Hellboy’s failure to launch at the box-office put the cap on what has turned out to be the worst opening period for theatrical releases since 2013, according to comScore’s reporting. That does not bode well for 2019 as a whole, though hopes were up not too long ago since, as the MPAA recently revealed, 2018’s box-office revenue in the U.S. and Canada was seven percent higher last year than in 2017, with actual tickets sold up five percent.
The reasons for this rough start are many, including a lower number of wide-release films and the fact that the most successful title – Captain Marvel – didn’t come out until later in the quarter. Analyzing them in a bubble, though, doesn’t paint anywhere near a complete picture of the forces that are impacting how, when and why the general public is or isn’t watching movies.
Fewer, Bigger Bets
As the MPAA report states, the top 25 films brought in 54 percent of the 2018 box-office and nearly a quarter – 23 percent – was generated just by the top five movies, including Black Panther and Avengers: Infinity War.
That’s why the bad news for the early days of 2019 have been greeted with a bevy of articles and analyses wondering whether this week’s Avengers: Endgame, Lion King and Star Wars: The Rise of Skywalker will be enough to make up for a weak start and save the year’s box-office totals. Hollywood is hoping a half-dozen (or fewer) big releases will be enough to keep the upswing going.
The tendency of studios, which now operate more as IP-management companies than anything else, to focus on franchise titles and massive blockbusters means those are the movies theaters subsequently offer to audiences. That leaves just a few players to keep producing mid-budget titles *not* based on existing properties to fill in the non-IMAX screens still around. Even smaller movies are going straight to Netflix because the kind of independent theaters that served to offer these movies to communities are disappearing, forced out by unfavorable economic realities. That trend is backed up by the MPAA’s own data, which shows the number of theaters with fewer than five screens has dropped by over 1,200 since 2014 while 2,000 venues with over five screens have been added in the U.S.
Economic Hardship Looms
While the moviegoing public looks generally similar to the U.S. population in terms of demographic factors, diving in a bit more to the numbers shows that the majority of those buying tickets and going to the theater are white and under 40 years of age. On a movie-by-movie basis the picture changes a bit, but if you were to guess that any given person heading to watch a movie at a theater was a white 20 year old you’d be on safe ground.
The MPAA is touting how moviegoing is still the least expensive entertainment option when measured against going to theme parks, or professional sports, which is true. On average, according to the report, a family of four can go to the movies for $36.44 before popcorn, soda or other add-on expenses. A ticket price increase of two percent from 2017 is below the three percent rise in the Bureau of Labor Statistics’ Consumer Price Index.
That seems like good news until you consider that while actual wages have modestly grown recently, real wage growth – an increase in the purchasing power of that income – is almost non-existent and has been for the last 50 years. Inflation means those dollars aren’t going nearly as far as they once did, and most of the increase in actual pay is going to higher energy, housing and other expenses.
Netflix recently generated a number of headlines – and raised some eyebrows – when it announced select subscriber viewership numbers, including how Triple Frontier had been viewed by 52 million households and The Highwaymen by 40 million households. That follows its touting of 80 million households watching Bird Box a few months ago.
Those numbers may be largely meaningless free from context, but thankfully we have at least some of the context. Specifically, that the digital home entertainment market makes up 44 percent of the “global theatrical and home entertainment consumer spending” tracked by the MPAA, compared to 42 percent for theatrical moviegoing and just 14 percent for purchasing physical media. More people are expected to ditch cable subscriptions in the coming year in favor of streaming subscriptions, a market dominated by Netflix. It might lose some subscribers to Disney+ when it launches later this year as people are lured by all the Marvel and Star Wars content that service will offer, but it plans to spend plenty on the kind of original titles that will help it create an identity not dependent on licensed content. Streaming may have been a bit of a punching bag among exhibition executives at CinemaCon recently, but audiences are choosing with their dollars and time.
The fate of the theatrical box-office, though, seems tied to the persistence of “frequent moviegoers” identified by the MPAA. That category of the audience may be negatively impacted by the problems that have lead MoviePass – a big factor in encouraging people to go to the movies more often and try smaller films because the cost of taking a risk was minimized – to shed 90 percent of its subscribers over the last year.
Where Does That Leave Us?
Let’s walk through this simply:
If home entertainment is the biggest category of consumer entertainment spending, and
If Netflix and other streaming subscriptions are huge – and growing – parts of that home entertainment category, and
If the relatively low costs of those subscriptions continue to attract consumers through the power of original content, and
If broader economic realities mean consumers simply have less discretionary income to spend on entertainment, and
If streaming subscriptions offer more value per dollar than theatrical or physical media, then
It holds that streaming subscriptions are how the audience increasingly wants to consume movies and other media.
This is not to say there isn’t still a continued place for the theatrical experience. It’s just that if the only movies being sent to theaters are massive blockbusters while everything else is available via streaming and movie tickets are more expensive for a one-off experience, then that’s all people will have the choice to consume.
It’s a scenario that means those frequent moviegoers that are so important to the theatrical industry will evaporate. Not everyone can choose to – or has the means to – see Avengers: Endgame five times in theaters. Some will, but two years ago MoviePass was credited for broadening the number of frequent moviegoers, a category that will likely contract as it fades from the field. Other theatrical subscription services like those offered by AMC, Alamo Drafhouse and other chains may prop it up a bit, but it’s likely not to be the same size as what was seen before.
Viewing theatergoing and other consumer entertainment trends within the context of the broader economic picture is essential. A recession is likely looming in the next year or so, which will further erode the income people have to devote to this spending and so they’ll be looking to squeeze every last bit of value from what they can afford. Streaming is a powerful options because of the choices available within one service, and it’s almost guaranteed that market will soon see a shakeout, perhaps caused by an economic downturn.
There’s still a lot of time left in 2019 to see if the box-office can rebound from a week first quarter, but relying on just a few releases to prop things up means if any of those misfire – as Hellboy did – the odds of a down year go up exponentially.