Advertising Is Rebounding Just In Time For Theaters To Reopen For No Reason

Political ads will prop up a market with few movies coming to theaters.

Last week a report was released predicting the U.S. advertising market, in free fall since much of the economy shut down in March and April, should wind up relatively stable for 2020, buoyed in large part by heavy spending from various political campaigns. While still down from its 2019 level, the report forecasts that decline only being around two percent.

That’s not too bad but assumes that more local and state economies will continue to reopen from their pandemic-related closures and that another Covid-19 wave – potentially in conjunction with flu season – won’t cause further restrictions. The report doesn’t go into detail, but it’s safe to assume 60+ percent of that will go to the duopoly of Facebook and Google, with Amazon getting a share of that as well while media companies continue to fall by the wayside.

Among the businesses reopening as states and cities loosen their guidelines for operation are, of course, movie theaters, who have been counting on such easing along with a slate of high-profile releases from Hollywood to bring people back. For months theater owners and other interested parties have been counting down the days until Tenet, Mulan and other titles finally came out.

But Mulan was shifted to Disney+, where it reportedly was viewed by 29 percent of U.S. subscribers to that service during its first weekend. Given the “Premier Access” fee of $30 attached to the movie, that comes out to roughly $260 million. And Tenet’s domestic performance has been very weak, though it’s done pretty well overseas. And it needs to be noted that many of these numbers are estimates given studios are under no obligation to share VOD revenue and WB is holding back official box office reporting.

Since then, Wonder Woman 1984 has moved from October to December and there’s rumors Black Widow may also be delayed while Soul could follow Hamilton! and other recent movies to go straight to Disney+. Theatrical releases are, in the last few months of the year, a risky bet to make, one that studios aren’t willing to make on expensive productions that require the economics of theaters to turn a profit.

Given that’s the majority of what studios are producing these days, that means theaters are now in the position of being open for business but unsure of what movies are going to be available to put on screens for the next several months. It seems like every media outlet has now run a variation on the “The Tenet Experiment Failed and The Fate of Fall is Unknown” story in the last week.

There have also been additional comments from others like the CEO of IMAX, who dismisses the PVOD “experiment” Hollywood has engaged in as “failed.”

While the economics of all this are still largely up in the air and open for interpretation, the repeated delays for some movies like WW84 and others that studios seem insistent on bringing to theaters at some point are causing massive audience confusion. That’s in large part because the advertising and marketing keeps shifting and changing, in some cases multiple times. In the case of WW84, branded products from promotional partner companies have hit store shelves with dates that quickly turned out to be inaccurate. Ads have been placed – including some on DC comics – with revised released dates that also were incorrect even before people retrieved them from their pull list boxes.

So audiences don’t have any idea when the movies they might be interested in are coming out because release dates keep changing. Such changes used to be relatively uncommon and only happened for major titles, often months in advance. Now they’re happening with almost every title save for those always intended for streaming and sometimes are announced just weeks before a target date.

Setting an accurate release date and sticking with it requires studios to select one of two options. They can either:

  1. Set a streaming/PVOD release, deciding that getting some revenue from subscriptions/downloads is better than holding the film back and earning nothing, even if that revenue is less than what it was anticipating from a theatrical release
  2. Maintaining a theatrical release date and counting on a combination of 1) health realities being such that theaters and other businesses are still fully open, 2) audience willingness to venture out to mass gatherings, and 3) the movie being attractive enough to a critical mass of people.

Neither, of course, is ideal and is definitely not a sure thing. While Covid-19 cases in the U.S. are falling (despite inaction and misinformation from the Federal government), there’s no guarantee that trend will continue as the weather in much of the country turns colder. Cases have begun rising in many states, which may lead governors and health officials to impose additional restrictions. That could lead to a chain reaction where such orders lead to theaters having to close or further restrict attendance levels, which in turn leads studios to rethink theatrical release dates for major movies, which means fewer options for the theaters that still open.

On top of the coronavirus, the western part of the U.S. is basically one massive wildfire, disrupting life there and causing many to evacuate or make substantive changes to how or when they venture outside due to unhealthy air quality. On the other side of the country, the Gulf Coast and eastern seaboard keeps getting hammered by a string of hurricanes that similarly upend normal life and cause property damage or loss.

The question also remains how many people are even able to head out to theaters right now or for the foreseeable future. On top of massive sustained unemployment numbers, “essential” workers who may be dealing with reduced hours or the need to change their schedule to accommodate remote learning for their kids anticipate earning have also had the “hazard pay” employers offered for a while cut completely. Even those who can work full-time from home likely don’t have the freedom they once did if they have young kids who need help with online classes and other issues. Gig workers and freelancers are largely uncertain of their future. Overall income has fallen after brief upward movement.

So who, then, is able to go to the movies either because of time or financial reasons?

If people don’t know when a movie is going to come out, how they’ll be able to afford tickets or how safe it will be to go to theaters, it’s unclear what exactly the core value proposition of a traditional movie marketing campaign is, exactly.

Those who question studios’ commitment to theatrical release models would do well to consider those points. Streaming’s lower price point makes the per-view cost almost zero, and even pricey PVOD titles eliminate the health and time points from the decision matrix. That makes running a marketing campaign a lot easier because, quite simply, there are fewer variables to balance and fewer potential potholes to avoid in running that campaign.

YouTube Set To Lose Significant Movie Ad Revenue

Given the slate of movies Disney has scheduled for release in 2019 it can’t be good news for YouTube and parent Alphabet that the entertainment company is reportedly pulling its advertising from the streaming platform in the wake of revelations of how often comments are used to highlight sexually exploitative material.

Movie ads are commonly seen on YouTube as pre-roll spots, and sponsored placements often contain prompts to watch new trailers for upcoming movies. Disney pulling their advertising spending from the platform means YouTube will not be used as part of the paid marketing for movies including:

  • Captain Marvel
  • Dumbo
  • Avengers: Endgame
  • Aladdin
  • Toy Story 4
  • Spider-Man: Far From Home
  • The Lion King
  • Artemis Fowl
  • Frozen 2
  • Star Wars: Episode IX

In 2018, Disney commanded 26.1 percent of overall U.S. box-office revenue, bringing in over $7 billion. The studio released the top three films of last year, including the top performing Black Panther, and its dominance is expected to become more substantial as it finalizes its acquisition of Fox.

Basically this is not who you want to have on your bad side if you are a platform or other outlet that’s reliant on movie marketing and other advertising income.

What Disney and others, including the maker of the Fortnite video game, are doing is deciding that YouTube-hosted content is no longer a safe space for their brand. They’ve determined that they risk substantial reputational damage that could potentially translate into lost revenue because they’re seen as supporting material that’s not just offensive but harmful and reprehensible.

That’s the last thing Disney wants to have happen. Look at all those movies listed above. They are all family-friendly franchise installments or starters that are designed to not just generate ticket sales but also theme park attractions, consumer merchandise and additional revenue streams both today and, through sequels, for years to come. Each is sure to be accompanied by massive ad campaigns in addition to the publicity tours and earned media efforts, and YouTube was positioned to receive a good chunk of that spending.

This is far from the first time YouTube has faced this kind of decision from advertisers. AT&T just recently returned ads to the site after pulling them two years prior for similar concerns only to reverse that decision in the wake of this latest controversy. Other companies have, at various times, removed their advertising and marketing from other sites, platforms and networks.

Yet where the line is between “acceptable” and “too far” remains mysteriously vague and uncertain. Facebook is currently under fire for its role in helping to spread harmful anti-vaccination conspiracy theories. Anti-Semitism is rampant on Instagram. Criticisms of how Twitter fails to protect women and minorities from harassment of all kinds are almost as old as the site itself. There don’t, though, seem to be any concerns over promoted posts and other ads being placed on those social networks, indicating the problem isn’t specific or substantial enough to warrant such measures.

In the last 10 years or so, Hollywood studios have increasingly worked to balance their roles as creative storytellers and brand managers. Disney is the best example of that new reality, releasing almost nothing that isn’t a remake, sequel, adaptation or spinoff. It can’t afford to be seen as endorsing, through advertising, those engaging in the sexual abuse or exploitation of children because doing so would harm not just the corporate brand but all the IP the company oversees. There’s simply too much at stake.

Yet the problems of offensive material go far beyond one platform or network. As has been the case since the first Google AdWords were placed in the right rail of a blog, advertisers can’t always guarantee their messages will appear alongside wholesome, brand-friendly content, but the reach of consumer-generated media is too enticing for most to pass up.

Right now corporate boycotts and ad blackouts are relatively isolated incidents. The platforms impacted by these actions as well as user backlash usually follow a script of pledging to do better followed by the CEO or other executive giving multiple interviews where they talk about how much they’ve learned from the episode. The cycle then repeats in four to seven months when the next outrage or crisis breaks. Indeed it seems YouTube isn’t doing anything substantively different in the wake of the most recent crisis, just offering explanations of existing policy to make sure creators and publishers understand when they might be penalized.

YouTube, like the other social networks, won’t react until they feel a threat to their income has been presented. On that front Disney has a lot of leverage, even just counting its movie advertising budget outside of everything else the massive company promotes on a regular basis. It simply can’t risk the damage that could be done to entertainment franchises that are designed for decades of profitability, at least not at the moment. My hunch, though, is that we’ll be having this same conversation sooner rather than later.