What Happened To The Movie Theater?

Everyday I check out my various news feeds. I really try to drill down on whats the latest in motion picture exhibition. My feed is always filled with stories about bigger screens, some theater in Switzerland is putting in beds, new sound systems, yada yada yada. It ends up being all white noise, because everyone is moving to luxury, everyone seems to be moving to chicken tender and not many are focusing on how we got to this problematic moment in time.

There are a couple of warning shots fired that showed exhibition as an industry was going to have problems. The first being the expanding of the number of theaters a movie could get released into. On June 20 Jaws opened across North America on 464 screens. 409 theaters in the United States, the remainder in Canada. The studio combined this wider release pattern with the movie’s then even rarer national television marketing campaign yielding a release method virtually unheard-of at the time. Universal president Sid Sheinberg along with MCA Chairman Lew Wasserman reasoned that nationwide marketing costs would be spreadout at a more favorable rate per print relative to a slow, scaled release. Building on the movie’s success, the release was subsequently expanded on July 25 to nearly 700 theaters, and on August 15 to more than 950. This strategy continued until we reached a high water mark of 4200 theaters.

Jaws earned during its first $7 million weekend and started turning a profit for the studio after two weeks. In just 78 days, Jaws overwhelmed The Godfather as the highest-grossing movie , it was the first movie to earn $100 million in American theatrical rentals. Its first release ultimately brought in $123.1 million in rentals. Theatrical re-releases in 1976 and 1979 added to its total rentals bringing it t $133.4 million.

Enter Star Wars

On May 25th, 1977 a small movie from 20th Century Fox and the creator of American Graffiti, George Lucas opened up in 32 theaters. Fox demanded that the movie get placed if theaters wanted to screen The Other Side of Midnight. Word of mouth hit and hit hard on this movies, and when it opened to wide release in June the movie blew away all box office records. Stars Wars expanded to 1,750 screens and stayed in theaters for over a year .

Now everyone started getting greedy…

Malls started expanding, and the real estate mavens saw the lines in front of downtown theaters and said “I want that” the circuits expanded on the back of sweetheart rent deals and large amounts of tenant improvement money. Circuits started consolidating. These circuits were run by clever men who had no idea what kind of deck of cards they were building. They were smart, creative, driven and unfortunately terribly corporate. The era of the movie showman started to gasp for air as the industry shifted to mall based theaters.

Now something had awoken in the dark hearts of Hollywood. Agents who had been in existence since the 1930’s, middle men who did not really produce anything, wanted to get their piece of the new movie economy. In the era of Michael Ovitz and the rise of the Creative Artist Agency, the concept of movie packaging was perfected.

The first thing that you have to realize is that agents work on percentages, silly percentages. If a star makes more, well they make more. If a movie is put together based on their putting together talent elements that they have control of, well they get to charge another percentage and charge a packaging fee. In the early 1960’s MCA’/UNIVERSAL’S fingers were slapped by doing similar things and were forced to disband their talent agency. Packaging has been brought to light as of late as a result of the dispute between the Writers Guild of America and the agencies.

Here is how packaging works. A studio or network is looking for a certain type of movie or TV show reaches out to one of the big six agencies and say. Hey we want a movie about aliens kidnapping the world’s most famous YouTube cat. These six agencies also known as Packaging Agencies , they control the best talent. The studios let these agencies know the concept of a proposed movie, along with the budget range, and asks each of these agencies to “bring them a tailor made movie”.

Although there are thousands of agents who claim to be part of the movie business there are only six agencies each that can (A) not only sell a movie script or get an A list actor in a role but also (B) create movie packages with talent they control and get the studios or someone else to pay for it. Neat trick eh.

Here are the agencies that are capable of doing this kind of package

APA (Agency for Performing Arts) / 3,400 Clients, 325 Agents
CAA (Creative Artist Agency) / 5,000 Clients, 1,500 Agents
ICM (International Creative Management) / 4,000 Clients, 450 Agents
PARADIGM AGENCY / 2,500 Clients, 350 Agents
UTA (United Talent Artists) / 3,000 Clients, 500 Agents
WME (William Morris Endeavor) / 3,000 Clients, 2,000 Agents
Higher budget mean bigger packaging percentage. Budgets are pushed higher, box office rental increases ….everyone except the agencies get hurt. You cannot cross the agencies because they control all the talent necessary to make movies, also they really don’t care about making good movies…they just want fees.

Of course there are other elements leading to the downfall of the exhibitor, but I think the wider release patterns, explosion of the circuits and the consolidation of packaging power by agencies lie at the core. What would ideal is reminding all the players of the rules of free enterprise, and an insistence of playing in a free and open economy.

But the exhibition industry, since the beginning has always struggled with this.