With Wonder Woman 1984 on HBO Max, WarnerMedia must navigate decay in streaming viewership and decay in cultural impact

parqor HBO Max logo large

It happened: Wonder Woman 1984 will be released on HBO Max on Christmas Day, and will stay on the service, free to subscribers, for one month.

To date, I have preferred to avoid answering the question of whether Wonder Woman 1984 would end up on HBO Max during the COVID pandemic. I think both distributing and marketing a blockbuster movie on a new streaming service that has yet to scale is highly nuanced and I think the negotiations with Roku and Amazon, which could help the movie get scale across 70MM devices, are highly nuanced and complicated, too.

That all said, there is one angle worth considering which I wrote about in this week’s Member Mailing, decay in streaming viewership and decay in cultural impact. Wonder Woman 1984‘s unprecedented distribution strategy appears to solve for both.

Decay in Streaming Viewership

I wrote on Tuesday:

The Entertainment Strategy Guy had an interesting post about how Streaming Films on Netflix (and others) Lose Viewership Very Quickly. He built the post around data provided to him from Nielsen from March 30th to October 18th 2020. The premise his post is decay: “films that premiere on Netflix tend to have a significant chunk of their viewership in the first week or weekend”, and then viewership drops off exponentially. Here is a chart he built for the post:

IMAGE 4 - Per WEek with with 3

The decay in viewership takes place over three weeks.

I think it is reasonable to assume that Wonder Woman 1984 will see similar levels of engagement on HBO Max: the biggest spike in consumption between December 25th and December 31st, then another spike driven by New Year’s weekend (January 1st through 3rd), and then perhaps some additional consumption driven by families still on holiday the week of January 4th. Then after that, Wonder Woman 1984 quickly becomes an afterthought for HBO Max consumers.

With Wonder Woman 1984 playing on HBO Max for 31 days, decay tells us that by the end of Week 3 (January 14th), Wonder Woman 1984 will be an afterthought for the majority of HBO Max users. That will leave 12 days where Wonder Woman 1984  is effectively in purgatory – capturing a long-tail of viewers or avid fans, but not scaling in views and not driving substantial new sign-ups. With decay, the value of a blockbuster movie is powerful but fleeting, and if Netflix precedent holds, is ultimately a story to tell investors about consumption at scale.

Decay in Culture Impact

In Tuesday’s piece, I also compared the chart above to Box Office Mojo results for The Rise of Skywalker and estimated ticket buyers over 13 weeks at an average price of $9.16 per ticket (data from this Google Sheet I pulled together back in May):

PARQOR Rise of Skywalker Ticket Buyers (est.)

I wrote:

Box Office Mojo reflects that there is a long tail of audience engagement well past the first three weeks. Nielsen data in The Entertainment Strategy Guy’s calculations reflect that there is a brief long tail of audience engagement with movies which tends to almost disappear after three weeks.

This all goes to Netflix Co-CEO Ted Sarandos’ comment from Netflix’s Q3 earnings call:

“I mean I think one of the things, going back to what Greg said, it’s not unusual for a Hollywood studio to spend 50%, 70%, sometimes 100% of the production budget of a film and marketing to get people out to the box office and opening weekend. We do a fraction of that in terms of paid advertising for our films. And yet we’re getting 70 million, 80 million, 100 million folks turning out to watch those movies in its first 28 days, which is like a $1 billion box office in terms of cultural impact.”

The obvious problem with this statement is Netflix’s “$1 billion box office in terms of cultural impact” lasts three weeks, whereas Disney’s $1 billion box office in terms of cultural impact” can last as long as 13 weeks in the case of The Rise of Skywalker, or as long as 20 weeks with Avengers: Endgame.

I think this same “obvious problem” lies in Wonder Woman 1984‘s distribution strategy, too. According to Box Office Mojo, the first Wonder Woman was a summer blockbuster in theaters for 23 weeks. That is 20 lost weeks of “cultural impact” for Wonder Woman 1984, too.

Giving Credit Where Credit Is Due

I also think the story reflects that the leadership of WarnerMedia under CEO Jason Kilar understands that, (1) viewership is likely to decay quickly, and (2) with the loss of theatrical, there are millions of fans of Wonder Woman in the domestic U.S. who may be more valuable outside of the HBO Max conversion funnel. This paragraph from Kilar’s corporate memo about the decision reflects that understanding:

I find it fascinating that we will be measuring the performance of this movie in an entirely new way. To use a line from The Wizard of Oz, we’re not in Kansas anymore. While we will pay attention to theatrical revenues, our expectations are clearly adjusted due to COVID-19. In parallel, we will be paying close attention to the numbers of families and fans diving into HBO Max, as we certainly anticipate that a portion of fans will choose to enjoy Wonder Woman 1984 that way on opening day and beyond. To provide a comparable, a little over four million fans in the U.S. enjoyed the first Wonder Woman movie on its opening day in 2017. Is it possible for that to happen again this Christmas with Wonder Woman 1984 between theaters and HBO Max? We are so excited to find out, doing everything in our power to provide the power of choice to fans.

WarnerMedia’s exhibitor and windowing strategy for Wonder Woman 1984 also reflects this understanding:

Are exhibitors getting a share of HBO Max revenues? One exhibitor told me that Warners will make terms comfortable. On the first Wonder Woman the studio took home a 60% domestic rental, and on this they hear the studio could go with 40% to 45% instead (another theatre owner told us that’s a ridiculous deal). Here’s the deal as I hear it, and remember, we don’t know what movie theaters will be open by Christmas: WW1984 will only play on HBO Max for the first 31 days before Warners pulls it off (and again it will be in play in whatever theaters). From day 32 to 60, the sequel will have an exclusive theatrical window before going on PVOD on day 61. That’s the only way Warners could get exhibitors to go along with this deal on WW1984, I’m told.

In the first three weeks of Wonder Woman‘s summer release in 2017, it grossed almost $300MM domestically, and saw 32MM ticket buyers (est. at U.S. average of $9.16 per ticket). It is notable that Jason Kilar is hoping for the 4MM fans from Opening Day, because that would be a promising sign of a first week spike, before the decay in consumption kicks in.

The go-to-market strategy of WarnerMedia seems savvy to the unusually rapid decay in streaming consumption because its exclusive window on HBO Max is only four weeks. The strategy also seems to accept defeat on the cultural impact of Wonder Woman 1984 that is feasible during a pandemic. Meaning, there are millions of viewers it simply will not capture on HBO Max, nor in theaters, that would have otherwise been captured in the long tail of a 23 week theatrical run.

Maybe, possibly those consumers will be captured in the theatrical window between January 25th (Day 31) and February 24th. But I think it is unlikely. As Kilar writes, “we’re not in Kansas anymore”. This is new territory for WarnerMedia, AT&T’s and WarnerMedia’s wholesale and retail marketing teams, theatrical distributors, and fans of DC.

A DC Fandome Flywheel?

On a final note, I am curious about whether DC Fandome (which I wrote about in August) helps WarnerMedia here. As I wrote then:

If WarnerMedia can build a media business ecosystem around DC IP where,

    • DC is an aspirational brand like Marvel,
    • has an ecosystem with multiple business models and revenue streams
    • has an existing user base at scale
    • offers a service that is accessible, daily, in both digital and physical worlds
    • and, enables WarnerMedia to contribute with its strengths in online and offline-to-online conversion

If WarnerMedia can do that, it will be closer to Disney’s model than it is today, and therefore will in a stronger position going forward. Because theatrical will reinforce gaming (Batman and Suicide Squad IP in particular) and streaming (The Batman and Justice League Snyder Cut); and, in turn, streaming will reinforce theatrical (Shazam and Superman titles) tie Black Adam, Justice League ties into The Flash).  22MM superfans drive engagement across all platforms. If those superfans represent householders in the U.S., that’s 60MM total consumers and an additional 38MM consumers for games, streaming, and theatrical.

For what it’s worth, I think Jason Kilar understands this.

Maybe the success of DC Fandome is the foundation for how Wonder Woman 1984 succeeds during a pandemic.

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