How to handle theatrical windows in a box office environment still reeling from the COVID-19 pandemic remains a central question going into 2021, and the top Hollywood studios are answering it in different ways.

On the one hand, The Walt Disney Co. won praise in the industry and from investors for its hybrid strategy. While Disney will release some new films straight to its streaming platform Disney+, it remains committed to an exclusive theatrical window for tentpole titles like Marvel's upcoming "Black Widow."

On the other hand, AT&T Inc.'s Warner Bros. drew criticism after it unilaterally announced that it would release its entire 2021 slate on streaming service HBO Max the same day those films premiere in theaters. The move surprised its own talent pool, and it may damage some relationships, analysts said.

Disney CEO Bob Chapek. Source: Disney

Leading a balancing act

At a recent investor day, Disney not only broke expectations with its commitment and forecast for streaming, but it also unveiled a content strategy that married streaming and theatrical distribution in a way that industry observers say could complement both.

"Disney showed why it is a leader in the industry," said Boxoffice Pro chief analyst Shawn Robbins in an interview.

The company increased its content investment in Disney+ dramatically, to a range of $8 billion to $9 billion annually by 2024, at which time it expects to have as many as 260 million subscribers to the service. Disney, a box officer leader in recent years, also signaled that it remains dedicated to the silver screen, however.

While some titles, like animated film "Raya and the Last Dragon," will premier in theaters the same day they are available on Disney+ for a premium video-on-demand price, others will debut exclusively in theaters. That includes "Encanto," supported by "Hamilton" directorial phenomenon Lin-Manuel Miranda. Three Pixar films — "Luca," "Turning Red" and Toy Story prequel "Lightyear" — will also get an exclusive theatrical release. The company at its investor event announced a range of Marvel content, some of which will debut as special series on Disney+, while potential blockbuster films, including "Black Widow," will debut in theaters.

"Rather than erode, I think these will reinforce the theatrical experience," Robbins said.

It is a true multiplatform strategy that aligns both streaming and theatrical interests, analysts said.

"I think you're going to see studios realize they can't make every single film the same way anymore," said B. Riley Securities analyst Eric Wold. Rather, some content will be geared to streaming, some to the big screen.

"Disney is showing an ability to adapt ... but they're balancing their priorities and not going too far too quickly," Robbins said.

Christopher Nolan's "Tenet." Source: Warner Bros.

Too far too quickly

By contrast, many in the industry have openly questioned Warner Bros.' decision to release its entire slate of 2021 films on streaming the same day they debut in theaters.

That includes director Christopher Nolan, who in an interview with NPR called the studio's plan "unsound" and "a great danger." Nolan has released several titles with Warner Bros., including "Tenet" in 2020, which was expected to be a blockbuster event before COVID-19 crushed the box office. Warner Bros. delayed the release of "Tenet" due to the pandemic, but it underperformed at the box office when it finally reached theaters in September, as some exhibitor locations remained closed and many moviegoers remained cautious about going out.

Part of the backlash against Warner Bros.' decision has to do with the way industry contracts are drawn up to include the expectation of theatrical profit sharing. For the studio to announce such a big move without consulting its talent pool struck many as a bad decision.

Warner Bros. is "not respecting how the industry does business," said Exhibitor Relations analyst Karie Bible in an interview. "There are a lot of directors and filmmakers who don't want their films consumed on phones."

Legendary Entertainment, which financed about 85% of the upcoming big-budget remake of sci-fi classic "Dune" for Warner Bros., said it was not consulted prior to the decision to include "Dune" in the straight-to-streaming distribution. Legendary is considering taking legal action against Warner Bros., according to Variety.

"It may cost them some partnerships," said Kagan analyst Wade Holden in an interview. "It could lead to a lot of litigation." Kagan is a media research group within S&P Global Market Intelligence.

The arrangement probably looks good to consumers, Holden said. An HBO Max subscription catapults the user to a full slate of new films from one of the country's largest studios in 2021, and many of those HBO Max subscriptions are already free with other AT&T packages. But it could have a devastating impact on theaters.

"Frankly, I think it's going to backfire somewhat," said B. Riley's Wold. "My gut tells me, by the time we get through the middle of the year, they're going to warp the plan, similar to what Universal did."

Comcast Corp.'s Universal Pictures in July negotiated a historic windowing deal with AMC Entertainment Holdings Inc. that included a revenue share on both theatrical and early streaming windows. While the deal drew early backlash, it became more palatable as theater closures and low ticket sales continued to weigh on the industry.

"Theater chains are already on their knees financially, and they're really hurting. This is only going to be more hurtful," Bible at Exhibitor Relations said. "It's scary."