How Streaming Killed Quality: Death of the Box Office

Over a shockingly short period of time, Hollywood intentionally abandoned a one-hundred-year-old system for making, releasing and profiting from the theatrical distribution of motion pictures that had served the industry and its audiences very well.

This was a system that generated billions of dollars, created an army of jobs and ancillary businesses, exported American cultural soft power across the world and made a lot of people extremely wealthy… and it was abandoned, all for a technological pipe dream of captured audiences mindlessly pressing “renew” on their subscriptions with the glassy eyes of the permanently zombified.

Now that the chips of that capricious decision have begun to land where they may, it has become clear that the new streaming model is a failure in almost every way. An ocean of ink has been spilled analyzing why streaming is bad business, but I want to approach the problem from a different perspective.

For all its other faults, the most devastating problem with the streaming model for a true cinephile like me, is that it has been disatrous for the quality of the movies Hollywood releases, both online and in theaters. There are a lot of reasons why that is so, and over the next few weeks we are going to explore some of them here at The Continental Congress, beginning with...

Part One: The Cruel Death of the Box Office

Late in the 1991 college football comedy “Necessary Roughness”, the head coach of the Texas State Armadillos Ed Generro (Hector Elizondo) has a mild heart attack and spends the climatic final game in the hospital, leaving his assistant coach Wally Rig, played by the incomparable Robert Loggia, to call the plays. At one point during the game, Coach Rig calls a running play that is immediately stuffed for a loss behind the line of scrimmage… the camera cuts away to Rig on the sideline as he dramatically rips the play out of his playbook and shouts “don’t run that again!”

(Above: Coach Wally Rig delivers a stemwinder inside a barn-burner)

This is what is known as “instant feedback”, and just as in football, the movie business used to get the same kind of instant feedback, on a weekly basis, from the theatrical box office. When a movie succeeded or bombed in its opening weekend, the entire industry used that information to adjust their development, production and release strategies for every movie at every stage in their production pipeline.

Back in the 80’s and 90’s when there were three to five new movies in theaters every Summer weekend, box office results were like a highly-diversified product review in real time. Like tracer rounds in a heavy machine gun… the weekend box office report allowed Hollywood to “walk its fire” away from movies audiences were rejecting and toward movies they were embracing, not just casually from their couches while scrolling Twitter (X) on their phones, but with the real committment of hard dollars spent at the theater.

By moving from the theatrical model to the streaming model, Hollywood has largely sacrificed this valuable source of instant feedback in favor of something much more diaphanous and difficult to interpret.

For as long as I’ve been in this business (30 years and counting), every entertainment company in Los Angeles has had a Monday morning staff meeting in which executives discuss the weekend box office results and what they mean. When a particular kind of movie is working well, entertainment companies try to make more of them. And when a particular kind of movie is performing badly, they try to make less of them. It’s the kind of thing they teach in every University level 101 business class at 8:00 on day one. But here in the streaming era, the conversation has shifted away from which movies actually make money to which movies have been labeled a “success” based on opaque algorithmic definitions provided by the streaming services… definitions that are often self-serving and have very little relationship to actual financial profitability.

See, the streaming platforms have oodles of data, but it’s not always clear what any of it means and it’s often impossible to separate the data from the noise. I’ve been in meetings where executives have said things like “over ten milion people watched at least thirty minutes of this movie.” In such moments, I’m always tempted to respond “that’s great, do we know how many of them had heart attacks, died on the couch and continued ‘watching’ the movie post-mortem?” It’s worth noting for the record, that if ten million people walked out of your theatrically released film after 30 minutes, it would be a sure sign that you’d made an historically awful movie.

At Netflix, it gets you a sequel…

It’s also not uncommon in Hollywood to find oneself included on email blasts sent to a huge list of friends and acquaintances saying something like “hey, my show is premiering this week on Netflix, even if it’s not your thing, please start the show and leave it running while you clean your toilet, scroll through Tik Tok or wash your dog. It will help boost the algorithm.” This is an easy, cost-free thing I can do to help my friends. But the best thing you can say about it as a quality control technique is that it leaves something to be desired. On the other hand, while I might buy a movie ticket to help a close friend, I’m probably not going to do it for someone I barely know and who simply puts me on an impersonal email blast.

A dollar spent at the theater is always going to be more valuable than ten minutes of “attention” delivered to some homogenous streaming product, I don’t care what the data hawks at Netflix say.

If nothing else, hard dollars spent at the theater helped Hollywood to understand which movie stars audiences would pay to see. In this way, Hollywood was able to package their movies with stars whose value, sometimes called “built-in audience”, helped guarantee a return on the studio’s investment. To take it a step further, the box office was a valuable part of a system which, once upon a time, created movie stars by the bunch. If you were looking for a reason why the movie star system has failed, this would be a good place to start.

As a result of this abandonment of hard market data in favor of a system that is much easier to game and which tells you almost nothing about how audiences actually feel about your product, movie companies are behaving like submarines cruising blindly near crush depth with a busted sonar. No one is really sure anymore what kinds of movies we should be making, we’re lucky if there’s even one great movie to see in theaters per month and everyone is losing money hand-over-fist.

In a sense, it’s no wonder that so many movies are getting shifted to the streamers… in a business full of huge egos, it’s very tempting to release your movie in a format where no one ever has to endure the humiliation of a very public bombing, and where you can use the data to convince yourself of just about anything. This has been an unfortunate development, since the fear of public humiliation, in business as in life, has long been an important societal incentive which kept people from doing stupid things.

And if there is one hallmark that defines Hollywood of the last ten years, it is that a lot of very smart people have done some very stupid things.

Up next… “Part 2: The Death of Incentives.”

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