A Perfect Storm, The Future of Movie Theaters

I read a lot, at least three hours of my day are spent reading. Newspapers, industry articles, and social media. This week I was on Facebook and I stumbled across a heated discussion between a couple of special effect guys I know. They were discussing Netflix, commenting on how difficult it was working with them. The final statement made by one of the participants was that he had no choice but to deal with Netflix, because in his words “movie theaters are dead.”.

This took my breathe away. Here was a man who entered his field because he loved movies and my guess movie theaters coming to the conclusion that much of what he loved was no more. I kept thinking about his statement, it haunted me.

Here are some rather cold realities, no matter what the people at the MPAA are telling you. In the last 10 years, our population base in the has grown by10%. So, during that same period of time, the number of movie tickets sold in the U.S has decreased by almost 10%, that represents an almost 20% decline in tickets sold.

While gross U.S. box office has increased by about 10% in the last 10 years , it is entirely a result of rising ticket prices. If we are to look at box office adjusted to inflation, the U.S. box office has remained flat. The number f tickets being sold is decreasing, given the rise of OTT ie Netflix and Amazon and the plethora of viewing alternatives, the trend to continually rising tickets prices will collapse the market sooner than later.

The cost of making and marketing movies has risen on average of 30% over the past decade. The original Star Wars cost 9.5 million, the last Star Wars, Solo, cost 250 million. Add the collapse of the theatrical window. The theatrical windows due to the machinations of Netflix has changed from months to days. Netflix is working on a daily basis to totally close that window. Mark my words the studio will inflate the piracy dragon and use it as a pretense to collapse the windows totally.

The writing is on the wall and something drastic needs to be done and done soon. I strongly feel that one or more theater chains will go bankrupt in a period of five years. Theaters, will in order to survive, have to enter into a frenzy of spending, place HDR Large Screens, or look at offering picture delivery by enhanced virtual reality. There will be a push to spend money on 4D solutions. Spend, spend, spend will be the order of the day and some theaters will surrender in the face on an ongoing need to re-invest any profits they might have.

The studios will cease offering windows for any picture unless it is IMAX release or in an enhanced theater. Movies will stop being a place for families to spend a night out and a hundred year tradition will have been lost.

There is one person who can stop this, one person who can work to put the train back on the tracks, that person is the independent theater owner. The circuits have put themselves on a hamster wheel that will see them continually diminished. The time for action is now. No group, nor association is going to advocate for you. By their nature they are excessively bureaucratic and are riddled with personal ambitions. You, the theater owner is the solution. In Europe Pop-Up movies are attracting a pretty healthy and growing audience. People like movies, they do not like multiplexes.

The bottom line is some of your audience remembers what movie going used to be like, before the neon and glowing plastic monstrosities that are the modern multiplex. They know the movies they see on Netflix pale to the ones they used to stand in line for. They want magic and they do not want to be taken advantage off. They want to see movies presented in a space that says, hey this is special and they want to be able to afford it.

The theaters are not alone, far from it. Traditional retail models are being turned on their head, primarily due to Amazon. Sears International stores have collapsed, Payless Shoes are gone and boutique stores are being shuttered left and right. The industry overbuilt multiplexes in conjunction with the mall craze in the late seventies and eighties, and what we are seeing is a long term correction in an overblown market. Throw in the new streaming offerings and we see the walls of our cinematic Jericho come tumbling down.

I have been accused of peddling doom. That is far from my intent. My intent is to motivate a small group on independents into action. My intent is to spread the word how precious our movie going tradition is and must be protected. My intent is to let industry insiders ask themselves is there any true leadership within this business. I have come to my own conclusion.

We need as an industry to implement the following;

Development of alternative programming models
Founding of a studio collectively owned by the independents
A program which converts an auditorium int an eSports facility
A program that integrates Virtual Reality into an auditorium
A collectively owned concession supplier
If any of this is of interest please reach out to me, bill@usadrive-ins.com, I can point you in the right direction

The movies are being hit by a perfect storm. The studios are about to advocate for eliminating projection and putting in its place flat HDR enabled screens. Again, the solutions rests in the hands of the business descendants of the first Nickelodeon operators…you the independent theater owner.

Change must happen and it must happen now. A mediocre summer just might set int play a series of market events which could herald a severe market adjustment.

As a society we need movie theaters.