For decades, Hollywood studios have relied on a time-tested theatrical distribution strategy - releasing films in theaters first for an exclusive window before making them available on home video and eventually streaming platforms. However, in recent years, this model has been upended by the rise of streaming and video on demand services like Netflix, Hulu, and Amazon Prime. These digital platforms are competing directly with movie theaters and shortening the theatrical window.

The Traditional Theatrical Window

Historically, major studio films would open first exclusively in theaters for an average window of 90 days. This gave theaters the chance to maximize ticket sales before films were accessible to watch at home. Studios depended on box office revenue to recoup production budgets. The theatrical window built anticipation and event status for moviegoing.

However, for most of Hollywood history, smaller independent films did not adhere to this system. Low budget movies would often forgo a theatrical release entirely and go straight-to-video or television.

The Rise of Streaming Threatens Theaters

The advent of streaming in the 2010s fundamentally shook up the industry. Netflix, Amazon, and newcomers like Apple TV+ have invested billions in original content and bid aggressively to acquire movies. These deep-pocketed digital platforms are luring top talent and financing films at a competitive level with major studios.

However, streaming services utilize a radically different distribution model. Unlike theaters, their business is based on subscriptions, not ticket sales. Therefore, they aim to attract subscribers by licensing or producing exclusive content. Netflix pioneered the strategy of releasing original films on its platform day-and-date with limited theatrical runs.

This approach has disrupted the traditional window, pressuring more studios to make films available in homes sooner. Major studios like Disney have begun experimenting with premium video-on-demand, releasing movies on digital as soon as 45 days after theatrical premiere.

Shorter Windows Benefit Studios But Threaten Exhibitors

For studios, earlier digital releases can provide a lucrative additional revenue stream while their films are still fresh in the cultural zeitgeist. But theater owners argue this model threatens their bottom line by giving consumers less incentive to go out and see films on the big screen.

Theaters rely on exclusivity, and worry that if people can watch the same films at home, ticket sales will dwindle over time. This existential conflict came to a head in 2021 when Warner Bros. announced its entire 2021 slate would release simultaneously on HBO Max. The news sent shockwaves through the exhibition industry.

Streaming Platforms Are Buying Movies Directly From Studios

Not only are Netflix and others disrupting distribution windows, they have also started acquiring films directly from studios during production. In 2021, Netflix made massive deals for new movies from A-list directors like Rian Johnson, Zack Snyder, and Martin Scorsese, outbidding traditional studios.

Streaming services are treated like any other buyer and can offer appealing upfront payments. For studios, this guarantees an audience and alleviates some release risks. However, it's another blow to theaters who are cut out entirely from profits.

Flexible Distribution Is The Future

While the debate over theatrical exclusivity continues, streaming has undoubtedly changed film distribution forever. The most likely outcome is that major blockbusters will preserve longer theatrical windows, while mid-tier movies go to streaming faster. Niche arthouse films will have targeted theatrical runs.

This flexibility allows both streaming platforms and theaters to thrive by catering to their target audiences. For consumers, it ultimately means more options to watch films how they want. Theatrical and digital releases will co-exist with each leveraged for different types of movies. Hollywood must continue evolving to satisfy shifting viewer habits in the digital age.

How COVID-19 Accelerated the Streaming Shift

The global COVID-19 pandemic put intense pressure on the traditional theatrical model in 2020 and 2021. With cinemas closed for months and audiences hesitant to return, studios had to reconsider their release strategies. Warner Bros. made waves by announcing its 2021 slate would debut simultaneously on HBO Max. Disney also experimented by premiering films like Mulan and Raya and the Last Dragon on Disney+ for an extra fee.

With theaters struggling to rebound, these hybrid or digital-first releases became an appealing option for studios. Streaming provided a lower-risk pathway to recoup costs and reach homebound audiences. While theaters protested the shortened windows, the pandemic undoubtedly accelerated streaming's disruption of Hollywood's distribution norms.

Smaller Films Are Going Direct-to-Streaming

While the fate of theatrical releases for major tentpoles remains debated, smaller mid-budget films with niche appeal are increasingly forgoing theaters entirely. In the streaming era, independent filmmakers have more distribution options than ever outside of traditional studios and arthouse cinemas.

Streaming services are licensing unique original content to stand out in a crowded market. Netflix and Apple TV+ have been aggressive buyers, acquiring buzzy films directly from festivals like Sundance. Amazon Prime Video benefits from user data to determine which niche genres find audiences. This appetite for offbeat content is a boon for indie creators seeking financing and distribution.

For niche films unlikely to attract a wide theatrical audience, going direct-to-streaming often makes more financial sense while still reaching targeted viewers.

Major Films Still Need Theaters

However, for major studio tentpoles with nine-figure budgets, theaters remain an important part of maximizing profits. Films like Marvel superhero movies, DC films, and Star Wars rely on visual scale and draw audiences who want to experience them on the big screen first.

Theatrical runs build momentum through word-of-mouth and allow for lucrative ancillary revenue like concessions. Early streaming availability could discourage the repeat theatrical viewings that propel massive global grosses. While the theatrical window for blockbusters is shrinking, simultaneous release remains unlikely.

Studios are also incentivized to maintain good relationships with the remaining cinema chains. Completely abandoning theaters could further jeopardize the infrastructure necessary for launching major films.

Flexible Windows Based on Genre and Budget

In the future, film distribution will likely be determined on a case-by-case basis depending on genre, budget, target demographics and other factors. Major blockbusters will still demand longer exclusive theatrical runs while smaller indie films may go straight to streaming.

However, the most radical shift is likely for mid-budget dramas and genre films. Studios will have flexibility to shorten theatrical windows to as little as 45 days before premiering on streaming to maximize profits. This tailored distribution model allows both digital platforms and theaters to thrive.

Theatricality Will Still Matter

While streaming opens more options for distribution, the theatrical experience still plays a major role in Hollywood. Having a successful box office run can elevate a film's prestige and pop culture buzz. A theater-first strategy is still key for films hoping to earn awards recognition.

Seeing films in cinemas with enthusiastic crowds also remains an irreplaceable experience for many moviegoers. While streaming brings convenience, theaters provide scale, technology, and a social environment.

Distributors will likely employ hybrid strategies that allow theatrical showings to co-exist with streamers. Theatrical and streaming can complement each other in promoting new movies to wider audiences.

Conclusion

The rise of digital platforms has brought the most radical change to Hollywood distribution models in decades. While tensions remain between streaming services and theaters, the likely path forward is more flexible windows tailored on a case-by-case basis.

Streaming provides consumers unprecedented choice in how and when to watch films. At the same time, cinemas still supply an important cultural experience that cannot be replicated at home. As viewing habits evolve, Hollywood must adapt its release strategies to serve both theaters and streaming audiences.