Disney, NBCUniversal, ViacomCBS unlikely to follow WarnerMedia’s 2021 movie plan

It’s been a week since AT&T’s WarnerMedia shocked Hollywood with its plan to release its entire 2021 movie slate on HBO Max at the same time the movies hit theaters.

Don’t expect other streaming services to follow suit — at least not yet.

WarnerMedia will likely be the guinea pig for the media industry — perhaps to the relief of its competitors. Even WarnerMedia CEO Jason Kilar doesn’t expect the competition to follow. He cited fear and a belief in a different business approach as reasons why WarnerMedia may be on an island with its film decision in 2021.

“I know that there’s a lot of different companies that think differently,” Kilar said on Kara Swisher’s “Sway” podcast. “It’s possible that some people might follow where we’re going, but I wouldn’t bet on it. I think there’s going to be a lot of people taking different paths here. Ultimately it’s the customer that is going to tell us which way this should go.”

Strategically, Comcast‘s NBCUniversal executives agree the theatrical window is anachronistic. NBCUniversal has already struck agreements with movie theater companies AMC, Cinemark and Cineplex to shorten the amount of time movies exclusively feature in theaters from three months to 17 days.

“With audience fragmentation accelerating due to the rise in digital, streaming and cord cutting, as well as the unprecedented issues our industry is facing right now, our relationship with exhibition had to evolve and adapt to the changing distribution landscape,” Donna Langley, chairman of Universal Filmed Entertainment Group, said last month.

But WarnerMedia is pushing the envelope even further. In that sense, Kilar is doing the dirty work for his peers.

There are several reasons other media companies will be happy to watch WarnerMedia bust through the theatrical window without immediately following suit.

WarnerMedia charges $14.99 per month for HBO Max. Some of these customers already pay WarnerMedia for HBO through cable bundles, and others get HBO Max for free as AT&T wireless subscribers, lowering overall average revenue per user (ARPU). Still, WarnerMedia charges more than double what Disney, ViacomCBS and NBCUniversal charge for their subscription streaming services, making the shift more palatable for WarnerMedia than its rivals.

“The number of incremental subs needed to justify abandoning a theatrical release model is not trivial,” said Bank of America analyst Jessica Reif Ehrlich in a note to clients. “If the whole U.S. industry were to shift to a day and date streaming model, we estimate 62 million U.S. incremental subs at $10 avg. ARPU levels would need to be added across the industry to recapture revenue lost from the box office/transactional windows.”

In other words, 62 million American customers would have to agree to pay $10 per month to streaming services to just break even for the lost theatrical revenue. And Disney, ViacomCBS and NBCUniversal all charge less than $10 a month for their streaming services. Disney+ is $6.99 per month. ViacomCBS hasn’t officially launched Paramount+ but has privately planned to keep the price the same as CBS All Access — $5.99 per month with ads. A limited version of NBCUniversal’s Peacock is free and a more robust offering is $4.99 monthly with ads.

That means those streaming services would need even more people to sign up for their services to make up for lost box office revenue than HBO Max.

Disney has also already toyed with eliminating the window when it charged Disney+ subscribers an extra $30 to watch “Mulan” immediately. But Disney CEO Bob Chapek has already said “Mulan” was a “one-off” and not a signal that the company was swapping to a new business model. Disney plans to release 21 movies in 2021, including several surefire blockbusters such as “Black Widow,” Pixar’s “Luca,” and Peter Jackson’s music documentary, “The Beatles: Get Back.”

Disney has its investor day Thursday. Chapek and other executives will almost certainly answer questions about their 2021 strategy in lieu of WarnerMedia’s decision.

While Disney+, Peacock and Paramount+ have all locked up carriage deals with Roku, the largest streaming distribution platform, WarnerMedia still hasn’t. The decision to launch all of its 2021 movies immediately on HBO Max will put pressure on Roku to reach a deal with WarnerMedia before the biggest of those movies — starting with “Wonder Woman 1984” on Christmas — hits the service. “The Sopranos” prequel “The Many Saints of Newark” is set to be released in March.

The continued Roku negotiation may have tilted the scales for Kilar differently than his media peers.

The owner of Warner Bros. studio received harsh blowback from director Christopher Nolan for its decision to eliminate the decades-old theatrical window. If actors and moviemakers bristle at WarnerMedia CEO Jason Kilar’s decision, rival film studios, such as ViacomCBS’s Paramount or NBCUniversal’s Peacock, could be in line to pick up new talent.

ViacomCBS CEO Bob Bakish made a point this week to emphasize certain movies are made to see in theaters.

“I think there’s a role for theatrical,” said Bakish at UBS‘s Global TMT conference. “Particularly you think of a film like Top Gun, it would be a shame to watch it on a mobile phone because it really is an incredible spectacle.”

Movie theaters may also strike back at WarnerMedia, perhaps refusing to air Warner Bros. films. Still, movie theaters are in such terrible shape during the pandemic that they may not be in the financial position to ban anything.

No one knows how many customers will incrementally sign up to HBO Max to immediately see blockbuster movies or how quickly they’ll turn off the service after watching one. Even Kilar has said there’s no certainty WarnerMedia will continue to offer movies day-and-date on HBO Max after 2021.

Several media executives are privately cheering WarnerMedia for taking the plunge because it gives the rest of the world one year’s worth of data to make future decisions.

“It’s pretty clear that the theatrical windows will evolve and get shorter,” Bakish said. “Some of these new monetization paths that we’re seeing are going to be more common. People are going to use films to drive over-the-top products. People are going to look for alternate monetization, and that’s going to be the norm.”

Disclosure: NBCUniversal is the parent company of CNBC.

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