#32 - Wonder Woman and the future of cinema

Product vs. performance and the performance value chain

From CNN (emphasis mine):

Warner Bros.’ sequel to the popular 2017 superhero film “Wonder Woman,” is going to HBO Max next month, the studio announced on Wednesday, showcasing the service's vital importance to its parent company (and CNN's), WarnerMedia.

The film will be released simultaneously in theaters and on the streaming service in the United States on December 25 . . .

Jason Kilar, the CEO of WarnerMedia, wrote in a blog post on Wednesday that there were several factors in the company's decision: the pandemic; being supportive partners to the cast and crew of the film; and “our belief in the theatrical experience and, to that end, the importance of exhibitors.

Studios have, in the past, put their newly-released movies on streaming services, but only after an exclusive “release window” for movie theaters. WarnerMedia’s move with Wonder Woman is, as far as I can tell, the first time a movie is being released simultaneously on a streaming service and in theaters. With this concurrent release, we’ll have more clarity to answer an interesting question: Is the cinema experience a compelling-enough performance to attract potential customers, despite the convenience of streaming thousands of other movies (perhaps including the same movie) on-demand?

The product-performance continuum

If your product can easily be copied or re-distributed, or if it competes in a market with an infinitum of substitutes, one way to maintain an arbitrage over your product is to turn it into a performance. You can see this in action in a bunch of consumer-focused industries, from pornography (and the rising popularity of OnlyFans) to video-game streaming (and the rising popularity of personalities like Tyler1 and Ninja). Before turning to movies, let’s look briefly at bars and concerts in particular.


In New York, people frequently spend upwards of ~$15 on a single drink at a bar, even though the drink probably costs only ~$3 to make. These drinks also aren’t a secret—some drinks are popular (moscow mule, mojito, etc.,), but even for a bar’s “specialty drinks,” any semi-trained bartender can probably go to the bar and figure out for himself how to make the drink. Does this immediately mean anyone can re-produce the bar’s drinks, sell them at a street corner, and undercut the bar?

Of course not! When you go to a high-end bar and spend $15 on a drink, you’re not really paying the $15 for the drink, you’re paying $15 to rent a bar stool. And the rent varies, as you would expect, with the quality of the experience. To put it differently, the upscale bar is a live performance venue, and the drink is the ticket to the show. Anything that is a live performance must be experienced to be appreciated, and that experience can shelter the product (i.e., the drink) from others commoditizing and distributing it.


From tape recorders, to CDs, to peer-to-peer file-sharing, to online pirating, to music streaming, live music performance has endured wave after wave of panic over the existential threat of new technologies. Today, even though we have an entire catalog of music right at our fingertips, immediately on release, musicians nevertheless command thousands of eager consumers to purchase tickets for their live performances. 

When you pay $100 to hear the New York Symphony Orchestra play in Carnegie Hall, you aren’t paying simply to hear the music, which you can obviously do on your own time. You’re paying to experience the acoustics of the venue, to see all the violinists lift their bows in unison when the conductor raises his baton, to clap and give a standing ovation. Similarly, when you pay $100 to attend a weekend EDM music festival, you aren’t paying simply to hear the music, which, again, you can do on your own time. You’re paying to get your eardrums blown out, to jump up and down in a mosh pit with new and old friends, to experience the flashing lights. 

Even as the recorded music business has withered, revenues from live music have boomed – in 2017, North American revenues from concert ticket sales grew to approximately $8 billion, rising from less than $1 billion in 1991. The music industry is re-configuring to emphasize performance over the commoditized product. Good artists and musicians aren’t only able to create good music—they’re also good performers. They’re able to transform their music, which has been widely distributed as a commodity, into a unique experience.

Movie theaters

Just as bars are to drinks, and concerts are to music, so movie theaters are to films. The former is the performance embodiment of the commoditized latter. When you pay $20 to watch a movie, you aren’t paying simply to watch the movie. You’re paying to see it on an absurdly large screen, in a pitch dark room with immersive acoustics. These are the performance aspects of a movie theater.

Notably, the value of a $20 movie ticket also largely goes to the non-performance aspect of simply getting access to a movie. For instance, if I wanted to watch Avengers on opening day, I simply had no other way to see it than by going to a movie theater! However, now, with WarnerMedia releasing Wonder Woman immediately on streaming services, this non-performance aspect of first access is diminished, leaving theaters to compete with HBO Max more solely on the basis of performance. But is the simultaneous release a one-off thing or merely the first occurrence of a broader trend?

My bet is on the former. Making blockbuster movies like Wonder Woman costs hundreds of millions of dollars, and it’s hard for companies like WarnerMedia to make a profit off those blockbusters simply by putting them immediately on streaming services. That said, the product-performance continuum point still stands: Movie theaters need to lean further into their performance aspects to succeed in the long-run because movies are commoditized and atomized products on streaming services. Indeed, while a blockbuster movie in theaters probably won’t need to compete with the same blockbuster movie on streaming services, that blockbuster in theaters will certainly need to compete with a whole host of other new movies being released on streaming services. Moreover, the release window (i.e., the time that a movie stays exclusively in theaters) may continue to shrink post-COVID. After all, back in July, Universal had already shortened its release window from 90 days to 3 weeks. With a shorter release window, consumers may simply choose to wait for the movie to hit streaming services rather than going to see it in theaters. Unless, of course, the cinema experience is compelling enough as a unique performance.

So how can movie theaters become more performant?

Performance value chain

The performance value chain can be deconstructed into the performer, the venue, and the audience. Together, these three elements make up the vast majority of the value of the performance. The more talented / unique the performer + the more engaging / immersive the venue + the more interactive the audience = the more valuable the entire performance. Here’s how these three elements of the performance value chain come together in various existing industries:

  • Video-game streaming: The performer is the streamer (e.g., Tyler1), the venue is Twitch (including all of the technical infrastructure that it provides, like low latency streaming), and the audience is everyone typing funny things in the chat.

  • Bars: The performer is the drink, the venue is the bar itself, and the audience is your friends (and the other unknown but attractive people at the bar you’re interested in hitting on).

  • EDM concerts: The performer is the musician (and the musician’s music sets, lights, etc.,), the venue is the warehouse (along with the speakers and acoustics), and the audience is your friends and the randos you’re jumping around with.

When we apply this framework to movie theaters, here are a few ideas:

  • Performer: Notably, movie theaters today have little control over the performer (i.e., the movie), aside from choosing which movies play at which times. In order to affect performance via the performer, theaters would need to start doing more than just showing movies. They could, for instance, offer unique food in conjunction with the movie, thereby turning the food into a performer. Perhaps movie theaters can begin pairing movies with fancy meals, just as wines are paired with multi-course dinners. 

  • Venue: The movie theaters themselves are the venue. The banal, incremental innovations here would be something like larger screens, better sound systems, etc. Many theaters have already been going in this direction. For instance, AMC has spent tons of money refurbishing their theaters and installing new state of the art sound systems. Most chains now also have premium theaters (e.g., AMC has Dolby Theatres, and Cinemark has Cinema XD). Thinking bigger, perhaps the venue can be even more immersive with augmented and virtual reality. 

  • Audience: Today, the audience at a movie theater is not particularly relevant to the overall performance. While it’s great to watch a movie with friends, nobody’s really interacting (hopefully) while the movie is playing, and many people find it totally okay to watch a movie alone, anyways. Again, here, to move the audience needle, theaters would need to start doing more than just showing movies. Maybe they can add pre- or post-movie hangout spaces for friends to discuss the movie, or something like that.

I don’t know, these are just ideas. But whatever the case may be, the future of cinema will depend on theaters being able to see themselves in context of the entire performance value chain rather than relying, as they traditionally have, on exclusivity of showing a particular movie.

📚 What I’m reading

  1. When will GAFAM choose to enter a startup’s market and completely take over, and when will it choose to watch from the sidelines? (Ben Evans)

  2. Part human, part machine: Is Apple turning us all into cyborgs? (The Guardian)

  3. How close is humanity to the edge? A profile of Toby Ord, a philosopher on existential risk. (New Yorker)

  4. How to think for yourself: A deep-dive into independent-mindedness (vs. conventional-mindedness) (Paul Graham)

  5. Apple is trying to water down a bill that aims to stop forced Uighur labor in China. (Washington Post)

  6. China's tech authoritarianism is too big to contain by any one country alone. (Politico)

  7. The intelligent monster that you should let eat you: A philosophical inquiry into the future of artificial intelligence and digital consciousness. (BBC Future)

  8. Nvidia and Intel chips are being used in China for surveillance and suppression in Xinjiang. (New York Times)