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Speaker 1: Welcome to Daily Variety, your daily dose of news and

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Speaker 1: analysis for entertainment industry insiders. It's Wednesday, December tenth, twenty

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Speaker 1: twenty five. Me your host, Cynthia Littleton. I am co

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Speaker 1: editor in chief of Variety alongside Ramin Setuda. I'm in

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Speaker 1: la He's in New York, and Bridy has reporters around

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Speaker 1: the world covering the business of entertainment. In today's episode,

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Speaker 1: we'll hear from Michael O'Leary, CEO and President of Cinema United.

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Speaker 1: That is the world's largest trade association representing theater owners

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Speaker 1: and about thirty one thousand screens in all fifty US

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Speaker 1: states and about another thirty thousand worldwide. O'Leary's job just

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Speaker 1: got a lot tougher last week. Exhibitors are gearing up

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Speaker 1: to make their voices heard as Netflix pursues its acquisition

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Speaker 1: of Warner Brothers and HBO. There's real fear that this

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Speaker 1: will put a huge dent in the supply of movies

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Speaker 1: to the Turnstone. But before we get to that, here

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Speaker 1: are a few headlines just in this morning that you

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Speaker 1: need to know. Tony de Koppel is the new anchor

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Speaker 1: of the CBS Evening News. He will take the chair.

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Speaker 1: On January fifth, Christopher Nolan is unleashing a six minute

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Speaker 1: prolog for the Odyssey. It will play this weekend before

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Speaker 1: Imax screenings of Sinners and One Battle after Another, and

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Speaker 1: it'll play next weekend when Avatar, Fire and Ash lands

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Speaker 1: in theaters. Nolan's adaptation of Homer's Big Trek lands in

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Speaker 1: theaters from Universal Pictures. On July seventeenth, Procter and Gamble

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Speaker 1: is going all in on microdramas. It will produce The

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Speaker 1: Golden Pear Affair, a fifty episode microsoap that will be

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Speaker 1: made available initially on social media platforms and later a

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Speaker 1: bespoke mobile app. Episodes will run one to two and

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Speaker 1: a half minutes. Call it Texaco Star Theater three point zero.

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Speaker 1: Channel four has a new CEO, Preadagra has been tapped

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Speaker 1: to take the reins of the UK pubcaster Dogwa comes

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Speaker 1: to Channel four after serving as Chief Advertising Group, Data

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Speaker 1: and Revenue Officer for Sky. All of these stories and

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Speaker 1: so much more can be found on Variety dot com

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Speaker 1: right now and now it's time for conversations with industry

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Speaker 1: leaders about news and trends in show business. Today, I'm

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Speaker 1: talking with Michael O'Leary, CEO and President of Cinema United.

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Speaker 1: O'Leary really untangles the reasons why exhibitors are so concerned

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Speaker 1: about Netflix potentially becoming the home of Warner Brothers, and

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Speaker 1: why they're concerned about Hollywood consolidation in general. Fun fact,

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Speaker 1: O'Leary's visit to the Variety Office was scheduled long ago

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Speaker 1: and long before the Netflix WVHBO deal was announced on

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Speaker 1: December fourth. To O'Leary's credit, he didn't beg off when

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Speaker 1: the news got more complicated. He's coming up on his

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Speaker 1: third year as head of the organization formerly known as

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Speaker 1: the National Association of Theater Owners. O'Leary makes it clear

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Speaker 1: he has command of the issues facing his members. A

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Speaker 1: longer version of this conversation will be released Friday on

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Speaker 1: Daily Varieties Sibling Interview podcast Strictly Business. When news breaks,

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Speaker 1: many just run for the hills, But I appreciate you

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Speaker 1: coming into We're going to talk about the issue issues

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Speaker 1: facing the exhibition. But of course, in the last five days,

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Speaker 1: there's been no bigger topic being talked about in all

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Speaker 1: of Hollywood, but particularly in the film community. A lot

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Speaker 1: of very vocal opposition to the idea of Netflix, given

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Speaker 1: its dominant streaming position, adding these significant assets Warner Brothers

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Speaker 1: Studios and HBO, Netflix has a very different view and

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Speaker 1: very different strategic approach to how it handles movies. It

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Speaker 1: does put movies in theaters, but for a very short time. This,

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Speaker 1: as you know, has people really animated and really upset.

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Speaker 1: Let me start by asking you, Michael, what are you

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Speaker 1: hearing from your members?

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Speaker 2: There's the concern among our members. After the steal was announced.

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Speaker 2: We put out a statement very quickly signaling our opposition

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Speaker 2: to it. I think it's important to look at this

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Speaker 2: deal in the larger context. So as we come to

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Speaker 2: the end of twenty twenty five, now, this has been

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Speaker 2: kind of an uneven year for exhibition and for the

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Speaker 2: movie industry, and I think on the whole it will

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Speaker 2: be viewed when it's finished as a positive. But it's

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Speaker 2: not where we wanted it to be. And so I

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Speaker 2: think there was some you know, kind of noise in

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Speaker 2: the system in terms of how much stronger can the

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Speaker 2: industry get, what does a continuing recovery look like? And

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Speaker 2: then you layer this on top of that, and it's

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Speaker 2: just another incredibly important existential variable which has come into play,

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Speaker 2: and which driving our approach to all this is frankly history,

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Speaker 2: and recent history at that history shows us that when

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Speaker 2: legacy studios are absorbed, the overall production of motion pictures

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Speaker 2: for the theater goes down. And obviously the most recent

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Speaker 2: example of that is Disney acquiring Fox resulted in about

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Speaker 2: forty three percent less movies being made for theatrical production

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Speaker 2: by those two studios, and that translates to roughly a

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Speaker 2: nine hundred million dollar loss in box office. That's almost

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Speaker 2: a billion dollars. Imagine if you had an additional billion

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Speaker 2: dollars to put on the end of the twenty twenty

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Speaker 2: five total. That gets us closer to where we want

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Speaker 2: to be. But imagine if you go the other way

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Speaker 2: and take another nine hundred out of it. Of particular

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Speaker 2: concern is that in the present case, the acquiring entity

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Speaker 2: is Netflix, which has had a clearly stated antipathy towards

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Speaker 2: theatrical exhibition for going on a decade, and so that causes, frankly,

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Speaker 2: the concern to be even more elevated if the percentage

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Speaker 2: of movies drops by forty three percent when the acquirer

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Speaker 2: is Disney, which takes a backseat to no one in

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Speaker 2: terms of their support of theatrical You really have to

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Speaker 2: wonder what the impact might be if it's Netflix is

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Speaker 2: the acquirer?

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Speaker 1: Can I challenge you on the forty three percent stat

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Speaker 1: because of course, Disney acquired Fox in twenty nineteen. We

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Speaker 1: all know what happened in twenty twenty twenty one. Is

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Speaker 1: that skewed it all by the pandemic? Or are you

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Speaker 1: saying that a rolling average now that the biz is

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Speaker 1: back to little strength.

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Speaker 2: We believe it's reflective of a larger trend. We're happy

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Speaker 2: to be proven wrong. If we wake up next year

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Speaker 2: and that numbers are back where they used to be,

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Speaker 2: which is in the mid tigh twenties for the two,

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Speaker 2: we would welcome that with open arms. I don't think

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Speaker 2: there's a lot of evidence that that's going to happen.

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Speaker 1: We know that exhibitors feel the wide availability of movies

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Speaker 1: across many streaming platforms, especially so close to their initial release,

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Speaker 1: that that is just telegraphing to consumers. Don't go to

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Speaker 1: the movies, you can just wait a few weeks. It'll

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Speaker 1: be on one of these streaming platforms. Do you have

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Speaker 1: any anecdotal or any evidence to show that that is

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Speaker 1: happening that that is costing certain movies Box office. Netflix

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Speaker 1: does experiment with putting their movies in for very short time,

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Speaker 1: I think to get that pop. What do you see?

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Speaker 2: That's a very important question and the answer is more

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Speaker 2: complicated than simply streaming versus going to the movie theater.

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Speaker 2: There's a lot of variables that go into the uncertainty

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Speaker 2: in our market right now, and one of them, which

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Speaker 2: is related to what you're talking about, is shrinking windows.

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Speaker 2: What's happening, we believe as a result of these increasingly

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Speaker 2: shrinking windows is that consumer perceptions are changing as to

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Speaker 2: when a movie will be available to them in the home.

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Speaker 2: And there's actually research that's out there now that suggests

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Speaker 2: that up to twenty six percent of the movie going

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Speaker 2: public believes that movies will be available to them in

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Speaker 2: the home faster than they actually are available in the home. So,

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Speaker 2: in this type of environment where people are being inundated

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Speaker 2: with information from all different directions, that type of perception

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Speaker 2: is fatal. And so we believe that if you had

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Speaker 2: a strong, consistent, reliable window that consumer could know is

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Speaker 2: how long it's going to be in the theater, you'll

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Speaker 2: put more people in the theater. And then I think

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Speaker 2: the other part of this, which people often overlook or

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Speaker 2: don't completely appreciate, is movies that begin in the theater

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Speaker 2: are more successful on each subsequent platform thereafter. So if

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Speaker 2: you're running a platform and you want to draw eyeballs,

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Speaker 2: one way to do it is to make sure that

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Speaker 2: you have a sufficient supply of movies that were theatrical.

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Speaker 2: I don't think it's binary streaming versus movies, frankly, because

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Speaker 2: people that watch a lot of movies in the theater

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Speaker 2: probably subscribe to a lot of streaming services too, and

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Speaker 2: we need those people to come to the theater.

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Speaker 1: We've seen some experimentation at Netflix. We saw them experiment

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Speaker 1: with a theatrical sing along release of K Pop Demon

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Speaker 1: Hunters over Halloween weekend. Do you see signs on the

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Speaker 1: horizon that Netflix is loosening about the way they think

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Speaker 1: about movies.

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Speaker 2: Well, I don't want to speak for Netflix. They're an

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Speaker 2: incredibly successful company and they are very good at what

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Speaker 2: they do. I think they are. As you note, they

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Speaker 2: have been putting things in theaters for different reasons, but

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Speaker 2: as we look at this as a core essential to

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Speaker 2: a strong theatrical ecosystem, they have yet to embrace a

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Speaker 2: truly meaningful window. They will sometimes put movies into a

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Speaker 2: theater long enough to allow them to qualify for awards.

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Speaker 2: Those frequently are not marketed particularly well, and they're almost

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Speaker 2: never reported. The box office has never reported, and I

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Speaker 2: think that if you're truly committed to being in the theater,

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Speaker 2: you need to have that reporting function because people want

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Speaker 2: to show, hey, this is a good movie, this is

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Speaker 2: how much money we made, and they don't do that.

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Speaker 1: Do your members have a standard that they would like

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Speaker 1: to see embraced by major studios.

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Speaker 2: We have For purposes of this conversation, which has been

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Speaker 2: going on for a couple of years now, we have

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Speaker 2: talked about kind of the core essentials are a consistent

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Speaker 2: slate of wide movies going into the theaters, supported by

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Speaker 2: a period of exclusivity. Last year at Cenemacon, I made

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Speaker 2: a speech about this and I said it should be

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Speaker 2: at least forty five days. We've used that as a marker.

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Speaker 2: There needs to be marketing commiserate with the se eyes

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Speaker 2: in the scale of the movie, and we believe that

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Speaker 2: those a core essential elements. S FOD window, the subscription window,

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Speaker 2: maybe ninety days, but those are kind of the key

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Speaker 2: elements that we've been consistent about when we have conversations

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Speaker 2: with people.

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Speaker 1: I know you've heard this before from the distributors. They say,

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Speaker 1: but I do all this marketing for the theatrical release,

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Speaker 1: and it does telegraph to the audience this is important,

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Speaker 1: pay attention. And then they say that I want that

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Speaker 1: home entertainment window or the streaming window to come sooner

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Speaker 1: so I can still piggyback off of all of that marketing.

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Speaker 1: You know, marketing is one of the many things in

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Speaker 1: our world is changing. Have there been any constructive discussions

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Speaker 1: or experimentation to bridge that gap somehow? So?

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Speaker 2: I think marketing is an area where we can work

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Speaker 2: together for a better result, frankly, and we've started to

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Speaker 2: have some of those conversations about how do we do

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Speaker 2: this better. If you were to ask me, where I

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Speaker 2: really think the marketing pinch has felt the most, it's

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Speaker 2: not in the top twenty movies. It's not in the blockbusters.

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Speaker 2: It's in twenty one through one hundred, what we call

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Speaker 2: at Cinema United the next eighty. The box office drop

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Speaker 2: post pandemic for those movies is three times as big

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Speaker 2: as the box office drop for the top twenty, and

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Speaker 2: those are the movies. They're the smaller movies, the medium

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Speaker 2: sized movies. They need the marketing, they need the time

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Speaker 2: in the theater to build an audience. So that is

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Speaker 2: an area where we should try and come together, because

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Speaker 2: the truth is our industry cannot survive without those next

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Speaker 2: eighty movies. We cannot just become simply a blockbuster industry

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Speaker 2: that has a certain number of event films throughout the year.

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Speaker 2: It's unsustainable that we have to bolster the rest of

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Speaker 2: the sleep.

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Speaker 1: So Michael was a DC veteran. You can see that

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Speaker 1: this is leading to hearings that there's going to be

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Speaker 1: a lot of discussion about this before the sides get

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Speaker 1: to the finish line. What role do you see Cinema

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Speaker 1: United playing in the larger conversation about whether this merger

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Speaker 1: would make Netflix just simply too big and too powerful.

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Speaker 2: One of the things that interests me is when you

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Speaker 2: have these big mergers, not just in the inner tainment space,

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Speaker 2: but in any space, they inevitably become narratives about stock price,

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Speaker 2: about how much money is involved, about executive compensation and

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Speaker 2: those types of things, and they're rarely about necessarily the

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Speaker 2: downstream practical impact of the merger itself, and so I

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Speaker 2: think that our primary focus is to educate people and

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Speaker 2: to elevate awareness. You know, the people that I represent

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Speaker 2: are the vast, vast majority of them are small business owners,

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Speaker 2: and they operate in rural communities, They operate in small towns.

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Speaker 2: It's not just the big circuits that you hear about

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Speaker 2: a lot or that appear a lot in variety. It's

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Speaker 2: different places all around the country, and they're the ones

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Speaker 2: that are going to feel the impact if there's fewer movies.

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Speaker 2: So we are getting out there trying to educate people

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Speaker 2: about these things. I grew up in western Montana, and

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Speaker 2: it's not uncommon for people or to drive thirty forty

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Speaker 2: miles and all types of weather to go to a theater.

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Speaker 2: Those theaters go away, then we're losing something, not just economically,

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Speaker 2: not just culturally, but a way that we communicate with

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Speaker 2: each other. And so part of our job is to

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Speaker 2: get out there and to make that case.

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Speaker 1: We've been talking about Netflix, but Paramount now is also

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Speaker 1: a factor, or really wants to be a factor in

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Speaker 1: this final decision. How do you think your members feel

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Speaker 1: about the possibility of these assets going to Paramount.

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Speaker 2: At this juncture. The way I would characterize it is

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Speaker 2: we are concerned about consolidation in general. Obviously, if you

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Speaker 2: have an acquiring studio that has a historical reverence and

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Speaker 2: support for theatrical we think that's probably a positive. But

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Speaker 2: at the end of the day, goes back to something

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Speaker 2: we talked about right at the outset, which is if

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Speaker 2: the number of movies that are for theaters goes down,

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Speaker 2: that's a problem for us, and we would have to

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Speaker 2: date that opposition. So we are not in a position

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Speaker 2: right now where we're choosing sides. We're evaluating both of

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Speaker 2: the situations and we'll go from there. But our north

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Speaker 2: star is really, really very clear. If it results in

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Speaker 2: fewer movies in the theaters, that's bad for exhibition, it's

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Speaker 2: bad for consumers, and frankly, I think it's bad for

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Speaker 2: the entire industry.

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Speaker 1: I think this is the moment time when Hollywood has

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Speaker 1: to decide whether it's going to invest in movie goings.

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Speaker 1: Much to discuss, Michael, Thank you so much.

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Speaker 2: Thank you is terrific.

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Speaker 1: As we close out today's episode, here's a few things

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Speaker 1: we're watching for none other than Miss Diana Ross will

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Speaker 1: perform on New Year's Eve, she'll take part in ABC's

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Speaker 1: Dick Clark's Rock and New Year's Eve. Don't miss our

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Speaker 1: top twenty five TV shows of the Year list from

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Speaker 1: Variety's great TV critics Alison Hermann and aromedde Tanuboo, Adolescence,

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Speaker 1: The Pit, The Studio, Pluribus, Dying for Sex. Those are

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Speaker 1: among the titles that made the cut. We love to

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Speaker 1: hear from our listeners, so please send thoughts, gripes, and

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Speaker 1: other feedback about Daily Variety two podcasts at variety dot com.

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Speaker 1: Before we go, congrats to Laura Segura. She's been named

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Speaker 1: executive director of She Is the Music. That's a nonprofit

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Speaker 1: dedicated to promoting gender equality across the music business. Sigoura

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Speaker 1: spent the past five years as executive director of Music Cares.

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Speaker 1: She Is the Music was co founded by Alicia Keys.

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Speaker 1: Thanks for listening. This episode was written and reported by

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Speaker 1: me Cynthia Littleton, Stick Snack's Hick Picks. Please leave us

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Speaker 1: a review at the podcast platform of your choice, and

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Speaker 1: please tune in tomorrow for another episode of Daily Variety