Floating Hope: Searching for New Movie Theatre Economy

Last week, The Historic Artcraft Theatre had six sold out shows of HOME ALONE, now HOME ALONE was released in 1990 and 27 years later it is capable of selling 3,738 admissions on one weekend. This week they will do similar numbers with A CHRISTMAS STORY. People want to go to the movies, they love going to the movies……they just don’t like Hollywood anymore.
It is important to understand this completely….it’s not you…it’s the person you are dancing with. Most of America thinks Hollywood is a bunch of sex crazed, narcissistic, Kardashian loving elitists. Frankly they have a point. This week I screened “7 Days In May” starring Kirk Douglas and Burt Lancaster and directed by John Frankenheimer, a great movie. After I had finished all I could say is what the heck happened to Hollywood.
Anyone in Hollywood who tells you they’re not scared silly about the future of their business is lying to themselves and others. It’s been 128 years since the Lumiere Brother, W.L.Dickson and Edison ushered in a wonderful new form of mass entertainment. In those years we have been given Casablanca, Gone With The Wind., The Wizard of Oz, Blackboard Jungle, Splendor In The Grass, On The Waterfront, Best Years Of Our Lives, Grapes Of Wrath, Bonnie and Clyde, Little Big Man, The Godfather, Close Encounters of The Third Kind and the first two Godfather films. I was lucky to have seen Lawrence Of Arabia on a Cinerama screen, even at its size the movie was hardly contained on that huge screen. It was consuming, it was entertaining and it was so much bigger than life. Today we have the Avengers, Spiderman and Justice League, shallow empty movie trifles that soon with be lost in our cinematic memory.
My deep concern is that if the theatres keep following in lock step they will meet the same fate. Things are changing and audiences are looking back at once once I personally do not think Hollywood can change. Studios, agencies and the major exhibitors are much too big, they move very slowly and they are intensely bureaucratic. The MPAA and it’s archaic rating systems lords off an industry that is dying on the vine and they are doing nothing about it.
The studios are no longer bastions of free enterprise or are entrepreneurial at all. Hollywood has evolved into a system of making upfront fees with no risk. In many ways they have become like the government with the ability to increasingly tax exhibitors with ridiculous movie rental splits, that really have no place within an free free enterprise system. If I go to a restaurant and if their food costs are anymore than 27% they are doomed to fail. Now the studios do not mind charging for essentially is a raw cost of 60% of box office. The remaining 40% must pay for staffing, building construction costs and operational costs. They expect money to be made in concessions and then I have seen the studios attempt to grab a piece of concessions if the concession and the tickets are bundled some how. What baffles is me is that most movies are financed by third parties and Hollywood has not problem charging a 35% distribution fee after taking all the expenses off the top before paying the people who have put up the money to make the movies. Now imagine if the theatres could deduct their operational costs prior to sharing with the studios…..
But the financiers like the Chinese and others are getting wise to their tricks. Chinese money is drying up. Wandai Dalian, owner of AMC has had its hands briskly slapped by Chinese regulatory authorities. Investors have lost interest in the traditional movie model and are looking for greener pastures. They have gotten wise to the Hollywood accounting that turns a blockbuster into a movie loser.
The box office is flat, no matter what the MPAA says…any growth is being driven by higher tickets prices, the last night the admission numbers are decent was in 2004 when there were 1.5 billion admissions. There are some blips driven by the latest release of the Star Wars saga but for the most part the numbers are lagging sadly. Studios are foolishly looking towards streaming to make up the loss of DVD and theatrical revenues. Frankly they are living in a fool’s paradise.

Streaming is not the end all and be all. With the impending tragic loss of Net Neutrality and the declining revenue of Netflix, they really only make a 2% profit. Amazon is about to make a major move to secure market dominance with the announcement of the production of the Lord Of The Rings series. They have committed $1,000,000,000 to that effort. They have waited until Netflix stumbled and they have made their move. Amazon has wisely understood the place that theatrical releases. They also understood they were really in the virtual mall business.
Studios are so fearful of losing home entertainment revenue they are making very poor decisions in collapsing the theatrical window. They in the process are turning their movies from events, from happenings into digital commodities that will quickly be lost in the noise of the internet. It’s all so very not thought out. The best ad for a movie is a theatrical release with a window…period. Amazon gets this….but Hollywood does not. They have fallen on their own swords of false accounting and are seeing the revenue loss in theatrical and they are not smart enough not to trust their own numbers. It’s totally baffling.
The internet is a noisy crowded space, Netflix is a crowded un-navigational mess. John Wayne one of the greatest movie stars, even has one movie on Netflix, The Longest Day….but if you want a documentary on making pasta on the steppes of Outer Mongolia, Netflix is the place to go. It has become a bargain bin of programming that really has little order to it. I do not think Hollywood is going to find streaming the shangri-la it is hoping for.

Mark my words the studios are going to collapse the 90 days windows and the movie exhibition industry will be sold out by the major chains like AMC and Regal who are being courted with promises of digital revenue share. This is causing some real organizational issues in organizations like NATO. There is a reason that AMC has announced a streaming service. Comcast through Universal has formed team whose sole purpose is to streamline movie distribution. Translation…..put movies directly onto Comcast cable pipes asap.

Like all bad marriages, the quicker the parties come to the realization that it just ain’t working and end it …the better, so in quick fashion here are my recommendations;

Form a collective buying aggressive buying group that only serves the independent theatre and small circuit
Create an industry committee to liaison with independent distributors and large entity alliance of producers like the Independent Film and Television Alliance.

Work with companies like DCU to establish a virtual streaming platform for independent theatres

-Ask theatres like the Nitehawk, Belcourt and the Historic Arcraft Theatre to form a committee to define the standards for operating a regional repertory theatre and publish a industry wide standard.

Ask folks like Vincent Guzzo in Canada and Bill Campbell in the US to provide industry background and intelligence on a weekly basis for the industry.

Understand that drive-ins are about to re-emerge in different forms, ask folks like Jim Kopp to widen membership in groups like UDITOA to accept pop-up theatres.

I shall walk in my town tonight, people shall be lined up to watch A Christmas Story. A marquee with glow, the smell of locally grown popcorn will waft down the street. I will see the marquee flicker and I will know absolutely that there is hope.