I am sad to report the death of film, or perhaps more accurately, the death of theatrical films.
First, let’s look at some hard facts:
- In the last ten years, the U.S. population has grown by almost 10%. During that same time, the number of movie tickets sold in the U.S has decreased by almost 10%, so that is the equivalent of an almost 20% decline in tickets sold.
- While gross U.S. box office has increased by about 10% in the last ten years (before this year), it is entirely attributable to rising ticket prices. On an inflation adjusted basis, the U.S. box office has remained flat. Given that the number of tickets sold is decreasing, a flat box office on an inflation adjusted basis means that ticket prices are increasing faster than inflation, which just cannot last in the face of so many viewing alternatives, discussed below.
- In the same ten year period, the number of films that are theatrically released in the U.S. has ballooned from 630 to over 730, which is about a 15% increase. Granted, many of these are limited releases, but that has been the case all along. This film glut means there is less of a diminishing box office to go around.
- At the same time, the cost of making and marketing studio films has steadily risen. Although the MPAA has stopped giving averages, a rough estimate is that the cost of producing and releasing an average studio film has risen by 20% in the last ten years.
- In the last ten years, there has been a steady expansion of viewing alternatives, including Netflix, Amazon, Hulu, YouTube, and now Facebook. Home screens have become the equivalent of mini-theaters, with high-definition screens and surround-sound, and younger people are more than happy to watch content on laptops or cell phones. Theaters are facing heavy headwinds in the face of this competition for eyeballs.
- And if that weren’t enough, the theatrical window is rapidly collapsing. If market forces don’t close it, piracy will. The window has gone from months to days, and in many cases there is just no window at all, since Netflix is happy to slam the window shut and others will have to follow suit.
- No doubt due to a combination of these factors, and not just bad films, the U.S. box office has fallen off a cliff so far this year.
Against this backdrop, here are my predictions on what the theatrical landscape in the U.S. will look like three years from now:
- One or more theater chains will have gone bankrupt.
- Many theaters will have shuttered. The smart ones will have converted to location based virtual reality centers. It is no mere coincidence that IMAX is already exploring this option with test sites.
- The theaters that survive will offer 4D seats, which move to match the film (where you feel like you are flying when a jet is on screen), and 3D sound, which seems to come from different angles at different times around you, like raindrops falling near you.
- A theatrical release will be day-and-date with the on-line release, except for big-budget studio films that will play in the theaters with the enhancements described above.
- Some studios will essentially become production companies for on-line distribution companies, such as Netflix and Amazon, and will get out of the distribution business, while other studios, like Disney, will compete with them.
So one day we will be telling our grandchildren about the wonders of going to a movie theater, and they will ask, “Did you really have to drive there, park, pay for it, and sit with all those strangers?”
Written by Schuyler Moore , Contributor to Forbes, who writes about the business side of the entertainment industry. Opinions expressed by Forbes Contributors are their own.
Schuyler Moore is a partner in the corporate entertainment department of Stroock, practicing entertainment, corporate, and tax law. I graduated from UCLA (Phi Beta Kappa, Summa Cum Laude) and UCLA Law School (first in class). He is the author of The Biz: The Basic Business, legal, and Financial Aspects of the Film Industry, a popular book in its 4th edition, Taxation of the Entertainment Industry, and What They Don’t Teach You in Law School.
Schuyler has been named (a) one of the top 100 entertainment lawyers by the Hollywood Reporter, (b) one of the top 25 entertainment lawyers by Variety, (c) one of the top 100 lawyers in California by the Daily Journal and (d) one of top 3 "Most Influential Lawyers" in media by the National Law Journal.