HBO Max And ‘Wonder Woman 1984’: Testing And Learning In Media Distribution

When Warner Media announced last week that it would release its superhero tentpole Wonder Woman 1984 simultaneously on HBO Max and in theaters, much of the industry seemed to have lost its collective mind. I get that the short- and long-term ramifications are unknown here. But if we are indeed witnessing an explosion of the traditional theatrical business model, it is the result of multiple fuses over an extended period of time in a media business that has always grappled with dramatic change.

HBO Max’s decision is really just another in a seemingly endless series of “test and learn” scenarios on how to best distribute and monetize media content. This method is hardly new – I would guess the cavemen had no idea what would happen before they threw their first animal onto a fire for dinner. If you’re not testing and learning in the media business, you’re ultimately waiting to be irrelevant.  

Within the “traditional” motion picture business, we’ve seen a flood of experimentation for years now. We’re a very long way from former Time Warner CEO Jeff Bewkes’s famous labeling of Netflix
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as the “Algerian army” and COVID-19 hardly started the fire here (where is Billy Joel when you need him?). Remember the huge industry outcry in 2018 over whether Roma should be Oscar nominated given its very limited theatrical run? How about the equally controversial battle over the limited theatrical run for Oscar aspirant The Irishman last winter?

Since COVID-19 hit we’ve seen an almost daily leap into the unknown from even the most hidebound corners of the motion picture business. This summer AMC Theaters agreed with Universal Pictures
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to permit the studio to release its to go to “Premium Video on Demand” (PVOD) after only three weeks in theaters. Cinemark Theaters reached a similar agreement with Universal. Disney’s much-awaited Mulan went straight to Disney+, but consumers had to pay $30 for PVOD. By comparison, Hamilton went free to Disney+ consumers in a bid to acquire new subscribers – the same ploy HBO Max is banking on for Wonder Woman 1984. Warner Bros. release of Tenet in theaters in the teeth of a pandemic was a test and learn experiment of its own. Literally dozens of other films have shifted their planned theatrical release dates, mostly to 2021 and every one of those individual business decisions will be its own test and learn experiment. Do we know how any of these will perform in the world we live in now? Warner Bros. and HBO Max are hardly alone in wondering what the world looks like on the other side.

In any historically successful business inertia is a powerful force, but the other sectors of the media business have had to plunge into their own test and learn experiments for years. Nobody had it better than the recording industry from the 1970s through the 1990s, taking old content (read: zero investment required) and transferring it to new technologies like 8 Tracks (ugh), cassettes and the biggest cash cow, CDs. Napster and Steve Jobs and Apple
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exploded the old models, but the music business didn’t end. It eventually – if all too slowly – found its way forward, with a very limited market for physical content, a new recurring revenue stream from subscription services and – pre- and post-COVID-19 – a sharing of live event and merchandise revenue among artists, venues and music companies.  

The traditional TV business enjoyed decades of predictable business models. I remember a senior broadcast network executive telling me well into the 1980s: “I could put up a test pattern in prime time and get a 15 share.” The explosion of new cable networks helped end the advertising and ratings monopoly of broadcast television, but facilitated two more decades of steadily growing cable and satellite subscribers, rising subscriber fees and growing advertising revenues created a massive ecosystem. It was “good to be the King” in this world, but it couldn’t and hasn’t stay the same.

Netflix and the endless consumer video options through the internet and streaming have decimated the decades-long predictability of TV cash flows, but is “TV” dead? Hardly – it’s just being constantly redefined. In 2015 John Landgraf, CEO of FX, famously claimed “There is simply too much television,” the year following the production of a record 371 original scripted TV series. Since then? Variety noted a “whopping 412” new productions in 2016 and by 2019 the number was 532. TV is a very different business from the one long-time executives grew up with, but in many ways a vibrant one.  

There are huge questions to be answered about not just the outcome of launching Wonder Woman 1984 on HBO Max, but the entire infrastructure for creating, distributing and monetizing media content going forward. What kind of content not just drives new streaming subscribers but sustains them? Where is the appropriate balance to strike between financial contributions of subscribers and advertisers? How much more can you earn with fewer commercials but far more precise data about their viewers? How much uncertainty will financial markets tolerate? How different will markets evolve around the world? $11.99 a month might be a bargain for Netflix in the U.S. and a day or a week’s wages in a developing nation. And finally, will the new ecosystem be able to support enough jobs for Ryan Seacrest? OK, probably not a strategic imperative there, but aren’t you curious?

It all sounds like a lot more testing and learning to come.