Although [theaters] make up less than 20% of gross, their importance is disproportionate due to the signal they send other markets about the popularity of a movie. In other words, a movie must first be proven in a US theater before its value is priced by the other channels.
However, this essential theatrical release has changed in one fundamental way. Releases are now geared for larger initial scopes with shorter runs and less dependency on “word of mouth” to increase sales.
Enter “P&A”
Instead, studios manufacture an audience through paid advertising and promotion. This initial burst of viewers is essential not just for generating revenues. It’s essential to driving long-term revenues.
The reason is that technology now allows the movie to be “monetized” through multiple channels. Recorded media, broadcast rights and even in-flight entertainment are all there to milk a franchise. But there is a need to get that initial vote of confidence from one crucial audience. That happens to come only from theatrical release.
