Evaluating 2019 Box Office, Anticipating 2020 Streaming

The audience has spoken and studios and media companies are listening.

2019 has now come and gone and the box office picture is less than wonderful. According to comScore, the year’s theatrical revenue was down 3.6 percent from 2018’s final take, the biggest drop since 2014, which saw a 5 percent decline from 2013. The $11.45 billion in revenue is still substantial – the second highest of all time – but it’s still not good news that the numbers are in the red.

The problem comes, as pointed out here, from how the year was substantially lopsided, with a handful of massive hits using up all the oxygen in the room. Marketing campaigns for Avengers: Endgame, The Lion King, Frozen 2 and other top performers dominated the media landscape, becoming the only movies people were thinking or talking about and therefore seeing. Even franchise entries that studios like Warner Bros., Sony and others were counting on to succeed didn’t resonate for a variety of reasons.

Disney was, of course, the exception to that because of the strength of the brands under its management, including Star Wars, Marvel and Pixar as well as the classic films remade for new audiences. When the films it inherited from the Fox merger are added to the total, Disney accounted for a staggering 37 percent of the total.

One side effect of a single studio dominating the box office is that spending on marketing actions continues to change in significant ways. TV advertising dollars from studios dropped 6 percent, but social advertising has risen slightly from previous years as tactics evolve to match consumer media usage trends. It also reflects how the massive footprint of movies like Avengers, Frozen, Spider-Man and other titles means they benefit from substantial amounts of earned media, alleviating the need to pay in order to get people’s attention.

Adding even more context to the 2019 revenue shortfall is that actual tickets sold were down again year over year. Based on numbers here, the last five years look like this.

2019

2018

2017

2016

2015

Tickets Sold

1.247

1.311

1.225

1.301

1.323

(all figures in billions)

That means 5 percent fewer people went to the movies last year than in 2018, meaning the only thing that kept revenue from dropping even more significantly was likely higher ticket prices, especially for premium format showings of the most in-demand titles.

So that’s where we’ve been. Now what’s next?

2020 promises to once more bring plenty of changes and surprises to the media landscape, including film marketing and distribution.

For one thing, Disney doesn’t seem to have as strong a lineup this year as it did in 2019. No Star Wars, some uncertain Marvel titles that will have to prove there’s life after Endgame, not as many remakes and two original Pixar titles instead of sequels. In fact, there seems to be more focus given to the original series streaming on Disney+, including the word-of-mouth hit “The Mandalorian” and the upcoming Marvel titles. Prospects are so positive the “WandaVision” series was moved up to 2020 from 2021.

Still, four of the 10 most anticipated titles according to Fandango are Disney releases, and sequels/franchise entries occupy all but two slots on that list.

But it’s clear the next year will be one where streaming is the big story in consumer media. These streaming services are seen by subscribers, especially the younger demographic, as essential parts of their media lives. Those platforms are seen by studio executives as compatible with a retail model where people still buy Blu-rays and other physical products. Indeed, the way content comes and goes from streaming services at random may prove advantageous for physical sales as people decide they don’t want to rely on the whims of the controlling company to watch the movies or shows they love, or have hit their limit with the number of subscriptions they can afford or can manage.

Overall spending on streaming – including both video and music – is predicted to rise almost 30 percent in 2020. That doesn’t mean there aren’t potential landmines along the road to growth, though. There are concerns over how streaming companies may be engaging in anti-competitive behavior to lock in users. Those players who fall in between “massive” and “niche” may have trouble differentiating themselves in the marketplace, especially if their business model is dependent on advertising and have to factor that into the user experience.

All those companies, especially the biggest of the big, are spending more and more on original content to get people’s attention. When something like “The Mandalorian” or “The Witcher” catches on in a substantial way, though the different manners in which those two series were released – staggered vs binge – seems to have had an impact on how long that attention was held and may present an argument for Netflix to abandon its current strategy in order to foster longer-lasting relevance and get more bang for its bucks.

The increased reliance on original content is on display in the list of the most popular titles on Netflix in 2019, with just one licensed title making the Top 10. But the manner in which those titles are sold is worth noting as well. Netflix CEO Reed Hastings has made comments in the past about how he hopes for a day where the company doesn’t have to do any external advertising but can rely solely on owned-platform promotions. Given the top-ranked movie – Murder Mystery – received minimal TV and online advertising, you can see that aspirational goal moving closer to reality, though substantial spending still supports the original series.

Get to the point, already.

It’s impossible, of course, to accurately predict what the distribution and marketing picture will look like a year from now. It could be that a number of mid-range titles rise up to fill in some of the gaps left by the lack of massive blockbusters to keep sales and revenues afloat. It could be that people rediscover the joys of collectively experiencing a character drama or quirky comedy in theaters and create a new market for original films. The success of titles like Knives Out is certainly encouraging on that front.

One would think theaters would be the first ones looking to push that idea into becoming reality. While the companies that produce the films shown in theaters are doing just fine, the stocks of the theater chains themselves are a bit worse for wear after the all-or-nothing year they just experienced that, again, saw the number of tickets sold go down along with revenue. Fewer people coming in means not only less in ticket sales – which are shared disproportionately with studios in the important early weeks of release – but also less in concessions sales.

At least one streaming platform will likely call it quits after failing to acquire a critical mass needed to justify the expense of content production and/or licensing. Prices will probably go up for a couple of those platforms, both to recoup expenses and because operating in a monopsony means the freedom to do nearly anything you want with relative impunity.

Whatever happens, its likely the changes will occur at an even faster pace than they have in the past. That means the impact from those changes will be greater and the adjustment period even shorter, both for companies and consumers.

So buckle up. It’s going to get weird.

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