• Michalis Papachristodoulou

Roll the credits: Hollywood’s last hurrah?

To say that 2020 was a tough year for cinemas would be a major understatement. Streaming services have been challenging the cinema industry for some time and the Covid-19 pandemic has left cinemas reeling from a year of closures. Many cinemas have already filed for bankruptcy and there is no guarantee that the appetite for the cinema experience will ever recover to its pre-pandemic levels. In a further blow to Hollywood film-makers, China’s cinema scene has blossomed, marking a shift towards Chinese-made films. The golden age of Hollywood has long passed, but we might be about to witness Hollywood’s demotion to the bronze level, trailing behind streaming services and China’s film industry.

Streaming Services

Video streaming services are, now, the single biggest threat to cinemas. Yet, it is easy to forget that until recently these services were not considered a threat to cinemas. Video streaming services, such as Netflix, were considered complementary to cinemas until the mid-2010s, operating as a means to further boost the sales of films after their cinema screenings had ended. This model operated similarly to the sale of DVDs. Indeed, Netflix itself started out as a DVD seller and renter.

The regular practice of film studios until the 2010s was to release the DVD versions of their films only once their 16-week run at cinemas came to an end, hence preventing any form of competition between cinemas and DVD viewings. Film studios would get significant royalties from any DVD sale or rental, allowing only slim profit margins for the businesses renting these DVDs to others.

Netflix upended this business model in more ways than one. Firstly, it started charging its clients a subscription fee rather than following the pay-on-demand practice. This gave it a double advantage over cinemas and its pay-to-rent competitors, as it could both offer an all-you-can-watch experience to its customers, whilst benefiting from a stable source of income each month. This contrasted to the periodical and unstable income of cinemas, which is heavily dependent on the release dates decided by film studios.

Technological developments gave Netflix an opportunity to gain even more of an edge against cinemas. It moved away from DVDs, becoming the first major streaming service provider. This move meant that thousands of films were just one click away and could be streamed at any time, all from the comfort of one’s home. Netflix did not stop there though. With fees and royalties rising in the 2010s, Netflix made the strategic decision to start producing its own content. After some years of trial and error, the streaming service provider fully graduated into the top-tier film studio category in early 2020, when its movies received more Oscar nominations than those of any other studio.

Netflix’s success has been replicated by others and the expansion of streaming services has been phenomenal over recent years. Prime Video, Tencent, Baidu, and even the recently launched Disney+ have all accumulated over 80 million subscribers each. Studies show that in 2019 the number of films watched per person per year had more than doubled since 2015. At the same time, the number of cinema tickets sold has decreased, evidencing the shift away from cinemas and towards streaming services.

Covid-19 and the lockdowns

When Covid-19 started spreading around the globe, cinemas were amongst its first big casualties. The need for social distancing and the recommendation to avoid closed spaces meant that the operation of cinemas quickly became incompatible with public health recommendations. Even before full-scale lockdowns were implemented, the closing of cinemas was amongst the government’s first measures.

The impact of these closures was massive. Hundreds of movies saw their release date delayed, with the most prominent examples being the latest instalment of the James Bond series, "No Time to Die", scheduled to be released in April 2021, and the much-anticipated superhero film "Wonder Woman 1984", whose release came after a six-month delay. These delays meant that even when cinemas re-opened, there was a surprising dearth of movies to watch.

Starved of both movies and audiences, cinemas took a hard financial hit. In 2019 the worldwide box office revenue amounted to around $43bn and predictions for 2020 were in the region of $45bn. By the end of 2020, it became clear that lockdowns caused a huge contraction in the performance of box offices globally, with the total revenue for the year barely reaching $16bn. Many small cinemas have already been forced to declare insolvency, whilst even big cinema chains are on the brink of bankruptcy. Cineworld, the world's second-largest cinema chain, was only saved from insolvency by a last-minute $450m loan agreement and its executives even admitted themselves that this may not be enough if closures continue.

Covid-19 also accelerated the already growing trend towards streaming services. Netflix gained 27 million new subscribers in 2020, with the bulk of these coming during the roll out of lockdowns and stay-at-home orders in spring 2020. As Hollywood studios announced their decisions to delay the release of their movies, streaming service providers continued to release a steady stream of content for their stuck-at-home subscribers.

Faced with this reality, Hollywood film studios started making the tough decision to move their films to streaming services without waiting for them to enjoy the traditional 16-week run in the cinema. Warner Bros announced in December that, due to the ongoing pandemic, all its movies scheduled for release in 2021 would be made available in HBO Max the same day they are released in cinemas. This marks a pivotal shift in favour of streaming services and to the detriment of cinemas around the world.

China’s rise

In contrast to the situation in much of the world, China’s cinemas have been open since March. Covid-19 hit Chinese cinemas in the first months of the pandemic, but the low infection rates reported since then have allowed audiences to return to cinemas. This has boosted an already thriving Chinese film industry, whose recent renaissance may bring it in direct competition with Hollywood filmmakers.

2020’s highest-grossing film was “The Eight Hundred”, a Chinese movie which made a quarter of its sales in international markets. The global appetite for Chinese films remains relatively low, especially in Europe and the US, but the recent successes of the Korean film “Parasite” and of K-dramas may have paved a way for non-Hollywood films to break into Western markets.

China’s influence in the cinema industry is not limited to its own releases. Its authoritarian regime has imposed a system of censorship that applies to both domestically made films and international films that are to be screened in China. China has the power to ban any film that is deemed to be harmful to its “dignity, honour and interests”.

For example, any movie featuring Brad Pitt is barred from Chinese cinemas due to his role in the film “Seven Years in Tibet”, a movie which depicted the Chinese invasion of Tibet and painted China in a negative light. The dystopian political action film ‘V for Vendetta’ was banned because of its anti-governmental themes. Other films have had to be edited to comply with Chinese censorship standards, such as the deletion of one minute from “Bohemian Rhapsody” to remove the on-screen drug use of the main character.

Such is the commercial importance of the huge Chinese film market that Hollywood film studios have openly sought to comply with Chinese standards by avoiding topics considered controversial by the Chinese government. Disney went so far as to film certain scenes of its live-action adaptation of “Mulan” in the province of Xinjiang, where internment camps have reportedly been set up for Uyghurs Muslims, in what has been perceived as an attempt to gain favourable access to the Chinese cinema market.

Looking Forward

The rise of streaming services has challenged the cinema industry, but the changes in consumer behaviour brought about by the Covid-19 lockdowns, have meant that the likes of Netflix, Prime Video and Disney+ are now posing an existential threat to cinemas. Meanwhile, China's rising film industry and its state censorship are poised to shape the future of the film industry, challenging Hollywood for hegemony in this market. Only once the Covid-19 pandemic has been dealt with will we know whether the age of the blockbuster Hollywood cinema may still get a sequel.