere Access option had a steep price tag of an extra $30, but that equals about what a family usually pays to go to the movies.  Yes, the piracy problem becomes an issue, but for Disney at least, they still receive that $30 revenue no matter what.  And in the end, even Disney saw that this was an unreliable generator of money for their films, and they went for theatrical exclusive premieres for the rest of the year.  Warner Brothers unfortunately were stuck with their highly publicized plans, and couldn’t course correct midway, because it would reveal their plan to be an overall failure.  Their consequence is probably the most clear example of there being no conclusive answer to the state of film releases in the future.  Warner Brothers did manage to keep it’s word and put every movie they planned for 2021 into theaters and onto streaming concurrently, but in doing so, it probably hurt their bottom line for the full year, with all their movies making less then they should’ve, even in the face of problems caused by the pandemic.

Essentially, the state of film releases going into this year is determined mainly on the desire of what audiences are willing to risk seeing on a big screen.  That’s why movies from studios like Marvel still potent in a pandemic market.  You feel like you’re missing out if you don’t see a big movie shown the way it was meant to be shown.  That’s largely why of all the Warner Brothers movies released in 2021, the only strong performers on the silver screen were the ones made for the big screen; Dune and Godzilla vs. Kong.  From my own experience, I will tell you that I saw the majority of the Warner Brothers releases in theaters, just because that’s the person I am.  The only ones I chose to see on HBO instead were The Little Things (because theaters were still closed in my area at the time) and Reminiscence  (because I wasn’t going to waste my time going out to the theater for a movie that I knew would just be disappointing.  There were quite a few movies in that bunch that I wish had been theatrically exclusive like In the Heights and The Suicide Squad, because those films should have been given the chance to prove themselves in exclusive theatrical windows.  For now, it looks like Warner Brothers saw that the plan did not work for them, and their 2022 outlook appears to favor theatrical over streaming.  We’ll see if that works better for them, with the highly anticipated The Batman coming out in March.  In the end, was it worth the risk for Warner Brothers.  It certainly drew some attention to HBO Max, and the streamer did see a bit of growth.  But, with the year over, it looks like it was a gamble that didn’t pay off the way the studio wanted it to.  Warner Brothers is still a big enough studio to where it won’t hurt them too much in the long run, and the executives that greenlit the decision have already left the studio completely, as AT&T have given up their stewardship in the last year and WarnerMedia is imminently about to merge with Discovery Studios, which is going to create a whole different outlook for the future of Warner Brothers.  For some, having the availability at home for first run pictures at no extra cost was very generous, but it’s better in the long run for movies to have a robust theatrical option to generate the most return on their investment.  That’s not to say that there’s no value in going straight to streaming either.  It really depends on the individual title.  Overall, HBO Max’s 2021 plan was an ultimately unsuccessful from a revenue standpoint, but still noteworthy in it’s way, as it did put the struggling streamer into the headlines and garnered the attention of the audience.  It’s own topsy-turvy results more than anything reveals to us that the state of Hollywood is still one with a undetermined outcome even post-pandemic; one in which the years hereafter will tell us more conclusively how the industry will look in the future.