The major Hollywood studios have begun clearing the 2020 decks.

With little hope that theaters in the U.S. will be able to open in sizable numbers before next year, or that movie fans would return to them even if they could, the studios are folding their tent poles for this year and decamping for 2021 in the hope of salvaging respectable theatrical openings for their big budget franchise releases.

Disney last week pulled Mulan from the 2020 calendar, just days after Warner Bros. announced an indefinite delay in the theatrical release of Tenet. The Mouse also pushed back the planned next installments in the Star Wars an Avatar franchises by a year.

Paramount has pushed back the release of Top Gun: Maverick, the sequel to the 1986 Tom Cruise blockbuster, to next July, after previously postponing A Quiet Place Part II. Also delayed are Sonic the Hedgehog 2, Jackass, Under the Boardwalk and The Tiger’s Apprentice.

Sony Pictures pushed back the release of the next live-action Spider-Man film to December 17, apparently hoping Christmas can yet be saved, but don’t be surprised if that web unravels as well.

While painful, the studios have little choice at this point. With hundreds of millions of dollars tied in production costs, to say nothing of merchandising tie-ins, theme park rides, spin-off plans and other franchise elements on the line, they can’t afford to let the main events fizzle. Whether they can turn fizzle into sizzle even a year from now, however, is an open question.

Theaters will eventually reopen. But their footprint will likely be reduced due to bankruptcies, real estate defaults and other exigencies, leaving fewer screens from which to conjure a blockbuster release.

Moviegoers, too, may be fewer in number after the trauma of pandemic and economic disruption, particularly with so much high-quality, high-profile content available for viewing at home via streaming services, some of it provided by the studios themselves.

In short, the studios could be facing a very different movie viewing and distribution landscape next year, which may never revert to its pre-Covid posture, and for which their core product strategy is singularly ill-suited.

For the past 15 years, the major studios have basically been in the franchise business, creating and acquiring IP that can be exploited across multiple domains. Periodic movie releases are the tent poles that keep the franchise aloft, while creating leverage with distributors, helping to attract capital, and providing fuel to keep the rest of the production machinery turning,

But for the strategy to succeed, each new movie must be made into an “event.” That means releasing it simultaneously around the world and on as many screens as possible on opening weekend to create the necessary downstream momentum.

Without sufficient screens or eager moviegoers, it may be much harder to create an event around a film’s opening than in the past, undermining the entire strategy.

Disney managed to create something of an event around the streaming release of Hamilton on Disney+, but the Lin-Manuel Miranda Broadway musical is not a property Disney can easily build a franchise around.

Nor is it clear whether Disney’s success with Hamilton can be consistently repeated, given the radically different consumer behavior around watching movies on demand at home vs. going to the theater for the 8:00 showing.

The studios themselves will also likely face conflicting priorities. As Disney, WarnerMedia and NBCUniversal pour millions into building out their direct-to-consumer strategies via streaming they face a strong incentive to put their most compelling programming on their own streaming platforms amid fierce competition for subscribers in the increasingly crowded OTT market.

If event movies don’t work on streaming platforms, maybe they need to shift production resources into something other than major event movies. Yet given how entrenched the franchise business is in Hollywood, that won’t be an easy pivot to make.

This was the weekend Christopher Nolan’s Tenet was supposed to open on the big screen, offering a desperately needed lifeline to struggling theaters and reviving the summer movie season from its Covid-induced coma. But Warner Bros. was forced to push back its release to August 12 as theaters in most states remain closed.

Even that new date now seems doubtful. As the pandemic rages out of control and the Trump Administration fiddles, states that had begun to relax some restrictions on businesses are now reversing those steps and re-imposing shutdown orders.

It now seems very unlikely that theaters will be able to re-open before the Fall and even that could be a stretch. Even if they are able to open, moreover, it’s very unclear whether consumers will be willing to risk sitting in them, which could force the studios to make some very difficult strategic decisions. Should they postpone the rest of their 2020 theatrical slate until sometime next year, or should they go the Hamilton route and release them via streaming?

Delaying release until next year would mean writing off whatever they have already spent on marketing in 2020 and budgeting for additional P&A spending in 2021, while undermining and perhaps even losing whatever merchandising tie-ins they may have arranged. It would also mean postponing any chance of seeing a return on the hundreds of millions of dollars invested in production while shouldering any financing costs that might be associated with financing that production.

Perhaps worse, it could prove a fatal blow to struggling theater chains who might not be around next year to book those films.

Going the streaming route also carries risk. If you release a film via premium VOD, as Universal did earlier this year with Trolls World Tour, you have to market the release to consumers still not accustomed to paying premium prices to watch a film at home. If you license the film to one or more subscription VOD service you limit the potential audience to subscribers of that service or services.

Streaming and VOD rights may have been sold separately from theatrical rights in difference territories, making it difficult to organize a global release. A streaming-first release also likely means forgoing whatever Blu-ray and DVD sales that might have been budgeted for.

For studios that have launched they’re own direct-to-consumer streaming services, of course, there is also the option of doing what Disney did with Hamilton and releasing sought-after films exclusively through your own platform in order to drive subscriptions.

That strategy appears to have been highly successful for Disney. The July 4th release of Hamilton drove a spike in Disney+ app downloads and signups.

But it’s a high risk, high reward strategy as it means writing off other platforms and limiting the potential audience for the film.

It is also a strategy that could eventually increase calls for antitrust scrutiny of the direct-to-consumer video streaming business.

As I’ve written here before, the studios’ launching of their own, proprietary streaming services changes the incentives for how they manage the monetization of their content assets and will eventually change how they assess the value of a movie. In Hamilton, we see how Covid is accelerating that reassessment.

I wouldn’t be shocked if Warner Bros. makes a similar accelerated reassessment and that Tenet ultimately makes its debut on HBO Max rather than in theaters, unless there is major shift in the trajectory of the pandemic before the end of the year.

Ironically, this is happening as the U.S. Justice Department is asking a federal court to end the so-called Paramount consent decrees. Those agreements, which resulted from a series of antitrust suits the government brought against the studios in the 1940s, have for the past 70-odd years prevented the vertical integration of movie production and distribution by barring the studios from owning theater chains, as had been the norm for decades before.

The decrees also prohibited certain abusive distribution practices, such as “block booking,” in which theater operators must agree to book a studio’s entire slate of films in order to get the most popular titles, and “circuit dealing,” in which a studio would make a single deal covering all the theaters in a single circuit.

But in the view of the Justice Department, the decrees have outlived their usefulness.

“We cannot pretend that the business of film distribution and exhibition remains the same as it was 80 years ago,” DOJ’s head of antitrust enforcement Markan Delrahim said in December.

Well, yes and no. Delrahim is correct that “much of our movie watching is not in theaters at all.” But many aspects of the business of in-home viewing increasingly resemble those of 80 years ago.

As I have also written here before, the video streaming business increasingly is being built around exclusive content and the vertical integration of its production and distribution. Netflix makes movies and TV shows for Netflix. When it acquires content from third parties it insists on acquiring all rights on a worldwide basis, limiting its distribution to its own platform. Amazon does much the same.

Disney, Warner Bros., and Universal are all now producing programming exclusively for their own direct-to-home streaming platforms.

The fragmentation of the market into proprietary channels imposes costs on consumers, forcing them to subscribe to multiple services in order to receive of the programming they might want to watch. As University of Illinois economist Derek Long ,  put it recently, “What is streaming if not the ultimate form of block-booking — making consumers take the good with the bad?”

As Covid drives more of what has been the theatrical movies business into proprietary streaming channels, it’s starting to look more like the 1920s than the 2020s.

Update: Warner Bros. how now officially bowed to the inevitable and removed Tenet from its theatrical release calendar for 2020. No new release date has been announced, although the studio said it would release further information on its plans for the film shortly.

“We will share a new 2020 release date imminently for Tenet, Christopher Nolan’s wholly original and mind-blowing feature,” Warner Bros. chairman Toby Emmerich said in a statement Monday. “We are not treating Tenet like a traditional global day-and-date release, and our upcoming marketing and distribution plans will reflect that.”

Notably, the statement does not commit the studio to a 2020 theatrical release for the film. Indeed, the stipulation that it is “not treating Tenet like a traditional global day-and-date release,” suggests it’s considering other options, perhaps including a streaming release. Stay tuned.

An Interesting and smart move by Sony last week to invest $250 million in Epic Games, publisher of the wildly popular Fortnite online game franchise.

The amount of money is fairly small relative to Epic’s overall market cap — good for about a 1.5% stake — but it should help Sony cement its strategic alliance with a company that has emerge as a major force in the games business — a sector in which Sony has a major interest as developer of the Playstation console and platform. The next iteration of the Sony console — Playstation 5 — is expected to be released later this year.

Perhaps as important,however, and likely a factor in Sony’s decision to invest, Epic is also emerging as an important and influential force in the music business, and the film and television business — two other sectors in which Sony has substantial interests.

Epic is the developer of the Unreal Engine, a game engine that has also become an important tool for filmmakers, thanks to its highly sophisticated graphics capability.

Using Unreal Engine, filmmakers are able to render cinema-quality virtual sets and landscapes that can be displayed on LED walls on a sound stage, allowing computer-generated graphics to be integrated in-camera with actors filmed on a bare stage. Thanks to Unreal Engine’s interactive capability, directors and cinematographers can also experiment with lighting effects, perspectives and other aspects of a shot on-set and in real time.

Much of the Disney+ hit The Mandalorian is filmed on virtual sets and locations using Unreal Engine. Like the Playstation 5, the next iteration of the Unreal Engine, which Epic says will allow game developers to create true cinema-quality images and graphics, is expected to be released later this year.

The Fortnite online “metaverse,” meanwhile, is rapidly evolving into a platform for hosting a range of different types of content, from immersive virtual concerts to interactive movie screenings. In April, Sony Music artist Travis Scott, appearing as an avatar, attracted 12.3 million concurrent viewers for a 15 minute “live” performance within Fortnite.

Epic’s emergence as a player in the music and film industries has been accelerated by the exigencies of the Covid pandemic. With brick-and-mortar music venues boarded up, preventing artists from touring, musicians have flocked to online platforms, especially online gaming platforms like Twitch and Fortnite that offer huge worldwide audiences, to maintain contact with their fans and promote their music.

Covid has also shuttered or limited the use of sound stages an all but wiped out location filming, creating an incentive for producers and directors to explore virtual alternatives.

Both phenomena are likely to outlive the Coronavirus, however. Fortnite concerts provide a highly immersive experience that would be difficult to recreate in a live setting. Once monetization strategies around them have matured it’s quite possible they will remain a popular complement to touring, allowing artists to create a new kind of experience for their fans and to reach audiences in places their live tours don’t reach.

The ability to move “location” shooting into a sound stage promises significant cost savings for filmmakers and financiers, as does the ability to limit the personnel needed on-set to film interiors.

Sony’s investment in Epic Games, in other words, helps strengthen its ties to a major player in one core business sector, but also gives it a front row seat to the development of a technology likely to be critical to the future of all of Sony’s core entertainment businesses (whether or not it ends up spinning off those businesses).

Moreover, Sony’s move comes at a time when a number of its Hollywood competitors are moving away from direct investment in the games business.

Disney moved earlier this year to unload the game development studio it inherited with the Fox acquisition, while WarnerMedia parent AT&T is exploring a spinoff of Warner Interactive, developer of the Mortal Kombat franchise, to help pay down some of the debt it took on to acquire Time Warner’s media assets.

NBCUniversal parent Comcast has also backed away from direct investment in games in favor of licensing its properties to third-party developers.

All three of those companies, of course, are investing heavily in direct-to-consumer video streaming, and no doubt view games as a less-than-core business. But video games are already a bigger business than the movie and music industries combined, and both the business and technology of gaming appear poised to begin absorbing big chunks of their smaller brethren.

By abandoning the field, Disney, WarnerMedia and NBCUniversal are leaving Sony with plenty of room to run into.

The OTT streaming wars are now a fully joined battle royale, with fire incoming from all points: Netflix, Amazon Prime, Disney+, Hulu, Apple TV+, HBO Max, Quibi, Peacock, CBS All Access and more.

But some of that crossfire is proving to be less effective than anticipated.

Quibi, as I’ve noted here before, was a misfire from the start.

HBO Max is scrambling to get out of the line of fire from its own friendly forces. After confusing everyone by branding multiple distinct services “HBO,” WarnerMedia last week announced it will pare the number of HBOs to two (I think): plain old HBO and HBO Max.

Now that HBO Max has launched and is widely distributed, we can implement some significant changes to our app offering in the U.S. As part of that plan, we will be sunsetting our HBO GO service in the U.S. We intend to remove the HBO GO app from primary platforms as of July 31, 2020. Most customers who have traditionally used HBO GO to stream HBO programming are now able to do so via HBO Max, which offers access to all of HBO together with so much more. Additionally, the HBO NOW app and desktop experience will be rebranded to HBO. Existing HBO NOW subscribers will have access to HBO through the rebranded HBO app on platforms where it remains available and through play.hbo.com. HBO Max provides not only the robust offering of HBO but also a vast WarnerMedia library and acquired content and originals through a modern product.

Got that? As they say in politics, if you’re explaining, you’re losing.

NBCUniversal’s Peacock has launched and is being advertised heavily. But the stampede to sign up has yet to gather detectable force.

Apple TV+ is out there, but has yet to gain significant traction with consumers.

What all those efforts have in common is a strategy developed from the top down and a lack of compelling reason for consumers to sign up. With the exception of Apple TV+ they were built by media or old-line telecom companies to chase tech company stock-price multiples without really grappling with current OTT market realities.

Netflix was an OTT first-mover, and it has benefited from all the advantages that typically accrue with that distinction. But it had also already built a substantial direct-to-consumer subscription business that addressed a genuine consumer pain point at the time: the annoyance of having to return DVDs to the video store or face late fees. When it moved into streaming it reduced that friction further by eliminating the need for DVDs at all.

Hulu succeeded on the heels of Netflix thanks to very good execution, at least in the beginning, and because it filled a real need in the OTT market for more TV content at a time when Netflix was still mainly focused on movies.

Amazon Prime came with free shipping.

Disney+ got off to a fast start by filling the same market niche that Disney DVDs, and even VHS cassettes did back in the day. It is the ultimate on-demand babysitter, now with a broader range of content to appeal to a broader range of age groups. It also benefited enormously from the Covid-19 lockdown by providing deliverance for stressed-out, working-at-home parents.

What is HBO Max’s consumer proposition? We have a HBO and a bunch of other stuff.

But HBO has been widely available to anyone willing to pay for it for a long time. Now that HBO Max is available at the same price there’s no reason why a current HBO subscriber shouldn’t make the switch. But if you’re not already committed to HBO, what’s the allure?

WarnerMedia has a deep catalog, but as a recent analysis by streaming guide Reelgood shows (h/t Techhive), HBO Max is out of its weight class trying to compete with Netflix, Hulu and Amazon.

Quibi? We have expensively produced short-form content for your phone and we’re working on letting you watch it on your TV, too.

There’s no shortage of short-form content available to watch on our phones. But with Quibi’s three-month subscriber numbers coming in at less than 30% of its goal, there is a clear shortage of evidence the expensive production values are a difference-maker.

Peacock’s proposition? We have a bunch of stuff that used to be on Netflix and Amazon, but with ads.

Huh.

HBO Max exists because AT&T wants it to exist, not because of any clear market opening or because it’s particularly suited to purpose. It exists because AT&T thinks that becoming a media company will persuade investors to assign it a higher valuation.

Quibi exists because Jeffrey Katzenberg was able to charm, badger, wear down or blackmail his Hollywood contacts into throwing money at it. Were there no Katzenberg there would be no Quibi, which is not a great selling point for Quibi.

Peacock is basically a glorified TV Everywhere offering at a time when cord-cutting is making the TV part less relevant.

That’s not to say there isn’t or won’t be quality programming available on the new collection of services. Of course there will be.

But consumers have a lot of choices these days for how to spend their entertainment time and dollars, and that time and those dollars are not infinitely elastic.

Emerging evidence, in fact, suggests consumers’ appetite for new streaming services is already flagging.

According to a new report by Visual Objects (h/t Streaming Media), 76% of consumers who subscriber to streaming services subscribe to three or fewer, and they pay less than $50 a month for them.

“It is essential for streaming companies to be in the top 3 most popular services,” writes the report’s author, Emily Clark.

With Netflix, Hulu and Amazon already crowding onto the couch, and with Disney+ in the side chair, there’s not a lot of room left for new entrants.

Simply throwing a lot of stuff over the top and expecting that will attract subscribers, or drive shareholder value for that matter, is no longer a viable strategy.