Is Hollywood back to normal?

Well, nothing is ever really going back to normal. We’ve all experienced almost two full years of life since the first lockdowns in the U.S. It’s impossible to just snap back to a pre-pandemic world and even more impossible to snap back to our pre-pandemic selves. We are all highly plastic bundles of nerves draped under intricate and remarkably vulnerable layers of flesh desperately sucking memory and evidence of some higher meaning out of the electrical signals our probes pick up as we march inexorably toward death, and unfortunately, the past two years of that march counted.

OK, but is Hollywood back on its pre-COVID course?

Oh! Also no. No, of course not, what a stupid question that is!

A quick glance at Box Office Mojo’s reference page shows the scale of the damage. After a quarter century hovering mostly within 10% growth or recession every year, total box office receipts shot down 81.4% from $11.3 billion in 2019 to just $2.1 billion in 2020.

Additionally, the number of releases, which had been climbing rapidly into the 900s as movies boomed around the world, almost exactly halved, from 911 releases in 2020 to 456 in 2020 and 435 in 2021. Those are right in line with turn-of-the-century numbers. To say the pandemic set Hollywood back 20 years or that we’ve gotten one year’s worth of movies over the past two is almost exactly mathematically accurate.

The idea of a Hollywood that may be getting back to normal is spurred by the runaway success of Spider-Man: No Way Home, which spent six of its first seven weekends in release at the top of the box office, performing a lot like what we’re used to seeing from major comic book crossovers and Christmas weekend box office champions that rake in receipts over January when nothing else comes out. It represents a staggering 12.8% of the total 2021 box office – that’s just counting what it made during three weeks in release during calendar 2021, not all the business it’s done in 2022.

I ran a few other movies against their years to try to contextualize this percentage, and here’s where we run head-first into the problem with this question – there isn’t really a “normal” to get back to. Hollywood, like us as individuals, is an ever-changing environment that doesn’t have a “pause” button. There’s nothing good to point to as “normal” because every year is, to an extent, an outlier.

No Way Home is an illustration of this – even though it looks like it’s performance is as “normal” for both a comic book crossover and the belle of the annual Christmas ball, we’ve never seen a movie that was both of those things before. The only December comic book movie I can remember is Aquaman, which is not a crossover and has its own laundry list of reasons to discard it as a comparable. No Way Home has also benefited from an especially empty January schedule, highlighted by Sony’s insane decision to remove Morbius from its Jan. 28 slot because they thought No Way Home would still be making $30 million a week by that time.

So there is no “normal.” OK. What general direction was Hollywood going when the bomb dropped, and is it going the same direction now? 

Well when you put it that way, it’s a very simple “yes.”

The pandemic has accelerated a preexisting movement toward streaming as the primary route to distribute movies – Warner Bros.’ crazed head-first dive into day-and-date streaming releases for its 2021 slate grabbed the headlines, but the reality is Disney had spent several years preparing to re-orient itself as a streaming-first company well before the November 2019 launch of Disney+. This was all already in the cards. It would probably be accurate to say the pandemic accelerated streaming’s dominance over theater-going by a few years.

The dominance of streaming originals among 2021 Oscar nominations brings this into sharp relief. Netflix has long seen Academy validation as its final victory, and it fought hard before the pandemic to foster this environment where originals like Tick, Tick… Boom! Don’t Look Up and Best Picture frontrunner The Power of the Dog could get Academy invites. With Amazon’s Being the Ricardos and Apple TV’s CODA and The Tragedy of Macbeth also earning multiple nominations, it looks like they won’t take quite so long to earn their bones. The original streaming service’s several-year dance of conceding a theatrical exclusivity window for contending releases and getting more prestigious filmmakers on its side seems to be reaching its conclusion.

Probably the only change we’ve seen over the past two years that can be nailed directly to the pandemic is the reduction of the theatrical exclusivity window. When theaters closed in mid-March 2020, Universal moved aggressively to put all of its in-theater content on VOD services, most prominently Bloodshot, which had only been in theaters for 11 days at that point, and refused to take Trolls World Tour off the calendar at April 10, 2020, saying they’d make as much money just throwing it up online, during a time when the schedule was clearing so completely there wouldn’t be another theatrical wide release until Aug. 21.

AMC Theaters, the largest theater chain in the world, boycott Universal, leading to a standoff that was quietly resolved when they agreed to an exclusivity window of just 17 days, down from 90, moving forward.

WarnerMedia CEO Jason Kilar has admitted regretting the sudden move to debut all movies same-day on HBOmax last year, a decision that appears even more to have been made by people who didn’t understand its consequences and without consulting anyone it would affect, but they went into it knowing they could just negotiate a smaller-than-normal theatrical window after the fact – Warner Bros. movies will be theatrical-only for 45 days, not 17.

We don’t talk about ‘Encanto’ – until it’s streaming

The dead canary in the coal mine here is Encanto, the animated Disney musical which disappointed theatrically – its $93.9 million domestic take, good for no. 15 in 2021, puts it in the early-mid 30s in pre-pandemic years in line with such classics as Ride Along 2 and the Downton Abbey movie – but has become a media sensation since its Dec. 24 streaming debut. We can’t know how Encanto’s online viewership for certain, but Google Trends, a key indicator for box office predictions, shows search traffic around the time of theatrical release was about 30% of traffic around the time of its streaming release.

A more prominent indicator than the movie itself, though, has been the cultural sensation “We Don’t Talk About Bruno,” a song from around the midpoint of the movie that began rocketing up Billboard charts, on Spotify and Youtube and as material for TikTok covers once the movie began streaming. Its presence on a cross-section of social media indicates appeal to a broad cross-section of age groups, which tracks – Disney’s grip covers so many generations they’re planning themed retirement communities now. It eventually became the first Disney song to top the Billboard since “A Whole New World” from Aladdin, which made $217.3 million domestic in 1992 – that’s $419.8 million adjusted to 2021 inflation, which would have easily topped the 2021 box office and put it among the top performers in pre-pandemic years – and, crucially, much better than “Let it Go” from Frozen, which is the specific cultural sensation Disney has been trying to recreate since it blew the doors off the box office all the way back in 2013.

At a moment in history when Disney had just bought Marvel Studios and Lucasfilm and seemed to be transitioning away from the animated movies traditionally associated with the brand, Frozen, which is from the same original Disney animation house responsible for the Disney Renaissance that traces its history all the way back to Snow White and the Seven Dwarfs, pulled in $400.7 million in a domestic run that stretched all the way into the next summer. This was the movie that proved traditional Disney material could compete with their new properties. “Let it Go,” Elsa’s seemingly ever-present coming out anthem that accompanied the movie’s rise, topped out at no. 5 on the Billboard chart.

Despite its apparently lacking performance at the box office, Encanto is having a tangibly greater cultural impact than that. 

So basically, streaming platforms are taking over from theaters as a method of distribution, and this was already happening, but the pandemic accelerated it. I prefer streaming anyway, so what does it matter?

Well, everyone gets to prefer what they prefer, and there are certainly advantages to streaming that were hard to ignore even before the COVID-19 crisis, but it’s a very different business model with different incentives that are worth understanding.

For a theatrical release, you pay however much it costs to make the movie, pay theaters to show it, and then make back whatever gets paid in tickets – this is not a simple step, different studios have different fees and revenue-sharing setups with different theaters, which are almost never talked about publicly so we can’t really worry about them.

For decades, Hollywood has been perfecting the Jaws/Star Wars model of making money, in which the movie’s production budget is matched and often exceeded by its advertising budget and merchandising revenue is the main focus for the bottom line, not ticket sales. 

The question of whether or not any given movie is a “success” is always kind of nebulous. Because box office data is independently gathered and we can see with our own eyes which movies are dominating advertising spaces, you can always tell which movies are prominent, but the actual dollars-and-cents bottom line for anything is famously opaque – the art of using selective data to make a line item look good to your boss is literally called “Hollywood accounting.” We reliably know what a movie’s production budget is and how much was spent on tickets to see it, but we can only estimate advertising budgets and merchandising revenue, which are the more important factors. However, since advertising commitment is usually a reflection of overall budget commitment and merchandise is usually bought by people who actually see the movie, production and box office are still generally good stand-ins for these numbers – Deadline Hollywood does spectacular work getting into the nitty gritty of reconstructing movies’ actual bottom lines, but they mostly do it during blockbuster season, which hasn’t happened for two years. 

All of this is complicated by the egos and business incentives involved. Studios are corporations, beholden to stockholders and ownership, and that means they always have to put on a smiling face. The line must always go up. They can use a combination of opacity externally and creative accounting internally to tell everybody that everything is always going as planned, and it takes a real disaster to break that artifice. In recent decades, there’s been a huge emphasis placed on the perceived stability of series, and the presumption that every project will get multiple sequels if it’s actually a success. This is where the art really suffers, because you start to get gaudy, baffling teasers for future movies within the runtime, and now even deliberately making incomplete movies. As such, Hollywood accounting is also used to justify sequels so that executives can say their near-term future is secure and fans and filmmakers can get the media they want or form a freakish cult to incessantly demand for years on end.

For a streaming release, you pay however much it costs to make the movie, then the streaming service outbids a studio for the distribution rights – or, for ground-up streaming movies, the streaming service commissions a movie and pays for production itself – and then they throw it up online. Because streaming services are paid for via subscription, actual viewership of any individual movie is mostly divorced from their profit. To the extent that viewership does matter, services have demonstrated several ways to control what you watch, from website banners to tinkering with recommendations to autoplay settings to counting partial watches, which is only fair for media platforms that are designed to have people fall asleep to them.

The real money is in the degree of attention, and therefore new, continuing or renewing subscribers, a service can garner. Streaming customers have proven to be quite frugal, and services are consistently seeing large spikes of members around anticipated content who drop off soon after. A streaming service isn’t a movie ticket that you only have to sell once, those dollars must be earned every quarter, and as the streaming wars enter their occupation phase, studios will compete tooth and nail with as much fresh content as possible for those viewership dollars, just like they did in theaters.

So, in many ways, yes, Hollywood is back to normal. It’s just moved online.