WarnerMedia's CEO predicts that blockbuster movies will have $1 billion budgets in the future as streaming surges

• WarnerMedia CEO Jason Kilar told The New York Times he thinks blockbuster movies will have budgets of $1 billion or more in the future as streaming subscriptions grow.
• "When a typical leading subscription service of general entertainment has, say, 600 million paying global subscribers, at those levels you can responsibly invest $1 billion in a movie and have confidence that it's going to be a very good economic endeavor," Kilar said.
• WarnerMedia sent shockwaves through Hollywood last week when it announced that all of Warner Bros.' 2021 movies would debut on HBO Max and in theaters in the US simultaneously.

WarnerMedia sent shockwaves through Hollywood last week when it announced that all of Warner Bros.' 2021 movies would debut on its streaming service, HBO Max, and in theaters on the same day in the US.

The move is in response to the coronavirus pandemic, which has upended the theatrical industry. But it will also boost Max, which has struggled to convert subscribers since launching in May.

WarnerMedia's CEO, Jason Kilar, has reorganized the company around its streaming business this year, which has resulted in hundreds of layoffs. Kilar has a reputation as a Hollywood outsider and a "tech guy," having been a founding CEO of Hulu among other ventures.

This week, Kilar made a bold prediction for the movie business that coincides with Hollywood's growing embrace of streaming.

On The New York Times Opinion's "Sway" podcast, hosted by Kara Swisher, Kilar said that he thought the budget of a blockbuster movie would be over $1 billion in the future as streaming subscriptions expand over the next decade and more.

READ MORE: Hollywood is raging over Warner Bros.' HBO Max plan. But one producer whose movie was impacted gave us the counter argument.

"We have the economic model in order to support it," Kilar said. "I'm not saying today. But if you play this out, when a typical leading subscription service of general entertainment has, say, 600 million paying global subscribers, at those levels you can responsibly invest $1 billion in a movie and have confidence that it's going to be a very good economic endeavor."

Big-budget movies today typically have budgets of more than $100 million, but costs have inflated in recent years.

"Tenet," which Warner Bros. released to theaters in September, cost $200 million to produce. 2017's "Justice League," another Warner Bros. release, cost $300 million after significant reshoots. And "Avengers: Endgame," a Disney release and the highest-grossing movie of all time, had a budget of more than $350 million.

Kilar noted that not every movie would have that kind of price tag, but that streaming will provide the kind of financial support and optionality in content to produce movies of that scope as well as smaller fare like romantic comedies.

"The business model that we're doing with HBO Max is something that is incredibly scalable that allows us to do a lot of things we couldn't do," he said. "We can do these niche romantic comedies and be able to have them be economically sustainable. Right now, that's a very challenged genre in theatrical exhibition if it's just purely theatrical exhibition."

He added: "I get excited because we have this business model that is so scalable in partnership with both theaters and the internet that will allow us to do a lot more in terms of storytelling in movies, but also the budgets at the high end are only going to get bigger. What makes for an epic movie in 10 years, 20 years is going to be very different than what makes for an epic movie in 2020."

Kilar's comments predict a bright future for the movie business at a time when Hollywood is fuming over WarnerMedia's HBO Max plan. Christopher Nolan, the "Tenet" director, said that the decision makes "no economic sense." Talent across Hollywood were stunned by the decision after not being consulted about how it would impact their payment deals, according to multiple outlets like The New York Times (and Business Insider). Perhaps Kilar is hoping his rosy prediction can smooth things over a bit.

Many major media companies have a streaming component now, but it will take a long time before any of them reach the size that Kilar is expecting. Disney Plus has gained 73 million subscribers since launching in November 2019. NBCUniversal's Peacock has 26 million signups since fully launching in July, but it's unknown how many are paying subscribers. Max has just 12.6 million "activations" since debuting in May.

But then there's Netflix, which is nearing 200 million paid subscribers worldwide (though still a far cry from 600 million).

On the subject of Netflix, Kilar said what differentiates WarnerMedia from the streaming giant is that WarnerMedia has the kind of intellectual property that Netflix doesn't.

"We have franchises that really created worlds in this company's history," Kilar said, adding that Netflix's co-CEO Reed Hastings would "kill for the kind of intellectual property WarnerMedia has that goes back 97 years."

Hastings does indeed want more franchises for Netflix. He told The Hollywood Reporter in September that one thing Netflix can learn from Hollywood is how to build franchises.

"We're making great progress on that with 'Stranger Things' and other properties, but compared to 'Harry Potter' and 'Star Wars,' we've got a long way to go," Hastings told THR.

Other notable subjects from Kilar's interview on "Sway" include:

• He said that WarnerMedia is not planning to sell or spin off CNN contrary to some reports, saying "it's remarkable the level of journalism that goes on there every day."
• He said HBO Max does not plan to add a "premium" additional cost to movies in the future like Disney Plus did with "Mulan."
• Kilar said that there's an opportunity for short-form content on Max, especially when a user is watching on a mobile device, but added that the "majority of the customer experience is going to be long form for us."