What Chance Do Indie Films Have?
Over the last three weeks, I had wanted to explore whether, as some were intimating, the idea of going to see movies in theaters is a dying market. Hi Def TVs, Netflix and Amazon around the world, TV downloadable to mobile devices, couch potato-itis, sequel-itis, too damn many super-heroes and anti-super super-heroes have all been touted and examined as the culprit(s). So, I wanted to get to the bottom of this through a deeper kind of analysis, and see if there is any truth to the Chicken Little cries, or if something more, or something more nuanced, is happening.
My driving interest in this was ultimately to see if Indie filmmakers of many stripes, should be nervous, very nervous, or right out frightened of the collapse of movie-going.
Well, the last in that list isn’t happening, certainly not yet. But there is nuance to this, and we have been seeing it in the downward slope of ticket buying per capita, and the real dollar downward slope in box office. We have also seen that theaters are building more theaters, even in the face of this, but not enough to completely erode the per screen yearly income. Still, that income is not growing
But several things are happening, as we have seen, US citizens have been buying fewer and fewer tickets every year, even with more theater screens competing for the movie dollar. Nonetheless, in real dollars, the chains have effectively been losing money comparatively.
So, having seen a pretty bad 2nd Quarter in 2017, and now a really bad 3rd Quarter, with only the numbers yet to come in for the double holiday last quarter of 2017, I want to step aside and look at another element of the box office, and that is, who has been capturing the box office dollars from year to year for the last 15 years.
I have not included the Thanksgiving weekend in this analysis, but it is through Q3, and This is being finished on Thanksgiving morning, so the holiday box office is not in yet, and we’ll look at that next week, but we have enough of 2017 in, to look at this from another point of view: Who is taking what there is to take at the box office? The next chart we have to analyze is one that details what portion of the annual box office has been taken by the Top 5 Distributors?
In 2003, the Top 5 took 64% of the total box office, and though this has fluctuated over the last 15 years, with 2010 hitting 74% and 2016 hitting 76%, at least as far as we have gone in 2017, these top 5 studios have captured 75% of ticket sales. The trend is to the studios taking a bigger share of the box office each year, leaving 25% available to the other 100 to 125 or so distributors.
So much for the 80/20 rule that says that 80% of any market is taken by 20% of the players. In this case, with the top 5 being variously 3% to 5% of the theatrical market players, we are still talking in billions of dollars available for the smaller players here, so there would be, (if 2017 comes to $11 billion box office, almost $3 billion left for the other 135 to 140 box office players. Still, this is far more stunning than the 80/20 rule.
To dig further into this, I also gathered the Market Percentage of the top 20 distributors for each of the last 15 years, 2003-2017, again with the caveat that 2017 is still in play. Here is the chart that lays that out for all the top 20 studio players:
What we see in this chart is that the Top 5 studios are battling it out almost continually with the next 5 top distributors (Top 6 to 10) for share of 90% of the box office each year.
The differences shown in the fortunes of the Top 5 can almost always be attributed to movement in the studios that grab these 6th through the 10th slots each year. Now, we also have to attribute these movements to players like Lionsgate, the fortunes of Paramount, and folks like STX, Focus, Open Road, Fox Searchlight, New Line and the like. Of course these companies slip above and below the Top 10 and Top 11-20 demarcation line from year to year, to join those like Roadside Attractions, Broad Green, Sony Pictures Classics, what was The Weinstein Company, CBS Films, IFC, Rocky Mountain, what’s left of Relativity and more.
So, the box office pain of the year we are in, and the long, slow-appearing decline of theatrical income in real dollars appears to be taking the biggest chunk out of the Indie-leaning market players among the top 20, while also leaving a very small share for the other 110 to 125 movie distributors that play in the theatrical market.
Remember, these 11th through 20th slots form the portion of the box office achieved by smaller distributors who are battling over between 12% at the high and 4% at the low of total box office. We currently see something like 5% so far in 2017 for those among these top 11-20 distributors. The top 11 to 20 distributors have had their share of the market cut in half over the last 15 years, while the market has also been shrinking in real dollars.
It makes me think of the story of the blind man trying to figure out what he is touching as he walks around an elephant. He knows something big is in the room, but he can’t precisely figure out what it is. In this case, as he tries to describe the elephant in the room, the room is slowly getting smaller. If the elephant is getting smaller, it is not shrinking in the same way the room is, but is taking up more and more of the room each minute, while the blind man and anyone else in the room is trying to find a safe place to stand so they don’t get crushed. The blind man in this little tale is the Indie distributor.
With the holiday season still to play out, and with Coco, Justice League, another Star Wars, Ferdinand, Pitch Perfect 3, the Jumanji sequel and many more coming between now and the end of the year, we don’t yet know the full outcome of the year, but it will definitely be largely played out in wide and very wide releases.
We will revisit this year more after we have been through the holidays and turned into 2018.
Next, for this blog, I will likely want to start a discussion about how I think some big decisions over the last 20 years have led to a place where the Indies have lost mojo, at the box office, but also in other markets, much of it caused by accepting the trickle-down decisions made at the larger outfits, decisions based on quarter by quarter short-term planning. These decisions reduced the potential for product differentiation that had made home entertainment a crucial part of the business.
END OF PART IV
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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