An aging business model that needs to adapt to the current audience.
By Andy Marken
“We are seeing a globalization of indifference. There is a culture of conflict, which makes us think only of ourselves.” —Pope Francis, The Two Popes, Netflix, 2019
OK, so we’re halfway through the year and movie house ticket sales have continued to rise, but no analyst we’ve heard from thinks the box-office numbers will surpass—or even get close to—2019’s $11.4 billion. Maybe $8 billion–$9 billion if the stars align… perfectly. Of course, they’re up. Have you seen the backlog of expensive tentpoles and really excellent “made for the big screen” projects ready to take us at least into the middle of next year?
Doctor Strange in the Multiverse of Madness, Top Gun: Maverick, Watcher, Jurassic World Dominion, Elvis, The Bad Guys, Lightyear, and a liberal sprinkling of horror and animated projects carried us into the summer months. There are killer films like Beast, Thor: Love and Thunder, Bullet Train, The Woman King, Halloween Ends, Black Adam, the re-release of Avatar followed by Avatar: The Way of Water, Black Panther: Wakanda Forever, and a heavy dose of horror and family extension/variation projects that will get kids to drag their parents/grandparents to the movie house.
However, despite what NATO’s (National Association of Theatre Owners’) head John Fithian said at CinemaCon, “robust” theatrical windows don’t protect against piracy. The window only gives theater owners more time to sell more popcorn and expensive sugary concessions. Ticket sales only sort of cover the cost of the lights for movie theaters; the big money is at the concession stand, which might explain why the lead-in content is so long. Movie ticketing site Fandango reported that 93% of folks who bought a ticket also bought concessions. And 67% of those surveyed said they spent $20 or more on popcorn, candy, soda, and other concessions.
No wonder Fithian and his NATO members are happy with the return: Theater owners don’t split concession sales with studios, as they do with movie ticket sales. NATO doesn’t bother telling you, though, that there were a number of piracy incidents in recent months with people resorting to “capturing” content from the really big screen. The quality of these off-the-screen copies is so bad that only Torrent users who know the film is never going to be shown in their country bother to download it. Everyone else will wait!
Yeah, the quality is that bad! But Fithian was somewhat right. There has always been an uptick in piracy the minute a project has had its theatrical run and goes to the streaming service. Or if the film had a simultaneous release (theater/streamer). BAM! copies and malware were available for download the next day.
Producers, studios, and streamers (Disney, Warner, Netflix, everyone) used to brag how popular their films were because of how many Torrent downloads there were—until their CFOs told them what 5 million-plus pirated downloads meant in lost income.
Folks, buying social media reviews is cheaper.
With the growing roster of great franchise and delightfully fresh projects set to smash records, every studio and streaming service has doubled down on project security—from the first frame shot to the delivery (theater and home screen).
“MESA’s (Media & Entertainment Services Alliance) and CDSA (Content Delivery & Security Alliance) has been working closely with content developers and delivery organizations since 2008 to protect digital video content from end-to-end,” said Allan McLennan, CEP/Media, head of M&E North America, Atos. “Streaming and digital content theft only accelerated the importance of protecting the content.
“Piracy became rampart in recent years as digital production/distribution swept across the industry because it is relatively straight forward to steal material being sent across the Internet,” he explained. “It’s costing the industry about $30 billion. “MESA, CDSA, SMPTE (Society of Motion Picture and Television Engineers), and MPA (Motion Picture Association) have developed guidelines that cover application, site, and cloud workflow/storage to protect valuable content for everyone—filmmaker, studio, theater, streamer as well as the audience.”
And this content is valuable!
Granted, we may have been a little short on originality; but hey, that’s always been a problem with Hollywood We’ve had/have a lot of sequels, prequels, or franchises for decades.
Old is new—Finally, the billion-dollar ticket sellers are back to the big screen to be enjoyed by adults again. Tom Cruise and James Cameron both have the track record and commitment for their projects to be seen on the large screen first. They’re big-budget projects with bigger returns for studios and the A-listers.
Don’t get us wrong, we waited a long time (36 years) to see Tom Cruise get back into the cockpit and show the kids how to fly in Top Gun: Maverick. We’ve been waiting 13 years for James Cameron to finally deliver Avatar: The Way of Water in December. To prepare, we’ll catch the reissued 2009 version in the theater in a couple of months, just as we caught up on Keanu Reeves’ earlier versions of Matrix and John Wick—streamed—before we saw the latest chapters. Fortunately, Cameron has promised a new version of Avatar every two years, so we know we’ll visit our multiplex at least three more times. Other than that, we’re not sure.
We don’t really dislike going to the movies, but it’s an aging business model that needs to adapt to meet the challenges of the digital world and the changing interests of their key audience segments. While the pandemic has hit the movie industry hard, it has also offered an opportunity for aging business models to adapt to better meet the challenges of the digital world.
For streaming video services, studios, and theaters, navigating these shifts requires time and patience. They challenge traditional ways of developing, distributing, and monetizing content. Yet, visionary M&E bosses see the opportunities in change and embrace them. Thinking differently empowers them to define their role in the future.
Superhero flicks have kept box offices afloat this year, spurring movie theater operators to envision a time when audiences might finally be ready to return to cinemas en masse. So, what have they done? The same old stuff, the same old way! Instead of treating them as valued guests, they treat them as targets for mass hypnosis… 20–30 minutes of trailers, ads.
Are you kiddin’ us?
The industry has done a very good job of profiling what percentage of folks almost compulsively have to come back to the theaters, as well as those who would maybe like to and those who are perfectly happy watching the stuff at home on their own screen when it’s available with their streaming service.
In addition, we have a good profile of the age categories and therefore types of genres that will be most appealing to them.
The Gen Z crowd are the folks theaters—and studios—want to appeal to because if the industry can win them back and get them into the habit of going to the movies, they will logically be going longer. However, there are two key differences with them and older generations that we need to come to terms with. One, they have grown up with a mobile device in their hands, which means they expect their information fast, short and sweet, or they cut you off, so they quickly tune out long “promo breaks.” And two, in addition, they aren’t really particular how they see their films—in the theater or streaming are equally satisfying, so improving the movie house experience isn’t just nice, it’s vital.
So, if theater owners want to attract the long-term audience and keep them coming back for years, they have to listen to them and deliver what they want.
OK, movie houses don’t have to listen, but just remember, they have devices and know how to use them! Which is another important point movie house management needs to work on with studios, producers, and A-listers.
Want to get more seats in seats? “Encourage” A-listers to use their social media followers to build interest/excitement in the film leading up to its appearance in the theater. A-listers tell their fans, their fans tell friends, their friends tell others, and BAM! seats are filled—and more popcorn/soda sold!
The complete M&E industry needs to continue to help (and encourage) movie houses to do more to win back the audience, and the industry continues to change in every direction.
Theater operators who believe they are the answer and the saving grace from online piracy have to look around and impartially see what technology has done—and can do—to keep disrupting the entertainment world. Carefully applied, technology can reduce the number of titles that are readily available to Torrent sites.
It’s a lot easier—and less disruptive—to come home and, on impulse, decide to use the service you’re already paying for—or can easily sign up for—to watch the movie, rather than corralling the family, driving to the theater, and dropping a bundle for tickets, popcorn, candy, and snacks. Theater owners have to take a close look at their content providers. Disney has a pipeline direct to the consumer. So does Warner. Ditto Paramount. And Netflix, Amazon, and Apple still have deep enough pockets to acquire the streaming rights for projects.
For all of these folks, good box-office results are nice, but they seldom move the company stock needle like decent global viewer numbers.
OK, Cruise and Cameron films may be off the table, but even they can be swayed by disappointing ticket sales and big front-end payments.
Hollywood is in the process of looking like a whole different place.
And all studios and theater owners have to do is look around and remember what Pope Francis said in Netflix’s The Two Popes: “When no one is to blame, everyone is to blame.”
As Cardinal Turkson observed, “The most important qualification for any leader is not wanting to be leader.”
On the positive side, with all the consumer streaming content demand and projects in the works, there’s plenty of work for indies, production, and postproduction crews.
It’s fun to go to the movies now and then, but it’s even more fun to see creative professionals fully employed.