Shaken studios. Empty theaters. What Hollywood lost during the pandemic

The Spanish flu of 1918 helped spur the creation of the Hollywood studio system under moguls such as Paramount Pictures co-founder Adolph Zukor, who took the opportunity to buy up failing theaters.

Hollywood is experiencing another massive disruption today as a result of the COVID-19 pandemic.

Titans of the entertainment and media business posted huge losses, with more pain to come. Industry-rattling trends that were expected to play out over multiple years — including the shift of movies from theaters to streaming services — have instead happened over the course of a few months.

Warner Bros. parent WarnerMedia on Thursday added rocket fuel to an inferno of disruption when it said the company will release all of its 2021 films on HBO Max the same day they hit theaters. That’s 17 movies — including some potential blockbusters — that are going to the $15-a-month streamer at no additional charge, in a bold effort to grow HBO Max. Executives insist it’s a temporary move, but many in Hollywood believe that the industry will never be able to go back to the old ways.

Among the most vocal critics is Christopher Nolan, director of Warner Bros. movies such as “Inception” and “Tenet,” who blasted WarnerMedia’s strategy Monday.

“This is going to forever change how we look at the movie business,” said “Get Out” producer Jason Blum. “It’s the biggest thing to happen to the movie industry in my lifetime.”

Direct-to-consumer platforms, including Netflix, Disney+, Amazon Prime Video and Apple TV+, have clearly benefited, though not every streaming service succeeded under lockdown. The pandemic also saw the blink-and-you-missed-it birth and death of Quibi. But there’s no doubt the cultural conversation shifted further from what’s playing in theaters to what’s coming to the living room, whether it was “The Queen’s Gambit” (Netflix) one week or “The Undoing” (HBO) the next.

While some hold out hope that effective vaccines will lead to a return to some semblance of normalcy, there’s little doubt many changes are here to stay.

Theaters go dark

The New Beverly Cinema, the Los Angeles movie theater owned by filmmaker Quentin Tarantino, seen on April 19, 2020 during the COVID-19 shutdowns.

(Jay L. Clendenin / Los Angeles Times)

The abrupt closure of nearly all the nation’s 5,477 cinemas was probably the most visible sign of the industry’s disruption from COVID-19 — one that industry veterans and filmgoers worry will do permanent damage.

Multiplexes in Los Angeles and New York remained shuttered since March, and the National Assn. of Theatre Owners warned that 70% of small-to-midsized operators could go bust without federal help. With theaters dormant, studios moved blockbusters to 2021 or straight to streaming services. With no movies, and box office down nearly 80% from last year, the multiplexes that reopened struggled to stay afloat. Many closed again or reduced hours. Others offer rentals of full auditoriums for private screenings.

“Exhibition is the most vulnerable,” said Jason E. Squire, a USC film professor and editor of “The Movie Business Book.” “It’s really tragic for any movie lover that there will be fewer screens.”

Fewer than half of U.S. locations are open now. The biggest chain, AMC Theatres, which is fighting to stave off bankruptcy, stunned rivals by agreeing to collapse its theatrical “window” of exclusive access to new movies from three months to 17 days through a deal with Universal Pictures. AMC chief Adam Aron, in a recent call with analysts, even channeled Winston Churchill by declaring “we shall fight on the beaches.”

Executives look to China’s revitalized film industry as a sign that people can’t live on Netflix alone as a source of entertainment. The global box office results from Universal’s “The Croods: A New Age” over Thanksgiving weekend boosted Wall Street’s confidence that theaters will recover after a vaccine becomes widely available.

According to the headline of a recent report by B. Riley Securities analyst Eric Wold, it’s “a question of ‘when’ and not ‘if’ moviegoers will return.” But WarnerMedia’s decision to put movies including “Matrix 4” and “Dune” concurrently on HBO Max and in theaters has dampened hopes of a significant recovery any time soon.

Studios shift strategies

You know things are bad when Walt Disney Co. — the dominant legacy entertainment company before the pandemic — is feeling the pain. The pandemic delivered a $7.4-billion blow to the Mouse House’s operating income in the last fiscal year and the company recently said its layoffs would total 32,000 as a result of COVID-19, mostly at its parks. NBCUniversal, WarnerMedia, ViacomCBS and others took big financial hits and cut staff as they focused on growth areas, mainly streaming.

Disney is all in on Disney+, which has grown to nearly 74 million subscribers. NBCUniversal is calling early premium video on-demand ($20 rentals) its “new normal” after experimenting with movies like “Trolls World Tour” and “The Invisible Man.” The Comcast Corp.-owned entertainment firm also launched streaming service Peacock during the pandemic. Studios lacking giant affiliated streamers (Sony and Paramount) sold movies to Apple TV+ and Amazon.

Warner Bros. shed hundreds of jobs during the pandemic as AT&T Inc., which has owned the storied studio since 2018, has dramatically restructured its entertainment businesses as it shifted its priorities to streaming. The $15-a-month service, which launched in May, struggled to take hold thanks to a rollout that confused customers and a lack of availability on platforms including Roku. AT&T CEO John Stankey on Tuesday told investors HBO Max has grown to 12.6 million subscribers, up from the 8.6 million it had at the end of the most recent quarter.

“We were already going to an online culture, but the pandemic has pushed it over the edge,” said Wheeler Winston Dixon, a professor emeritus of film studies at the University of Nebraska-Lincoln.

Crossroads for cable and broadcast

Traditional TV networks already were reeling from a defection of viewers and prominent writer-producers to streaming services before the pandemic hit.

The broadcast networks — ABC, CBS, NBC, Fox and the CW — were gearing up in March to employ thousands of workers in the annual ritual known as pilot season. In a normal year, as many as 100 pilot episodes are produced during this February through April window — sample shows that then jockey for a slot on a network prime-time schedule. But this year’s production shutdown wiped out the pilot season and an estimated $500 million in annual spending injected into the entertainment.

The effects were even more widespread. TV companies lost an estimated $3 billion in advertising they had been expecting, according to research company Media Dynamics. Much of that was due to the loss of live sports on TV.

Network chiefs quickly realized the traditional September TV series launches were toast, and they also scrapped their May advertising ad sales bazaars for advertisers, making the process of selling ad time more arduous. Production didn’t resume until late summer, and then under COVID-19 protocols, forcing networks to dramatically downsize their programming ambitions and order fewer new shows than usual.

While shows are back in production, the disruption threatens the long-term health of the industry. TV executives worry that their slimmed down offerings in prime time, particularly on the cable channels, will be even less of a draw for viewers who already are ditching their pricey TV subscriptions in favor of lower-cost streaming services.

Though entertainment networks struggled to keep viewers, cable news channels had a blockbuster year as coverage of COVID and its impact on the presidential campaign was front and center. CNN was the biggest beneficiary, seeing a 178% year-to-year increase in audience in November according to Nielsen data. Fox Corp.’s Fox News also saw gains, drawing an average of 4 million viewers in prime time, up 39% from the same month a year ago, while NBCUniversal’s MSNBC also hit an all-time high with 2.7 million viewers, a 28% gain.

Productions push through

So far film and television productions in Los Angeles and beyond have been able to stem outbreaks on sets by following meticulous safety protocols. In September, Hollywood studios and entertainment unions agreed to a new set of safety protocols for TV and film crew, which have increased production costs for studios.

Major film productions, including Warner Bros.’ “The Batman” and Universal Pictures’ “Jurassic World: Dominion,” got underway in other countries, such as the U.K. and New Zealand, where infection rates are lower than in the U.S. Productions such as Universal’s musical adaptation “Dear Evan Hansen,” which filmed in the Atlanta area, managed to wrap during the crisis.

“This has never been about how do you keep COVID away from your set, it’s about what do you do when somebody tests positive for COVID,” said Donna Langley, chairman of Universal Filmed Entertainment Group, in an interview last month. “You can manage through that with all of the protocols you have in place if the numbers are at a reasonable level.”

Overall, the new safety measures mean shoots take longer and can be more expensive due to the costs of testing and sanitation, as well as the costs of a shutdown because of positive tests on set. The COVID-19 pandemic has taken a big toll on California’s creative economy, causing the loss of an estimated 284,000 jobs in fashion, entertainment, digital media and arts institutions, according to one report.

In the Los Angeles area, production has been dominated by smaller-crewed and short-turnaround productions like commercials and reality TV shows. Some TV shows including “The Bold and the Beautiful” and CBS’ “Swat” were able to restart filming when the county started issuing film permits once again in June.

While the U.S. struggled to contain the virus, other countries became production hubs. Iceland’s film commission and government quickly set up a system to capitalize on the country’s small population and expansive geography by establishing a comprehensive program that included inbound and outbound testing and charter flights while also creating filming location bubbles.

According to Iceland’s film commissioner, Einar Tómasson, in addition to 15 domestic film and TV series shot, a number of international projects have filmed in Iceland this year, including the New Regency feature “The Northman,” a Viking revenge epic, starring Nicole Kidman and Alexander Skarsgård. “When the pandemic started, like everyone else we had worries,” Tómasson said. “Because we are so small we can act quicker than most.”

Agency drama

Talent agencies also suffered alongside their clients. Major agencies, including CAA and WME, implemented cost-cutting measures including furloughs, salary cuts or layoffs.

The pandemic put more pressure on agencies that were unable to work with writers due to a long-running dispute with the Writers Guild of America over practices like packaging and ownership in affiliated production companies. During the pandemic, large agencies including Paradigm Talent Agency, United Talent Agency and ICM Partners reached agreements with the WGA.

Some agencies are seeing signs of recovery. ICM Partners CEO Chris Silbermann said that the TV business has bounced back close to where it was before the pandemic, but getting new movies greenlit is taking longer due to factors such as increased production costs during the pandemic, a lack of clear theatrical distribution options and the ability for studios to get films insured.

Silbermann said he’s not counting on live events starting until late summer at the earliest. ICM Partners’ speakers division has shifted to virtual events.

“2020 has been a year for the books, anybody that’s come through it intact is ‘battle hardened’ — pretty well able to handle almost anything that’s going to get thrown at them,” Silbermann said.

Times staff writers Wendy Lee, Stacy Perman and Stephen Battaglio contributed to this report.