The Impact of Overlooking the 45-Day Exclusive Release Window on Movies and Why Netflix’s Approach to Theatrical Releases May Be Misleading

Editor’s Note: Joseph M. Singer, a seasoned producer and film financier, previously served as a studio executive and founded Elixir Media. As Managing Principal and CEO of a company specializing in mergers and acquisitions, he has contributed to financing and producing over 120 major studio feature films, negotiating four multiyear slate co-financing deals. This article follows up on his December 19 guest column addressing why no major media conglomerate should acquire Warner Bros Discovery.

The Relevance of an Exclusive Theatrical Window for the Survival of the Global Film Industry

The film industry is currently facing a pivotal moment, with traditional distribution methods under pressure from the rapid rise of streaming services and platform-centric business models. Central to this evolution is the concept of an “exclusive theatrical window,” defined as the period during which a film is available solely in theaters before transitioning to lower-priced releases, beginning with Transactional Video on Demand (TVOD). This model is at risk of being curtailed, which could jeopardize the viability of theatrical distribution, a structural component vital for value creation and creative diversity in cinema.

Historically, the duration of the exclusive theatrical window has decreased significantly, slipping from a six-month standard in the 1980s and 1990s to approximately 90 days in the early 2000s, and settling into a range of 60 to 45 days for most studio films in the post-pandemic era.

Data indicates that a 45-day minimum exclusive theatrical window is essential for maximizing revenue from TVOD. If this window is compromised, the industry’s reliance on theatrical revenue could deteriorate drastically, threatening long-term sustainability. Such assertions are grounded in rigorous data analysis, emphasizing the critical nature of these frameworks.

To thoroughly understand the implications of preserving an exclusive theatrical window, it is essential to explore: 1) its role in studio economics; 2) the empirical consequences of window compression; 3) the potential changes in creative risk-taking and film slate composition; and 4) the impact of shortened windows, particularly concerning the potential Netflix acquisition of Warner Bros. Discovery and Universal Pictures’ ongoing 17-day window.

The Role of an Exclusive Theatrical Window on Studio Economics

A theatrical “window” designates the exclusive period a film spends through one distribution channel before transitioning to another, aiming to capture revenue from various consumer segments at different price points. Current sequential distribution windows include:

• Theatrical exclusivity, designed to capture high-margin consumers. The widely accepted minimum is 45 days to maximize subsequent revenue.
• Transactional Video on Demand, characterized by a 30 to 60-day exclusive period for renting or purchasing films without subscriptions.
• Pay-1, an exclusive window for licensing films to a major streaming platform, which usually occurs 90 to 120 days post-theatrical release.
• Pay-2, where rights are sold to another streaming platform after the Pay-1 window expires.
• Linear TV/Other Windows, which eventually feature films on broadcast networks or other video-on-demand platforms.

This structured distribution system allows studios to earn revenue multiple times for the same film, capitalizing on the high margins associated with theatrical showings. Generally, a majority of a film’s profitability arises from post-theatrical windows, meaning that a loss of the theatrical window could severely damage revenue generation.

Hearing Before the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights

On Tuesday, Netflix’s Ted Sarandos testified before the Senate subcommittee on Antitrust, Competition Policy, and Consumer Rights. However, Netflix’s assurances regarding the 45-day window were misleading. When Netflix claims it will uphold this window, it refers to a timeline for transitioning to SVOD rather than the industry-standard 45-day period for TVOD. The typical wait for SVOD tends to be 90 to 120 days post-theatrical release, reflecting a shift toward short cycling and higher profitability from TVOD.

Netflix’s promise to protect the 45-day window effectively ignores the importance of the preceding TVOD phase, shortening the timeline between theatrical release and SVOD. Such compression risks making films less profitable and poses a threat to numerous jobs in the industry—potentially exceeding 250,000—including exhibition workers and other industry stakeholders.

The Empirical Consequences of Window Compression

A. Reduced theatrical window. The contraction of theatrical windows diminishes the incentive for audiences to attend theaters. If consumers anticipate that a film will move to a streaming service shortly after its release, they may choose to forgo purchasing tickets. A decrease in box office revenue of just 10%–30% could transform a potentially profitable film into a financial loss. Estimates suggest the actual impact could reach 30%–50%, severely curtailing major studio outputs.

Theatrical revenue is a direct, transparent source of income, allowing studios to retain significant portions of the gross revenue. Transitioning to a streaming model complicates the revenue picture, favoring platforms over content creators. If studios cannot rely on theatrical hits for immediate cash flow, their ability to reinvest in new productions will be compromised.

Notably, a protected theatrical run provides a “durable asset,” whereas a rushed release creates “perishable inventory,” decreasing the value of studio libraries.

A limited theatrical window undermines the cultural significance required to elevate a film within public consciousness. This lack of cultural weight leads films to blend into a vast sea of content, diminishing their revenue potential and long-term value. Without sufficient time for theatrical exposure, the industry’s landscape may shrink significantly by the end of the decade.

If a merger involving Warner Bros. occurred without a protected theatrical window, the ramifications could result in the industry halving in size by 2030, leading to widespread job losses and theater closures.

B. Reduced downstream revenue. If the lucrative theatrical window is diminished or eliminated, the overall revenue generated by film projects could collapse. Despite the current streaming boom, the loss of a strong theatrical performance would substantially reduce subsequent revenue across various platforms.

Data consistently shows that shortening the theatrical window does not necessarily lead to an expanded audience; instead, it drives high-paying customers to lower-margin platforms, noticeably devaluing intellectual property.

C. Cost increases and decreased creative risks.

With shorter windows:

• Theatrical distribution transitions from a profit-driving force to merely an expensive marketing endeavor with negligible ancillary returns, increasing customer acquisition costs.
• Financial risks mount as studios produce fewer films, limiting diversified slate offerings and the flow of creative narratives.
• Only prominent directors and stars will find opportunities for original stories, leading to a monoculture focused on franchise-driven productions.
• As a result, the mid-budget film sector may disappear, leaving room only for content tailored to streaming algorithms rather than cinema.
• Studios may shift focus from film production to intellectual property management.

Why Studios Experimented With Shorter Windows

The move toward compressed or simultaneous digital releases emerged from immediate pressures, rather than established economic strategies:

• The closure of theaters during the pandemic forced studios into “emergency experimentation” to recover investments.
• The competitive streaming landscape led studios to treat valuable theatrical assets as loss leaders for their platforms.
• The assumption that marketing effort for theatrical releases would carry over into home viewing proved flawed.

Current evidence from these experiments shows that while streaming metrics may have seen temporary boosts, many films ultimately lost money. Releasing titles on premium streaming shortly after launch did not significantly enhance revenue during the first weeks after release compared to longer waits.

Ultimately, these strategies led to cannibalization of theatrical revenue, escalating risk for studios both for individual films and across entire slates.

Notably, Disney extended theatrical windows for several films beyond 100 days last year. This move occurred alongside the company’s first year of generating over $1 billion in profit from Disney+. Such instances illustrate a willingness to return to traditional models following the recognition of failed short-window experiments.

The Existential Risk of a Netflix–Warner Bros Merger and Universal’s 17-Day Window

The potential acquisition of Warner Bros by Netflix represents a fundamental shift that could dismantle the economic framework of the film industry. This merger could significantly undermine the ancillary market ecosystem vital for theatrical filmmaking.

If Netflix establishes its historic preference against exclusive theatrical windows as a new standard for Warner Bros’ extensive library, the repercussions could be catastrophic for ongoing revenue streams.

Netflix’s commitment to protecting the 45-day window misrepresents its intentions, aiming for a transition to SVOD far earlier than the conventional 90-120 days.

Netflix’s operational model contradicts the essentials of theatrical filmmaking and, despite regulatory assurances, historical patterns indicate a preference for shorter release windows to serve shareholder interests optimally.

A merger between Netflix and Warner Bros represents more than just a business transaction; it poses a structural threat to the future of theatrical filmmaking.

Equally concerning is Universal’s 17-day window, a practice continuing from its pandemic-era shifts, which conditions audiences to expect immediate home availability. Many studios have previously abandoned this model due to its detrimental impacts.

While high-margin theatrical revenues can lead to substantial returns, streaming films typically rely on a different model, leading to a disconnect in financial efficiency.

Conclusion

Proponents of shortened theatrical windows often claim they are modernizing an outdated model. They assert that such changes will capture additional value. However, evidence suggests this perspective is misleading, benefiting only those prioritizing subscriber growth and streaming revenues.

The theatrical window is not a relic; it functions as a financial stabilizer and a mechanism for price discovery essential to the entire film industry. Eliminating it does not modernize operations; rather, it undermines the structural integrity of the business model, jeopardizing longevity and diversity.

Shortened windows diminish a film’s viability and perceived importance, permanently affecting its market performance. Such shifts threaten to contract the industry and undermine the vibrant, diverse film culture necessary for creativity and evolution.