Three years after brutal Covid shutdowns, spring is in the air for cinemas with the box office blossoming and the economics of streaming looking muddy. Traditional studios are re-committing to theatrical, with Apple and Amazon on board. That’s the view from the perch of John Fithian, longtime president and CEO of the National Association of Theatre Owners, taking a final bow next week in Las Vegas at CinemaCon, the industry’s biggest annual event. He will formally pass the baton to Michael O’Leary on May 1.
“John did an amazing job of leading this industry through an existential threat. It is my hope that this is the last existential threat for some time. If not, I have John’s number,” says O’Leary, who spent years lobbying and leading government affairs in D.C. including for the MPA and 21st Century Fox.
“Michael and I have known each other since 2005. We’re comrades in arms. He knows Washington really well, he knows Hollywood really well,” says Fithian, who is preparing his last CinemaCon State Of The Industry address. “I’ll handle one last round and then I will — gracefully, or not — step out.”
“In the immature style of a 61-year-old who doesn’t want to accept his age, I am having a private pool party with a couple hundred of my closest friends at Caesars.”
Before diving in, the duo spoke with Deadline on exhibition’s rebound, screen count, specialty film, windows, and not obsessing about Netflix anymore. The streamer’s co-CEO Ted Sarandos reiterated again this past week that “driving folks to a theater is just not our business.”
“We’ve made it clear that our doors are open to Netflix. Apple and Amazon are listening and watching the data and expanding their markets. If Netflix doesn’t want to follow that model, that’s their economic choice,” says Fithian.
DEADLINE: There are many positives in exhibition right now, but it’s a mixed bag still. I was just listening to a Cineworld bankruptcy hearing. Not to preempt your speech John, but is exhibition really out of the woods?
JOHN FITHIAN: Our members feel as optimistic about the growth and expansion of the cinema business globally than they have in a very, very, very long time. And we’re going to see that optimism in a number of ways. One, the box office is exploding. And almost every wide release this year is exceeding pre-release expectations, with only a couple of exceptions. Look at Super Mario Bros. The mid-budget films like Air are performing well and holding. So we’re coming into CinemaCon at a very strong time.
The main issue since we came out of the pandemic has been the supply of movies, it has not been consumers’ unwillingness to come back to the cinema. And now the movies are coming back. So, with the slates expanding, we’re very proud of the growth of the industry. It’s expanding from the traditional distributors and it’s expanding from others like Amazon and Apple. And we’re just thrilled that a kind of return to traditional, but still evolving, theatrical release strategies are working.
We just had a round of meetings in the creative community. Producers guild, directors guild, some agencies. The enthusiasm of filmmakers on the return of theatrical is huge.
MICHAEL O’LEARY: They were very good meetings and reflect the overall optimism that I’ve experienced since I came on board. I think the industry is in a great place. Obviously, there are still hurdles. But that’s true of everything coming out of the pandemic. Nobody’s in the clear. So, you know, I feel like there’s a very positive momentum and a lot of optimism across the board. So I’m looking forward to jumping in.
DEADLINE: What does CinemaCon attendance look like this year versus last?
FITHIAN: It was not back to pre-pandemic levels last year. This year it is. As of last week, we were tracking the same or better on registrations than in 2019. The other part of it is that each of the studios that are bringing movies or movie clips, directors and talent are putting on the biggest shows they’ve put on in years. Because they have a lot to show. They haven’t had as many movies in the pipeline to show. So, there’s a lot of great stuff coming, which means that our members will get very fired up about promoting those movies and investing in marketing dollars.
DEADLINE: Everyone expected many more theaters to close after Covid but that didn’t happen on the scale anticipated. Why? Is the U.S. over-screened?
FITHIAN: People said we’d lose half the theaters during the pandemic. And that just didn’t happen. Didn’t happen because theater leaders across the world worked with their governments on support. Didn’t happen because they’re smart business people that managed the situation very, very well. And so we lost about 2,000 screens out of 40,000+ in the U.S. and Canada. That’s a lot less than we thought we would lose.
As for screen count going forward, we are not over screened in this country if, as we expect, the movies will come back to produce similar or better box office returns than pre-pandemic. Because that was a profitable, very profitable model. In 2019, we had $11.4 billion in revenue in the U.S. and $42.5 billion globally. So, if we get back to that kind of film supply, the answer is no. We are not over-screened.
Everyone’s going to be stronger coming out of the pandemic. There are a couple of companies that have gone through the bankruptcy reorganization process and a couple of companies that have avoided it. And I think all of these companies are going to be stronger, because film supplies coming back.
DEADLINE: Following up on screen count — pandemic relief funds kept many smaller theaters and chains afloat and those funds are over. What happens now?
FITHIAN: Well, the whole point of the pandemic funds was to sustain them through the dark times. And times aren’t dark anymore. I think we’re back, building back the box office numbers. And so I think the government assistance did what it was supposed to do. But it wasn’t just the grants. It’s also really important to remember that we lobbied successfully for a lot of tax breaks. That applied both to our big members and our small members. We lobbied successfully on a state-by-state level for relief packages as well. Our counterparts overseas did the same thing. It was just supposed to tide everybody over. And for the most part, that’s what happened.
DEADLINE: Arthouse and specialty film have been slower to return. They mostly haven’t been anywhere near 2019 levels. Why?
FITHIAN: Yes, of course, coming out of a pandemic, the thing that worked first was blockbusters. And part of the reason was that a lot of the smaller titles got delayed more in the production impact of Covid than the big titles did. Because the producers of the big movies had the money to execute all the protocols and keep shooting, and smaller budgets didn’t have that. So, literally, production stopped on a ton of midsize and smaller movies. And that’s a big delay in the pipeline. So that’s number one. But those movies are coming back too.
O’LEARY: People tell stories, want to tell them, in many different ways. Not everything can be a blockbuster, a tentpole, and I think there’s a lot of desire out there to fill that space. A desire in the marketplace for those types of films. A desire in the creative community for those types of films. And we’ll work towards getting them back into theaters. I know that everybody wants to kind of compare everything to 2019. And I certainly understand that. But I think it’s going to take a little bit of time to get back to that place. And I’m not sure that there are many aspects of American life which are exactly the way they were before the pandemic. But John and I are both optimistic about the return of those films.
DEADLINE: Michael, you were on the other side, the MPA, for years. Having that well of knowledge and relationships across the aisle as it were seems like a real boon for NATO.
O’LEARY: Yeah, I spent a big chunk of my professional life there. Almost ten years. I have a strong affinity for the MPA. A lot of the people there are people I worked with, and some that I brought in. So I have a good sense of how they view the world, how their members see the world. So I hope that my experiences and relationships can help. I expect they will. I think we need to find areas where we can work together. And we also need to be clear when there are disagreements and differences of opinions. l look at it as a positive and an opportunity to move together, to seek common ground and opportunities to work together.
DEADLINE: What is the biggest point of disagreement right now?
FITHIAN: I don’t think there are any points of disagreement between the MPA and NATO right now. I mean, Charlie [Rivkin, MPA chief] and I have had a great partnership. We talk regularly, we brief each other before each other’s respective board meetings. Charlie’s very mindful of the importance of the resurgence of theatrical to his members’ bottom lines. And so there really isn’t any point in continuing the contention. And I think that partnership will only grow under Michael. I’ve never worked the studio side. I’ve never worked at the MPA. All my life, I’ve been representing theater owners. And Michael’s ability to understand both studios and distribution and exhibition is a key asset of his taking over the leadership role of NATO.
DEADLINE: No points of disagreement is a big change from last CinemaCon. In your speech then you declared simultaneous release in theaters and streaming “dead” — but it wasn’t yet. Now it is?
FITHIAN: It’s better now. Windows have been our number one concern for years. During the pandemic, it was a huge battle. A lot of studios experimented with simultaneous release, or going straight to streaming, much to our concern. But then, what they discovered as a whole, and this is the silver lining of the pandemic for us, what they saw was a bunch of data that proved what we’ve been saying for years. That a theatrical release with a robust window produces a much better result in the home later. So even for companies with their own streaming services, to go theatrical with the movie, have a long run, play well, develop a brand, develop word of mouth — then it pops on the streaming service.
Take Warner Bros. During the pandemic, the studio under AT&T did a year of simultaneous releases, much to our concern and the concern of the creative community. And under David Zaslav, it’s a whole new world of using theatrical to drive streaming results. And so yeah, I’ve been dealing with the windows wars for almost 30 years. And we’re actually in one of the best places we have ever been on a common understanding among creatives and distributors that the exclusive theatrical window produces results in the home. That’s why Amazon and Apple are jumping in.
DEADLINE: Not Netflix. But you don’t need everybody, right?
O’LEARY: I think there’s a groundswell of support for the cinematic experience. And you know, from my perspective, my focus is on the people who recognize the importance of that, organizations that recognize the importance of that, and on driving the content that we need to fill the theaters. If people choose a different path, that’s certainly their choice. But as John said, and he’s been saying it for some time, we’re open to anyone who’s interested in the cinematic experience.
Look at where the industry was 18-24 months ago, and where we are now. I think we’re taking advantage of that opportunity, and showing people, inviting people back to the theater, reminding people what an important thing it is culturally. It’s incumbent upon us to focus on the folks that are interested in doing that. And spend less time on people that are not.”
DEADLINE: Large screen formats are doing great, concert films, bars in theaters, upgrades. Have these been a key to bringing people back?
FITHIAN: There’s no question. I think that you’re seeing cinema owners, theater owners focusing on creating the best consumer experience. And you see that in different ways, whether it’s food and beverage, whether it’s seating, whether it’s the screen, I think there’s a, a common recognition that we are selling an experience. And people are working to make that experience as exciting and as entertaining as possible. That’s been the big change. It’s happening in all sizes of chains all across the country. One of the great strengths of this industry is the diversity of our membership. From arthouses up to the big circuits. And they are all an important part of the cultural footprint that this industry has. And there’s a lot of great consumer experience being had out there by people all over the country.
Our members are innovating in so many different ways. We did a survey recently of members’ plans, and the numbers for upgrades and innovation are inspiring. I’m talking about adding PLF [premium large format] screens. I’m talking about improving their sound systems. I’m talking about adding more recliner seating. Expanding food and beverage options. Improving projection and going to go into full-on laser, which improves the light source, and on and on. Our members know they have to continue to innovate and expand the uniqueness of the cinema experience compared to the home, or compared to anything else. And they are.
O’LEARY: We are in a place where there is an opportunity to position this industry for success well into the future. Events of the past few years have been incredibly difficult. At the same time, we’ve learned a lot, the entertainment industry has learned a lot. And I think if we seize this opportunity, and promote this industry, and remind people about how great an experience it is to go to the theater, which just simply cannot be replicated in your house. I think we’re in a good place. The history of this industry is resilient. I wouldn’t bet against us.
DEADLINE: Are new security measures in place after the Olivia Wilde incident last year?
FITHIAN: We’re not discussing them publicly. Because what’s the point of security measures then. But yes. We reacted very quickly, after the Olivia Wilde matter and had discussions with all of our studio partners and quickly implemented a series of reforms and strengthened security that the studios are very comfortable with. [Wilde, while presenting at an event, was served with an envelope that someone pushed onto the stage and turned out to be legal documents from her ex Jason Sudeikis.].
The Q&A has been edited for brevity and clarity.