You may have heard the news. The producers behind the new James Bond film No Time to Die have decided to postpone the film’s release date because of the coronavirus. Despite the millions already spent on promotion, we will have to wait until November instead of the originally planned April release date.
The James Bond series is one of the world’s biggest entertainment franchises, having grossed over $7 billion in the box office from twenty seven films over the last 57 years. The latest film Spectre (2015) grossed $800 million worldwide and the previous film Skyfall (2012) grossed $1.1 billion worldwide. It’s safe to assume the producers are hoping No Time to Die will have a similar level of financial success. So a lot is at stake in making the right decision behind the film’s distribution.
And as we are all beginning to learn, every business decision made today is affected by the coronavirus. If we look to China, we can see how a similar situation turned out differently and showed us that the film industry has other options.
The Chinese film industry was affected by the coronavirus at a much earlier date than the Western film industry. Thousands of Chinese movie theaters have been shut down for months, since January. Similar to No Time to Die, there was a highly anticipated film in China called Lost in Russia that was set to be released in January of this year. The film is the third instalment in a comedy series — the first two films Lost in Thailand (2012) and Lost in Hong Kong (2015) became massive successes in China, grossing a combined $463 million.
The producers of Lost in Russia are Huanxi Media Group and they had to make a similar decision about what to do with their film because of the coronavirus. Instead of postponing the release date, they turned to Bytedance, the Chinese tech company best known for owning a group of consumer apps including short-form video app Tik Tok, Douyin, and Toutiao.
Bytedance agreed to pay Huanxi Media Group $90 million and a share of ad revenue to obtain the rights to Lost in Russia. The deal was negotiated quickly and the film was launched across Bytedance platforms on January 25. The film received 600 million views from 180 million households across three days. It was viewed more than 25 million times in Hubei province, the origin of the coronavirus.
This was a win-win scenario for both Bytedance and Huanxi. By sharing revenue, they had the incentive to cross-promote and see each other succeed. Huanxi avoided significant losses by releasing Lost in Russia on another platform. Bytedance gained more brand affinity from movie fans who are stuck at home. The only people who are angry about this are the traditional movie theater chains in China, who have sent a public letter describing how Huanxi is “destroying” the movie industry and its traditional business models. The big cinema chains have urged the Chinese Film Bureau to intervene and threatened to boycott future Huanxi releases.
This agreement between Bytedance and Huanxi is the equivalent of Instagram buying the rights to show a major film like The Hangover Part 3 or Deadpool 2. Like Instagram, a lot of Bytedance’s focus with apps such as Tik Tok or Douyin is on short-form content like 15-second videos, not long-form content like feature length films. Tik Tok and Instagram really aren’t OTT/VOD platforms like Netflix, Amazon Prime Video, or Disney+. It’s really a curve ball to see this happen.
But maybe what we are seeing is a glimpse into the future of the film industry business model? As more films make the decision to postpone their planned release dates, companies like Bytedance provide another option. Another major Chinese film Enter the Fat Dragon debuted on video streaming platforms iQiyi and Tencent Video last month, while simultaneously cancelling their traditional theatrical release. It might not be too long before this becomes the norm, rather than an exception.
As a fan, I definitely see the appeal — I would love to watch No Time to Die on Netflix right now or even on Instagram, rather than waiting until November! It was just announced today that Disney is delaying the release date for their new Mulan film. Couldn’t Disney just release Mulan on Disney+? That’s an advantage Disney has vs. many other entertainment companies, owning their own OTT platform as a way to distribute new films.
Apart from the greater convenience for the fan, hosting a movie release online lets a film studio take advantage of the fact that you technically have endless inventory. You could imagine a world where hundreds or thousands more feature films are being released online as there are offline, where there is a literal finite amount of cinema screens that exist in physical movie theaters. That trend is already happening, as you see more films like Netflix originals increase in number and prestige as they become serious contenders for Academy Awards. Netflix launched their Academy Award-nominated, Martin Scorsese-directed film The Irishman both in theaters and on Netflix.
There’s also a lower cost for the fan. Movie theaters generally don’t make much money from ticket sales, where they are splitting the majority of the revenue with the production companies. The movie theater business model is contingent upon selling concessions (food, drink, etc.), where they can regularly make around 80–85% gross margins. They essentially make money by marking up popcorn, candy, and soda. So when people stop going to movie theaters, whether because of coronavirus or not, the theaters suffer more by missing out on selling concessions rather than selling tickets.
The coronavirus first affected the way business is conducted in Asia, and its starting to do the same in the West. We can look to China as a way to look into the future of the entertainment industry — challenging, exciting, and different, whether traditional industry likes it or not.
Someone famous once said, “Never waste a good crisis” and clearly, Bytedance and Huanxi understand that.