IMAX (IMAX) CEO is bullish on the theatrical window.
"The debate is over," IMAX CEO Richard Gelfond told Yahoo Finance Live in a new interview (video above). "The argument that you can skip a theatrical window and make up for it on streaming just isn't true. The theatrical window is more essential than ever to get the streaming revenue."
Gelfond referenced deep direct-to-consumer losses from streaming-facing media companies like Disney (DIS), which reported disappointing earnings this week amid unfavorable macroeconomic conditions and high content costs.
Disney+, Hulu, and ESPN+ lost a combined $1.5 billion in Q4 after losing $1.1 billion in the third quarter. Average revenue per user for Disney+ also disappointed, dropping to $3.91 (vs. estimates of $4.29) due to an adverse foreign exchange impact and a larger subscriber mix.
Management said that it expects streaming losses to shrink by about $200 million in the first quarter of 2023 and that Disney+ is still on track to achieve profitability in fiscal 2024.
Gelfond argued that the "facts are uncontroversial" when it comes to the benefits of releasing a film in the theater first, citing "Top Gun: Maverick" as a prime example: The summer blockbuster saw record-breaking success at the box office after Paramount (PARA) delayed its release five times due to the pandemic.
The Tom Cruise-led sequel, which debuted nearly three years after originally intended, went on to gross a whopping $1.5 billion globally and eventually became the number one digital release of all time on OTT streaming platforms.
"So that $1.5 billion not only didn't distract from the streaming revenue — it added to it," Gelfond said, underscoring that "almost every streamer has now said they recognize the need for theatrical release."
One exception to that has been Netflix (NFLX).
"We are in the business of entertaining our members with Netflix movies on Netflix, so that’s where we focus all our energy and most of our spend," Netflix Co-CEO Ted Sarandos said following the company's third quarter earnings results.
But even Netflix will release its much-anticipated "Knives Out 2" sequel in select AMC, Regal, and Cinemark theaters for one week over Thanksgiving Weekend.
Theater owners praised the announcement, calling it as an industry breakthrough considering how resistant the platform has been when it comes to theatrical windows.
Sarandos, however, downplayed the decision, telling investors on the call: "There are all kinds of debates all the time, back and forth. But there is no question internally that we make our movies for our members, and we really want them to watch them on Netflix."
He added that "with one week of release in theaters, most people will see them on Netflix. Just like they see all movies. Most people watch most movies at home."
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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