Last week, I discussed box office, primarily by quarters over the last nearly eight years. I hinted that I was going to go in a slightly different direction to see if we can discern if there are fundamental elements causing this to play out the way it does, and who is benefiting, or is not.
First, no one benefits from a plummet in box office. Far-flung outfits like Screen International, Variety, Hollywood Reporter, and major business magazines have spoken out about the dismal summer, and the dismal fall. Screen Daily said: “The summer blockbuster season is traditionally the time when critics and commentators bemoan Hollywood’s reliance on franchises, sequels and reboots, while studio bosses point to the box-office numbers that prove audiences are being served very nicely, thank you, by a series of adroitly marketed tent-poles that blend the fresh with the familiar. You can carp all you like, they say, but the numbers don’t lie.
In 2017, however, the studios have lost control of the narrative.” Screen Daily further counseled that “The millennials (born early 1980’s to 2000 or so) are coming…” as if to say that all would be alright.
Deadline.com said: “There’s been a lot of crying out there over how this summer was the worst in 11 years, logging an estimated $3.78 billion. But there is a positive takeaway from this mess: Movie-going habits aren’t broken. That’s right.”
Last week’s charts we looked at here did not tell us that the Milennials are coming in North America. It said that not a lot of people are coming. Millennials are a difficult audience to cultivate, as they have new and growing families, and so their focus is more diffuse than that of GenZ (ages 3 to 22, which includes the “dependable” opening weekend PG-13 crowd and more than 25% of the R crowd). After them, but much less opening weekend is the older filmgoers, the only really growing age demo.
Content has driven the highs in the past, and it will drive the highs in the future, even though Box Office sales are entering a long slow decline as we saw over the last two weeks. But let’s look now at what another leg of the industry, the theaters themselves, look like in more detail, and over time.
I have, literally, since the last half of the 1990’s been hearing that screens are being built too fast, and that the glut of screens means more competition among them and a thinning of profits. As well, a glut of screens has been pointed to as the culprit in over-saturated releases, on 3,500 to 5,000 screens, causing faster box office drop-off. Are the exhibitors causing a real problem here? Let’s look at some charts.
With these charts, I am able to more easily to show all 14 years without a muddy graphic. We can see above that the rise of screens in 2003 through 2006-07 was pretty rapid, but once we hit the slippery financial patch in 2008 and 2009, growth in screen counts slowed measurably, while still continuing. I plotted next to it the growth in constant dollars of ticket prices, showing that ticket prices also lost their momentum from the early 2000’s, in relation to screens. This hints that we could be seeing a redlining of both.
Now, when we look at screens across this same period of time as per 1,000,000 citizens, screens and citizens kept pace with each other, until about 2014, when the number of screens per million citizens began to fall. Now we find that the number of screens per citizen is about 5 per million less than in 2012. This is likely not evidence of the over-saturation discussed, but in light of the reduction of tickets sold, and the drop of approximately $5 per citizen per year on movie-going we saw in a previous post, just plotting the “ever-rising” box office and tickets sold may have been masking erosion underneath the theatrical business.
Looking further underneath, to see if the action at the box office has been generally dismal as well for theater owners across this 14 year period, I decided to take a look at the average sales per screen per year, to see what insight that might give us about how theaters may be faring. The following chart, showing the number of screens, and the sales per annum per screen, shows us that as the number of screens has grown (along with ticket prices and so on), there has been only a small amount of growth in the per screen take over the last 14 years, gaining about $25,000 per year per screen over that span of 14 years, or about $2,000 per year growth each year, and meanwhile, per capita screens are dropping a bit, and per capita citizen’s spending on movies has dropped.
Just to put this in tighter perspective, with a chain which had an estimated 5,426 theaters in 2016, the income difference of $25,000 per screen would mean $131,500,000 per annum for the chain in 2016, compared to 2003. If they are 12% of 2016 screen count total (of 40,000 screens), then their pro rata 12% of 2016 box office would be approximately $1.356 billion in 2016. If their screen count in 2003 was at 12%, then their share of (adjusted) box office would have been $1.425 billion. This would have been a loss of box office of roughly $5 million per year for the entire chain of screens, over each of the 14 years (in constant dollars). Balancing the relative stagnation of per screen per year income, and the reduction in screens per capita, it seems like theater chains may have the number of screens somewhat right, or not massively overblown, but the problem appears to be moviegoers are just not growing their movie-going, and really haven’t for some time.
We know that box office, important though it is, is not the raison d’etre of the theater business, concessions is, but if people don’t come and buy tickets, they can’t sell them concessions either. And per screen sales averages dropping $1,000 per year over the last 14 years is not anything to crow about. Things are stagnant, and have been for some time.
More to come…
END OF PART III
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What originally caused me to begin FilmProfit® was my noticing that the studios and big players had lots of folks to help them figure out how to make their films profitable. Indie producers were in a gunfight with rubber stage knives. I wanted to give them some weapons to begin to level the playing field a little. The things I do, whether for rump indies or mi d-level players, or even the studios are meant to get down under the hood, not just numbers, although numbers tell a story, but to get at the functions, of moviegoers, exhibitors, distributors, and all the working parts of the industry, to help my clients see better what they are getting into and how to prepare for it.
Onward and Upward