Tuesday, January 3, 2012

I Know Why Movie Attendance And Revenue Are Down

With 2011 coming to a close, the latest movie industry report declares that attendance was down 4.2% and US revenue was down 3.4%. And from the Bloomberg article comes the reason for this downturn, "'It’s the movies themselves, it’s the economy and it’s all the competing technology,' said Paul Dergarabedian, president of the box-office division of" So my question is, are these the real reasons for the downturn or is something else at play. Let's dive deeper.

1. It's the movies - we didn't have an Avatar this year, but we did have a Harry Potter and Mission Impossible. Were there less movies distributed in 2011 or more bad movies? Regardless, people like to be entertained and the movies are a release from reality. And yes, even bad movies get watched. Perhaps people don't care as much for 3D, but a number still attend 3D movies and pay more for that right. So I don't believe the drop in numbers is about the movies themselves.

2. It's the economy - the cause for every problem these days. But in the early days of movies, a bad economy and job loss was a reason people went to the movies. It was an inexpensive way to escape our problems, even if it was just for a couple hours. So why is the economy the culprit now? There is more here then meets the eye.

3. It's competing technology - blame on-demand, blame the internet, and you may be right. It is less expensive to watch a movie this way then at the theater. And with new releases hitting the smaller screen just 3 to 6 months after its initial release, the wait to watch is not so long. It is a reason for shifting viewership, but it also represents money back in the distributors' hands, simply through another window. But it shouldn't be blamed for lowering theater attendance. People like to escape their homes too and the movie theater offers the bigger screen, better sound, and especially that key word, "escape". Sure some indie films are direct to TV, but they are not the cause for lost theater attendance.

So why is attendance and revenue down? Perhaps, the cause is price elasticity of ticket prices. The cost for a family of four at the movies for tickets alone nears $40. In the cities, it is even higher. Could a rollback of 50% in price of a ticket encourage an increase in attendance? Perhaps a marketing test is in order. I believe that the price of tickets are too high, especially when you consider the other revenue that theater owners are gaining.

When ticket prices were lower, there was also no advertising on the screen. Today we pay a ton more to sit and watch multiple commercials. Is this revenue being separated from the revenue theater owners are receiving from receipts. Perhaps the bigger picture shows that theater owners are actually seeing total revenue growing. It's a true number I would like to see. By lowering ticket prices, attendance should rise significantly and advertisers will likely pay more for more eyeballs. A win-win scenario.

Lastly, one can not blame what you can't control. Technology is here and will continue to improve the home screen experience. But more can be done at the movie theater to keep customers coming in for more. How about more IMAX screens for popular movies. A 3D experience without glasses, and lastly the rise of the 4D experience with vibrating seats and other special effects in the auditoriium to make the movie watching experience more immersive. And make the theater a destination with more retail opportunity to buy items featured in films. As kids leave a movie, they are going to want to buy a Harry Potter wand or an Alvin plush doll or even a Mission Impossible poster. It is an opportunity that seems to be largely ignored.

It's easy to blame the movies themselves, the economy, and the technology; but the solution for theater owners is in your grasp. Don't blame, lead the change.

1 comment:

  1. Ticket prices, like medical costs and college tuition, have outpaced inflation.

    I remember biking down to the theater with my friends and catching a matinee, the summer when I was 12 (1981). A child's matinee ticket was $1.50 back then. Adjusted for inflation, that would be $3.73.

    My dad tells how he used to go to the movies in Los Angeles as a kid. For 25 cents he got a bag of popcorn and 4 hours of features, serials, and cartoons on a Saturday afternoon.

    25 cents in 1948, adjusted for inflation, is $2.35.

    But let's remember that the studios have upped their demands on theater owners. For many theater owners, even if they sold the tickets "at cost," it would still be very expensive.