Waiting for Top Gun

If you visited Prime Video, Apple TV or Google Play Movies in the last couple of days, you may have noticed that there’s something new available to buy.

Top Gun: Maverick has just arrived on digital-to-own streaming services. In the UK, it’s priced at £11.99 for an SD copy (Why would anyone buy a title like this in SD? Don’t do it!) or £13.99 for HD or UHD copies.

However, the film is also still in cinemas.

In the UK, it’s still the #7 film at the box office, grossing £517,000 last weekend and a cumulative £80m in its 13 weeks on release to date. Worldwide, Boxofficemojo reports that the film has earned $1.4bn to date, especially impressive considering that the film has not been released in China (or Russia). That places it at #12 in the top grossing films of all time (with grosses not adjusted to account for inflation).

Having an overlap between digital availability and a film still playing theatrically has become quite normal during the COVID era. But those very early windows tend to be premium rental ones. In the UK that means paying upwards of £16 for a short rental period. This was very much to capture some revenue from consumers unwilling or unable to go to cinemas while COVID is still around. But that’s not quite the case here with Top Gun: Maverick.

In general, films fall into well understood [by the industry] windows. And while the duration of these windows has changed a lot in more recent years, it’s important to note that with Top Gun: Maverick, this is a title that has already been in cinemas for 13 weeks at this point – vastly longer than most titles would ever normally be available. So it’s digital release at this stage is very much a regular VOD window.

In recent years, it has become common for studios to release films to premium video on demand services a couple of weeks before they get a physical release. DVDs and Blu Rays have declined in market share over time, and indeed outside of specialist retailers like HMV or Fopp, it’s pretty hard to buy a physical disc on the high street. Even the big supermarkets have stopped carrying discs. For whatever reason, studios are prioritising digital over physical – higher margins is the likeliest reason.

But what I find interesting is that while Top Gun: Maverick will be getting a physical release, the DVD, Blu Ray, and UHD Blu Ray isn’t being made available until 31 October – some two months after the digital release. Very different to the one-to-two weeks that would normally be the case.

I’m pretty sure that relative to the rest of the market, this title will sell a good number of physical copies. Those of us who continue to stick with our Blu Ray players tend to be older, and while this film is a “four quadrant” film, appealing to young and old, male and female, it’s likely that the owners of discs will skew older (and male).

But why the long wait between digital sell-through and physical sell-through?

It’s surely not a production issue – the film was famously ready for over a year before the release, with Paramount sitting on it until the worst of the pandemic was over. I think we can assume that the DVD-extras were also ready to go.

The other part of this is the question of when Paramount puts the film on Paramount+. It’s definitely going there, and will be potentially the biggest single sign-up moment in the service’s history. Paramount+ has had something of a low-key launch in the UK, and as with the US, the launch of this title on the service will be a big event. The value to Paramount of those sign-ups will be significantly more important than revenues from physical discs.

My suspicion is that the film arrives on Paramount+ sometime just ahead of the disc release – perhaps mid-October sometime.

But it’s worth stepping back a little and seeing what studios now consider the most important items on their balance sheets. Because it’s no longer quite as straightforward as it once was.

In the past, it was entirely a question of maximising revenues. You put a film in the cinema for as long as possible – the chains demanded things like 90-120 days of exclusivity.

Next you put the title in the “transactional” video on demand window. This is when you have to pay to access the film – probably at quite a premium price. You’re probably paying $/£10-15 for a rental.

Next up is the subscription video on demand window or pay-TV tier one. This is when a movie ends up on something like Sky Cinema (UK) or HBO (US), or perhaps Netflix or Amazon Prime. This might be somewhere around 3-9 months after the film’s theatrical release. Essentially this is bundled into whatever subscription consumers are paying for.

Beyond that, there’s pay-TV tier two, which might be 12-24 months after the tier one period. Another service provider might pick up the secondary rights during this period. And rights can often alternate between rival services.

And so it goes on, with films reaching free-to-air TV channels, and beyond.

Obviously, if a particular broadcaster or studio put money into a production, they may get a title earlier based on that.

At each stage of a title’s lifecycle, the value of it declines but there are revenues that continue to be had all the way through. It’s also worth noting that titles are usually bundled together by studios – you don’t just get an individual film.

But these days, this model has been profoundly disrupted by the need for studios to grow their streaming businesses. For at least the last couple of years, growing subscribers counted ahead of everything else – certainly ahead of growing revenues.

This reached its apex in 2021 when Warners released all their theatrical titles simultaneously on HBO Max, a move that cost them dearly because agreements with film-makers often had box office performance goals, and because they were decimating their own box office revenues by making titles available to HBO Max subscribers, they had to pay out as though every title had been a smash hit. They did that to juice their subscriber numbers as much as possible and it worked.

However, there’s a new regime in charge at Warner Brothers Discovery these days, and they’re certainly not putting their big titles on HBO Max anytime early these days. They want to maximise their revenues. Hence recent stories of films like the 95% complete Batgirl being written off as a tax break, and less-watched library titles on HBO Max being quietly removed from the service to save on residual payments. New Warner Brothers Discovery CEO David Zaslav has promised $3bn in savings following the merger of Warners and Discovery to help service their $50bn of debt, and that means a massive change in tack across the board.

In recent months, some normality has returned to most of the industry, and growing subscriber numbers at any cost is no longer regarded as sensible by Wall St. That said, if you look at a studio like Disney, they’re still putting their titles on Disney+ around 60 days after release, meaning titles appear there quicker than for most studios potentially harming box office revenues in the longer term if people stay at home and wait for a couple of months to see the latest Marvel movie. But even Disney restrained itself in the recent IPL cricket rights in India and lost the streaming rights as a result. They retained linear TV rights, but they’ve subsequently lowered their global subscriber targets based on the fact that low-paying Indian subscriber numbers will fall following the loss of streaming rights.

The irony of all this is that while studios rediscover the importance of theatrical revenues – aside from Top Gun, we also saw Spider Man: No Way Home earn in excess of $1.9bn globally – the cinema chains are also feeling the pinch. Cineworld has in the last week been looking at whether it should file for bankruptcy. While rival AMC has been in a very strange place since it became a “meme stock”, something it has leant into heavily. Whether it can survive in the longer is also questionable. Because the real issue the chains have beyond debt loads is a lack of films.

It’s now late summer, but the next big blockbusters aren’t due now until October and November. Smaller titles are much likelier to reach audiences on streaming platforms – there’s very little in the middle ground between art house and blockbusters that gets audiences actually into theatres.

As we returned from the pandemic there had been a fear that cinemas would be backed up with unreleased titles that were waiting for audiences to return to before being released. But in fact, most titles got released earlier – either studios selling them to streamers, or just adjusting release strategies and going for it.

Medium sized titles just don’t exist so much any more. Either they’re only being made by streamers, or they’re not being made at all.

In the meantime, yes – I could go and see Top Gun again on an IMAX screen somewhere. But I’m just going to wait a couple of months for the UHD disc, because the streaming versions of UHD films are so heavily compressed that the quality just isn’t there.