Will the industry draw the right lessons from this summer’s successes and failures?
It’s a tradition at the end of the summer to opine on lessons learned about what kinds of movies worked and why, and to extrapolate from that “what audiences want.” This focus is always too narrow and tries to prove too much. It also drives a mad chase after what worked or didn’t work in this season as markers for what will or won’t work in the future. Never mind that every movie is different, even ones carefully tailored to match the parameters of recently successful movies and to reassemble the same lucrative audience.
This leads to foolish generalizations – not least of which is that “shrinking audiences” mean that America is “overscreened.” Yet no one can tell you by how many. Where? Across the large swaths of the Great Plains and the South that powered “Twisters‘” success? Manhattan? Is the right number of screens 10,000 (The Katzenberg Constant) or some other number? It’s nonsense driven by anecdotes or self-serving corporate spin.
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Instead, I will focus on the larger issues affecting the theatrical industry season in and season out.
Issue number one – there are not enough movies, specifically wide releases aimed at broad audiences. This has been true throughout the recovery from the pandemic, in which there has been a nearly one-to-one relationship between the percentage of wide releases compared to 2019 and the percentage of box office compared to that year. It was true in 2022 and remains true today, exacerbated by the strike delays of 2023. That hobbled supply needs to be front and center of any analysis – it is often part of the analysis, but usually trails an obsessive focus on the fortunes of whatever movie is in the marketplace and a desire to link it to the zeitgeist.
But this obscures the fact that there weren’t enough wide releases in 2019 either – particularly those looking for grosses in the $50-$100 million box office range. In 2019, there were 39% fewer wide release titles (1,000+ screens) in this category than in 2004 which brought in – wait for it – 39% less box office ($1.68 billion in 2019 vs $2.75 billion in 2004). It’s important to note that those movies remaining in the theatrical marketplace in 2019 averaged the same box office per title as in 2004.
Keep in mind that those 2004 numbers were at the absolute peak of the DVD boom – people were going to movies AND buying and renting them at home. The decline in the number of movies was a conscious choice to prioritize one market over another, and not because the studios were following the audience. They were trying to lead them to places the studios controlled. This has continued into the streaming era and it is costing everyone money.
More shocking, though, is the potential revenue that was left on the table. There were 261 million fewer admissions in this category in 2019 than in 2004. Using 2019’s average ticket price, that is nearly $2.4 billion dollars in foregone revenue, not to mention the increased viewership and retention from theatrical films once they go to streaming over straight to streaming titles.
Major studios have too high a market share, giving them too much power over exhibition – 73% in 2023, though down from the peak. That lower share is due somewhat to the lower number of wide releases from the majors, forcing exhibitors to look to other sources – something they should have been doing in their own interests years ago, before they became utterly dependent on Hollywood to drive their own success.
The results in the domestic market are exorbitant film terms, limited flexibility on screen programming – distributors demand every showtime on booked screens whether or not another film might play better at certain times throughout the week, no flexibility on pricing due to regional per caps that set a de facto floor on what exhibitors can charge, and excessive minimum runs that exhaust potential audiences in smaller markets and obliterate profits by week three. With their market share and reduced supply, studios no longer truly compete with one another on any given weekend or overall, leading to homogenization of booking terms, pricing, marketing expectations and more.
By contrast, European theatrical markets with robust local film industries have returned to positive EBITDA and cash flow with many territories all or nearly recovered based on box office in 2023 compared to 2019. Why? Because the studios don’t wield the same power and must compete.
Domestically, we have a fractured and inefficient film industry (outside the majors). Too many movies, from too many distributors, with too few resources trying to overcome too many gatekeepers, expenses, and other barriers to entry are the hallmarks of the indie film industry at present. This leads to saturation of films in certain markets (with films playing in just N.Y./L.A. for example), with many parts of the country woefully underserved.
It was presented as a delightful surprise, but “Twisters’” 60% upside miss on tracking underscores just how much the industry is underestimating potential audience. If it’s happening at that level of budget and resources, how much potential audience is being missed on smaller titles? The data is out there, but is not being used to target movies to audiences and in the markets where they live. That data can connect theaters to distributors, movies to audiences and marketing dollars to support them. Instead, the industry relies heavily on “comps” as the key data driving distribution decisions and box office expectations. This data is necessarily backwards looking and fails to leverage so much of the consumer data that could be used to drive audiences and improve forecasting.
In short, the theatrical industry, at all levels, needs experimentation, iteration, and competition in programming, amenities, and pricing that will grow audiences and revenues.
And movies. Lots and lots of movies.
Patrick Corcoran is the former VP and Chief Communications Officer of the National Association of Theatre Owners. He is a founding partner of the Fithian Group, which provides strategies and insights to the cinema industry.
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