After weeks of threats and security breaches, believed to be from North Korea, The Interview made its way to Google (NASDAQ:GOOG) (NASDAQ:GOOGL) Play, YouTube and Xbox, thereby skipping the large 3,000 or so theater debut most big budget Hollywood films seek. Then, four days later, the film became available on Apple's (NASDAQ:AAPL) iTunes. While launching the movie on Google's Play and YouTube is not exactly the way Sony (NYSE:SNE) envisioned the film's debut, it could very well create a domino effect, and have an unintended outcome that's good for consumers and big technology companies, but bad for theaters.
In essence, what's really surprising about The Interview's launch to streaming is that film developers haven't yet tested the streaming waters before now, and that it took leaked emails regarding celebrity pay and potential mergers to push Sony in this direction. While Sony would have much preferred a large box office haul from The Interview, the company's move might actually take streaming video to the next level, and work to the advantage of studios, consumers and streaming media giants.
In limited theaters The Interview topped $1 million in sales on Christmas Day. While decent, it hardly compares to the likes of Hunger Games, and will unlikely ever get close to $100 million at the box office. But The Interview was never going to win any Academy awards, or break box office records. However, on that same Christmas Day, The Interview found itself as No. 1 on YouTube Movies, Xbox Video and Google Play, simultaneously.
While we don't know yet how that translates to revenue, we do know that holding the No. 1 spot on these three platforms is impressive, and we also know that The Interview has had well over 100,000 "likes" and "dislikes" by YouTube Movie viewers just 24 hours after its launch.
All things considered, given its initial success on three streaming media outlets, The Interview might very well have just as big a weekend on streaming outlets as it would have in theaters alone. More importantly, it might signal to studios that straight-to-streaming is more convenient than the typical theatrical approach.
For just $5.99, consumers can stream the movie much cheaper than going to a theater, from the comfort of their own home, or wherever they choose to watch. In essence, this could end up being a blessing in disguise for Sony and others, who've had to fight rising ticket prices in a theater environment that has hardly adapted itself to a new media world, a world that's quickly migrating to the streaming space in almost all content other than new movie releases.
If The Interview does do well beyond the initial weekend, it might make more sense for studios to launch their movies via streaming. After all, most marketing and advertising dollars are spent through social media, and even on YouTube. Therefore, why not give consumers the convenience of watching the movie on the platform where they first saw its trailer?
If studios do follow Sony's lead, it will clearly be bad news for the theaters, as there are 1,000s that missed the opportunity to capitalize on the demand for The Interview. The big winners would, of course, be the likes of Google's YouTube and Play, Apple's App store, Microsoft's Xbox Video, then also Netflix (NASDAQ:NFLX) and Amazon.com (NASDAQ:AMZN).
With The Interview, Sony elected to use Google and Microsoft exclusively, which leads to the idea that studios could use all streaming outlets for maximum revenue creation, or streaming outlets could bid for content to make movie releases exclusive to its service. In the last year alone, we've seen Amazon.com and Netflix fork out big dollars for content, whether it be Twitch, HBO, or Marco Polo. Thus, one thing's for sure: Streaming companies would pay big dollars for new release movies. In fact, given Netflix's recent plans to release up to 20 original series per year, the streaming giant might find it more economical to bid for new release films, perhaps even paying the entire production budget, versus $90 million to develop an original such as Marco Polo. At that point, competitors like Amazon.com and Google are sure to bid on content as well.
With that scenario, there would be fewer risks in production, as studios would have the backing of a big time streaming service like Netflix to share costs. Further, quantity of movies would not be limited to the number of screens in a theater. After all, who wants to wait two and three years between the first and second Avengers or Man of Steal installments, especially when filming and production typically lasts only six months.
In terms of revenue creation, studios might earn less revenue via cheaper prices, $5.99 versus $7.99, to stream. However, if streaming giants bid on content, thereby sharing production costs, studios might actually create more revenue per film. Further, studios could create more revenue with higher volume, as previously stated, not having to wait for screen openings in theaters.
Lastly, services like YouTube, Google Play and iTunes already provide a format that allows studios to create revenue per download, thereby sharing a similar format to theaters, but this move could open new revenue opportunities for Amazon.com, Netflix and others. While this is entirely speculative, Netflix and Amazon.com could charge subscribers an additional $5.99 fee for new release movies - provided to the movie studio. If offered to subscribers only, such a service could increase subscriber growth with consumers who wish to see a particular movie.
In essence, both Amazon.com and Netflix's goal of spending tens of millions to produce new series is to gain new subscribers, as neither company collects immediate revenue on the series/show itself. Therefore, the addition of new release movies would serve a similar purpose for streaming outlets such as Netflix and Amazon.com, regardless of the streaming company's bid to acquire rights for a particular title, as paying for the content would be equivalent to paying for a new series to attract new subscribers.
In my opinion, the move to streaming for big budget motion pictures could be one of the biggest trends of late-2015 through 2016, as historically the most efficient technology always reigns superior with consumers. That said, there are still many kinks that must be worked out, such as revenue sharing, all of which are minor in the sense that a far superior service (streaming) to theaters exists.
In many ways, the entire scenario is very reminiscent of the music industry, as studios gravitate toward streaming just like music labels did with iTunes, Pandora (NYSE:P) and Google Play. In this instance, theaters are equivalent to CDs, something that has become nearly extinct in the music industry thanks to more efficient delivery options of music. With movies, streaming is the equivalent to Pandora or iTunes in music. As a result, there's a strong case to be made that theaters in general are the best short ideas for the next two years, or at least stocks that should be avoided at all costs.
Moreover, even if The Interview is one of a kind, and no other big budget motion picture film elects streaming before theater over the next several years, the realization that the movement is coming is enough to create uncertainty surrounding stocks such as Carmike Cinemas (NASDAQ:CKEC), IMAX (NYSE:IMAX) and AMC Entertainment (NYSE:AMC). In other words, it's tough to see how any of these noted companies could be good investments, as the positives far outweigh the negatives in favor of streaming over theater viewing. And thanks to The Interview, investors might see a move toward streaming new release movies sooner than originally thought.
The bottom line is that North Korea's threats and attacks, which then forced Sony to stream The Interview, might actually be a blessing in disguise, or at least for Netflix, Amazon.com, Google, and other companies with similar streaming ambitions.
Disclosure: The author is long NFLX, AAPL.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.