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Welcome to The Bloch,
It has been a little while since my last letter. If you’ve been anticipating it, thanks, I’ll try to make it a good one for you. :)
I need to tell you a story. It was November of 2013, I was in a class called theatrical film symposium, which was a fancy way of saying watching movies. USC does have a pretty solid film school, so it’s not as ridiculous as it sounds on the surface.
One evening in class we were doing an advance screening of the new Marvel blockbuster Thor: The Dark World. It was cool to get an advance screening and get to see the movie for free. (We’re obviously not counting the cost of attending this class in this ‘free’ calculation). Even better was Marvel Studios President Kevin Feige was there to talk about the film and do a Q&A after it ended. I remember some of the ladies in the class being upset that Chris Hemsworth would not be in attendance.
At the end of the Q&A, the professor opened up the floor for questions from the students in the class. Up to this point, while the Q&A was going on, I had been toward the back of the theater on my phone, Googling “Kevin Feige” and “Marvel Studios” and looking for recent news. I found some fresh news about how Netflix had just “picked up” four live-action series (Daredevil, Jessica Jones, Iron Fist, Luke Cage), slated for a 2015 launch. It was perfect, I had just completed a project for my finance class on Netflix stock and company valuation. I knew that Netflix subscriptions were skyrocketing and I knew that Netflix Originals don’t play at your local movie theater. So Marvel teaming up with Netflix seemed like a great partnership. People aren’t going to the theater as much, so releasing content via streaming services like Netflix was clearly the future, right? I decided to see what Mr. Feige had to say on the topic.
With as much gumption as I could, I mustered up my question into the microphone that they passed to me, “Hi Mr. Feige, um, thank you for being here, I really enjoyed the film. I read recently that Marvel has a new partnership to make some shows for Netflix. I’m curious what you think might be the timeline for when big box-office movies like Thor would be released in theaters and online at the same time?”
I didn’t know at the time that what I was asking about was called the “theatrical window.” The time between when the movie comes out in the theater and when it can be released for rental or purchase is known to the industry as the theatrical window. Maybe I should say it was known as the theatrical window in the industry. Because according to this article from Variety the once-thriving 90-day theatrical window is dead.
Back to the story. I launched my question at Mr. Feige. He took a few moments to ponder his response. Then he very confidently said something to the effect of ‘we have some really amazing stuff in the pipeline and it is all made for the big screen.’ Not so fast millennial, not on my watch. Fair enough Mr. President, fair enough.
And for a while, he was right. Marvel released banger after banger to massive crowds in theaters all over the globe. Somewhere during that run, they made an agreement with my favorite Marvel superstar, Scarlett Johansson, about her feature film Black Widow. Scarlett has been in the news recently as she is suing Disney for breaching this contract.
According to the lawsuit, Johansson was promised a theatrical release for Black Widow [by Marvel Studios]. As an Executive Producer and the star of the film, Johansson’s income was also linked to the film’s box office success. However, by releasing the film in both theatres and on Disney+, the company has prevented Johansson from her deserved compensation. “Disney intentionally induced Marvel’s breach of the agreement, without justification, in order to prevent Ms. Johansson from realizing the full benefit of her bargain with Marvel," the suit, in part, read.
Her contract was written and the film was pre-COVID, and my guess is that Marvel President Mr. Kevin Feige told Scarlett that Black Widow would get an exclusive theatrical release, same as all Marvel blockbusters. And if COVID had not happened, maybe it would have. But with the streaming wars picking up, Disney+ launching, and COVID closing down a bunch of theaters, Disney made the choice, apparently without Scarlett’s consent.
Black Widow came out on July 9th in theaters and on Disney+.
The new Space Jam movie came out a week later on July 16th in theaters and streaming on HBO Max.
It appears the answer to my question to Mr. Feige back in 2013 has been answered. We were 7-8 years out from streaming releases of major box office movies, and it took a pandemic to make it official.
In 2013 movies produced by streaming services received zero Oscar nominations. Since 2013, movies produced by Netflix and Amazon have received a combined 113 Oscar nominations. Times are indeed changing.
On their earnings release for the last quarter, AMC Theaters CEO Adam Aron said the following:
Many of our new individual investors have showered us with great ideas about how we can strengthen and brighten the future of AMC. Among their ideas for AMC are that we show concert movies, professional sporting events, e-sports, and gaming events. Wasting no time, we've immediately started to implement these very good ideas. Our first 2 UFC matchups, which were in July, drew significant attendance to our theaters.
Our first two concert movies, with Chance, the Rapper, and Halsey will show at AMC theatres across the country later this month in August. We're quite optimistic that this alternative programming can be built into a real revenue opportunity for AMC in future years, and we're chasing it hard. We also hope to engage in meaningful dialogue with professional sports leagues and collegiate sports conferences to see if we can obtain the rights to show more sporting events at our theaters.
As for gaming opportunities, indeed, the president of Epic Games is a member of the AMC Board of Directors. And I cannot even count the number of times already that our shareholders have asked us to reach out and partner with GameStop. We're on the case, more to come...
Many of our new shareholders also are quite enthusiastic about cryptocurrency… I've had to learn more in the past 6 months about Blockchain and cryptocurrency than I learned about it in the entire decade before that. This increased knowledge has given me the confidence to tell you all today that AMC is hereby formally announcing on this call that by year-end, we will have the information technology systems in place to accept Bitcoin as payment for movie tickets and concessions if purchased online at all of our U.S. theaters.
One of the individual investors he mentioned is none other than yours truly (although I don’t currently hold any AMC shares).
The moral of the story is that trends take a long time to play out. Big decisions, especially when it comes to corporations and governments, can take a long time to ultimately be made, and even longer for them to be executed. Understand that long-term trends, like the transition from brick-and-mortar theaters to online streaming services, or the transition from gold to paper money to digital money, takes time. Be patient, and let time work.
It seemed obvious to me in 2013 that there would come a time when major box office movies would be released straight to streaming. The President of Marvel didn’t seem to agree at the time, and he clearly didn’t really want to think about it. And now, his studio is in a bit of a pickle on that very issue. The irony is validating to me. I spotted the trend pretty early. Other big trends are playing out right before our eyes. It’s fun to watch.
I hope Disney settles its lawsuit with Scarlett and pays her tens of millions of dollars. I know I have zero say in the matter, but I think she deserves it.
Until next time.
Bloch
MARKET SNAPSHOT
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Black Widow Lawsuit is a Sign of the Times