Commentary

Theatrical Movie Releases Face A Tough Future

Declining or weakly performing legacy media/entertainment businesses aren't news; print, radio, and in some ways music, have all taken major hits. 

Are we now adding theatrical movies to the list?

One key measure is attendance. From 2000 to 2019, U.S. theatrical movie attendance stayed relatively stable — from around 1.4 billion (2000) to 1.2 billion (2019) — all with steadily rising revenues.

Now all that could change, given the COVID-19 pandemic.

MoffettNathanson Research projects this year that movie attendance numbers will drop to 600 million -- about half of 2019.

While it will recover in 2021 to around 1 billion, this seems to be a turning point. The business is projected to steadily fall to around 900 million by 2024.

Much of this permanent lower traffic of theater-going customers has been predicted for sometime -- even before the rise of streaming.

advertisement

advertisement

All that occurred with the rise of better legacy quality TV transmission and content, as well as a wide variety of TV and movie programming on ever-bigger HDTV screens, which lured people to stay in their living rooms for entertainment.

In recent years, movie studios continued to focus on fantasy/sci-fi/action film franchises -- “The Avengers,” “Star Trek,” “Star Wars,” “Fast and the Furious,” “Jurassic Park,” “X-Men” to name a few -- catering mostly to a younger audience. Future screenings of those movies will still draw younger movie-goers.

But it's those smaller and mid-size movies, especially targeted to older adults, which will increasingly find tougher financial sledding in theaters. Expect more of those films to head to streaming services, such as Netflix, Hulu and Amazon.

The fight with rising streaming services will only get tougher.

All this will contribute to a slow sinking of U.S. box-office revenue from the $11.4 billion last year. Expect a $5.5 billion this year due to COVID-19, and then back to near typical yearly levels -- $9.7 billion in 2021. Profits will then sink to $8.5 billion in 2024, says MoffettNathanson.

“This would mark the lowest box-office levels since the early 2000s [$7.5 billion in 2000] and the first time we expect the industry to see a reversal of the stable growth over the past decades toward a structural decline.”

In addition to slow-declining attendance, key average ticket pricing won’t rise much -- just 1% through 2024 from 2019 -- going to $9.49 from $9.16. That’s not going to help matters.

More than one business analyst has said the pandemic will create permanent negative trends for a wide range of U.S. businesses. Entertainment is not exempt.

For example, early on in the pandemic, Wall Street investors were betting heavily against the world’s biggest theater owner, AMC Entertainment, driving down its stock. Though AMC theaters will open soon on a limited basis -- resulting in a sharply higher stock price in recent days -- not all analysts are ruling out bankruptcy proceedings.

The proof will come, to use industry jargon, if theater owner/movie studios can put “butts in seats.” What about eyes on screens?  That has always been a bonus.

Next story loading loading..