The Digital Shift
For a movie buff like me, going to the movie theatre every weekend has been a ritual. But increasingly, I’ve enjoyed the movie-watching experience at home — plus, I don’t get sucked into eating unhealthy treats that I usually do at the theatre 😅. This made me wish that new movies be released on digital platforms at the same time as they did in theatres. My wish has just come true.
For years, the Hollywood machinery has been trying hard to resist this change. First, NATO (National Association of Theatre Owners) refused to release movies in theatres as Netflix, Amazon, and other streaming services broke the industry’s traditional theatrical window of 72–90 days. Second, even the Academy made sure that movies that were released online were not eligible for Oscar nomination unless they had been running in a Los Angeles theatre for at least a week.
It took a global pandemic to finally accelerate a change that has been staring at the eyes of the Hollywood industry. As reported by WSJ, Universal Studios blazed a new trail by releasing “Trolls World Tour” as a digital-first, launching the experiment that its executives have been plotting before the pandemic broke. So what’s big the deal?
Trolls World Tour digital rental strategy has been a spectacular success and may have changed the calculus of the movie business, forever. In 3 weeks, it generated ~$100M in revenue, beating all digital launch records.
This success has long term ramifications. The digital releases are way more profitable, compared to the offline releases. The studios keep 50% of the fees collected at the box office vs. 80% of the fees collected online. The key question is can digital sales generate as much revenue? The answer is a definite yes during the pandemic, with a good chance of changing consumer behavior for good. In the meantime, Universal has already collected as much fees from the Trolls sequel in 3 weeks, as it did from the entire box office revenue from the first Trolls.
As expected, the theatres are fuming and threatening to not work with Universal. It’s an act of desperation and a futile one. It reminds me of the Chinese proverb:
When The Winds Of Change Blow, Some People Build Walls, Others Build Windmills — Chinese Proverb
Make no mistake. This a monumental occasion and will change how studios approach the entire business. I’m no oracle, but I can see that these changes are here to stay.
Amit Rawal is a Sloan Fellow at Stanford’s Graduate School of Business. He has spent the last decade in building and scaling e-commerce ventures for 40%+ of the world’s population. At Stanford, he is focused on bringing together tech, design, and data to create joyful shopping experiences. He is a data geek and loves tracking all kinds of health and wellness metrics. He can be reached at firstname.lastname@example.org.