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Why is Movie Theatre Revenue Attendance Declining?

Posted By Barry Ritholtz On July 19, 2005 @ 8:01 am In Film,Intellectual Property | Comments Disabled

There’s been plenty [1] of chatter [2] about declining [3] movie theatrical revenue attendance [4]. You just know the MPAA is itching to tie this onto piracy [5] somehow and thus get some favorable legislation.

Let’s nip this one in the bud, shall we? 5 6 7 factors are hurting theater attendance:

1) Social factors eroding theater environment (talking, cell phones, babies crying, etc.); 
2) Sacrificing long term relationships with theater-goers for the increase in short term profitability (commercials, no ushers, etc.);
3) Higher quality experience elsewhere (Home theater);
4) Declining quality of mainstream movies;
5) Easily available Long Tail content alternatives (Netflix, Amazon);
6) Price;
7) Demographics: Aging babyboomers simply go out to movies less.

While content quality has indeed worsened over the years, it shouldn’t be the main concern this Summer:  As of late, there have been a spate of movies which have been either well-reviewed (Batman Begins [6]) or had good word-of-mouth (Wedding Crashers [7]) or incredible special effects perfectly suited to the big screen (Revenge of the Sith [8] or War of the Worlds [9]).

So what else might be the source of declining theatrical fortunes?

Well, how about the movie theater-going experience itself? The adventure of heading to a cineplex is becoming a less and less pleasant form of entertainment. Many of the headaches involved have been painfully detailed by Bob Lefsetz’ [10] readers (see their ordeals below [11]).

Note that we are not even discussing content quality at this point.

Then there are the adverts. A recent L.A.Times article – Now playing: A glut of ads [12] — points out that even studio executives were stunned by 15 minutes of commercials theatre goers had to endure after paying their 10 bucks:

"As head of production at New Line Cinema, Toby Emmerich is not your typical moviegoer. So when he wanted to see "War of the Worlds" the other night, his choice was between seeing the film in a theater with a tub of popcorn or watching it in a screening room at Jim Carrey’s house, with a private chef handling the culinary options. Despite this seemingly loaded deck, Emmerich opted for a real theater.

"I love seeing a movie with a big crowd," he says. "But I had no idea how many obnoxious ads I’d have to endure — it really drove me crazy. After sitting through about 15 minutes of ads, I turned to my wife and said, ‘Maybe we should’ve gone to Jim Carrey’s house after all.’ "

When DreamWorks marketing chief Terry Press took her young twins to see "Robots" this year, she said, "My own children turned to me and said, ‘Mommy, there are too many commercials!’ Now, when the lights go halfway down, I’m filled with dread. The whole uniqueness of the moviegoing experience is being eroded by all the endless ads."  (emphasis added)

So while the industry laments piracy, consider if you will why going to the theatre has become so much less enjoyable than watching DVD films on your own big screen in the comfort of your home theatre.   

The theatres have adapted Radio’s disasterous Hamburger Helper [13] approach: Short term increases in profitability in exchange for alienating your core audience, who eventually seek out a more enjoyable substitute. Quite frankly, I’m astonished the film industry has (contractually)
allowed theatre owners to degrade their copyright protected product by
diminishing the experience so dramatically.

As Radio has so painfully learned [14], the end result is a big fat Buh-bye!

To a large degree, this is  a zero sum game: The theatre chains losses are Best Buys’ gain; Is it any surprise that high quality home sound systems and large screen TV sales have gone through a ginormous growth spurt over the past 5 years? Even as the lowest common denominator [15] productions falter, Netflix [16] (and its rivals) allow home theater owners to enjoy a Long Tail [17] orgy of DVD content. 

Yo, theatre owners, when a segment of retail electronics called HOME THEATRE explodes in sales, that is your wake up call. You seem to have been oblivous, and missed the bell ringing.

Good luck getting the toothepaste back in the tube!

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UPDATE: July 25, 2005 7:37pm
At Slate, Edward Jay Epstein explains the numbers behind decreased attendance on increased revenue [18]. Fascinating stuff . . .

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UPDATE II: August 30, 2005 12:07pm
A weekend NYT article, titled Summer Fading, Hollywood Sees Fizzle [19] quotes an exec as blaming the quality of flicks:

"Part of this is the fact that the movies may not have lived up to the
expectations of the audience, not just in this year, but in years prior," said
Michael Lynton, chairman of Sony Pictures Entertainment, which had some flops
this summer, including the science fiction action movie "Stealth" [20]
and the romantic comedy "Bewitched." [21]
"Audiences have gotten smart to the marketing, and they can smell the good ones
from the bad ones at a distance."

 

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Sources:
Now Playing: A Glut Of Ads [22]
The Big Picture
Patrick Goldstein
L. A. Times, July 12, 2005
http://www.latimes.com/business/custom/admark/la-et-goldstein12jul12,1,35978.story

Lefstz Letter
June 5, 2005
(complete sourcing below)

Summer Fading, Hollywood Sees Fizzle [23]
By SHARON WAXMAN
NYTimes, August 24, 2005
http://www.nytimes.com/2005/08/24/movies/24slum.htm

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Continue to see Lefsetz’ readers critique of the theater experience . . . [11]

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Comments in response to the Lefsetz Letter about declining theatre going experience:

Steve Lukather:

Hey Bob, its MUCH worse in Europe. I went to a movie in London a few years ago and it was almost 45 MINUTES of commercials!! This was before this shit started to happen in the USA. I was freaked out! Pissed off, same as you. Fucking COMMERCIALS in a movie theatre!???? I like the trailers for new movies, thats cool, but I am with you 1000%. It is all about greed as the movie theatres or the people that made the movie you are PAYING to see are getting that kickback from the sponsors. Hell it is bad enough with "product placement" in the actual MOVIE! Look around in the backround of a scene and see a coke can, or what kind of car the bad guy drives..I could go on but hey.
I would rather stay home and crank it on my 5.1 system, smoke a bowl and have a pizza and some wine. Why deal with the traffic and the assholes in the theatre.How much is it for popcorn and candy????? 100 bucks? hahaha Parking..yeah THATS like 15 bucks now. Fuck that? I should have bought parking lots when I was young. i would bwe stinkiing rich. Its fucking pavement with minimum wage losers taking your money. PURE profit. hahaha
Anyway, have a nice weekend. I will. hahahaha
Luke

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Wade Biery:

There is not ONE person I know who has chosen NOT to go to the theater anymore, who chose that because of the MOVIES. Not one. They have ALL chosen it because the experience SUCKS!! A bowl of wet dicks……

Kids (as well as their self-important over-entitled asshole parents who taught them that they really ARE that fucking special) on cell phones, kicking my fucking seat and hollering at the screen, 20 minutes of previews and commercials and other dickhole nonsense that starts when MY FUCKING MOVIE is supposed to be starting, prices for junk food that would make a 50 year old hooker embarrassed, and the slack-jawed mouth-breathing progeny of a trailer park orgy 18 years ago running the whole thing, no fucking wonder people are staying away in droves. I know these days if I were to go to a theater, I’d end up punching people right and left, and that’s not what I’m into these days…..

Fuck those cock-cracks, they get what they deserve.

__________________________________________________________

Jason Miles:

We went to go see Crash a few weeks ago and the Movie went out of Focus 5 Times-I was the only one in the theater who got up to tell the manager that it was out of focus-people were just sitting there. I got up the 5th time and started to really complain to the manager. He then said if I don’t stop complaining he’s going to call the police on me.
Do you believe that!! I got my wife and we left I wouldn’t leave until they gave us our money back. The manager (20 something) started to then harass us and wouldn’t give us our money back until we produced our ticket stubs told him to take the ticket stubs and shove them.
i mean what a great movie experience-we missed the end of the movie and I know people were sitting there just watching a movie out of focus-So do you think people in the year 2005 are totally fucked up or what

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John Boylan:

Okay, okay, I agree, although I only pay $8.00 at AMC because I’m over 55. But how did you like "Crash?" I loved it. I suspended disbelief for almost two hours and had a great time. Plus, I was stimulated to have a long discussion about racial issues with my significant other. Plus, I was glad I have a house in the Hudson Valley.

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Michael Patterson:

When is the last time you went to see a movie in Europe? The commercials before the movie are amazing. I usually try to go early to make sure I see them.
I was living in NYC when prices hit $9.50 and my friends from the Midwest were shocked. I went out on the road with an artist at that time and paid $2.50 for a matinee in Iowa and $4.50 at night. How times change.
I now use bit torrent to find a movie if I miss it in a theatre. I am going to the SPOT conference in Denmark this week and I have 25 things lined up to download for the travel time. Of course it is all student films that use creative commons to let me download  it and use it as long as I follow the cc license.
I also have a bridge in Brooklyn for sale if you are interested.

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Barry Ritholtz:

I used to go to the movies all the time — Even my blog is called the Big Picture.  Then I started going less — and then less still and now — hardly at all.

My screen at home is better, the sound system is better, the picture is in focus, the floors aren’t sticky and the movies start on time. My seat is clean.
And there’s no idiot chattering away 2 rows behind me, and (this is my favorite) THERE’S NO CELL PHONES RINGING.  EVER.

Hey, but they are saving $6 an hour per theatre on ushers.

The commercials just add insult to an already declining experience.

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Damon Lawner:

I usually start screaming obscenities, and my wife looks at me funny and that quiets me down a bit. those fucking commercials. it’s worth the $14 to skip them, AND I don’t have cable in my home anymore for a reason. with a child on the way, I am trying to keep the bombardment from those fuckers down to a minimum.

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Al M:

re: the whole get to the theatre for the show, then
having to sit through 20 minutes of crap – i treat it
as shit buffer time. if you’re gonna see anything at a
multiplex, know that you don’t really have to get
there right on time. to do this reliably, you have to
go during the off-peak times, and it means you can’t
see movies opening day (but honestly, who the shit
wants to brave that gong show, ESPECIALLY for the dork
fests. i got roomies who went to the episode three
midnite screenings. freaks come out at night…).

course, none of this applies if you go to a decent
art-house cinema. could be i’m just spoiled, but if
you go to the Cumberland or Carlton cinemas here in
TO, you sit through 6, 7 minutes max before your
flick, and most of that being artsy trailers you
wouldn’t see advertised in usual channels anyway.

movies are generally crap nowadays anyhow; TV, too.
best to just download the stuff you know is good
(recommendation from a trusted source). i’ve always
felt that if you’re gonna waste your time on something
totally gratuitous, might as well surf some porn.
cheaper, and no one’s insulting your intelligent under
the pretext that it’s anything other than what it is.

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Mike Campbell:

Hahaha. Oh man, I was wondering when you’d get around to this one!

Tickets cost more, they’ve torn down all the best movie theatres (real estate value, don’t you know), the popcorn SUCKS – I don’t care that the average large bag of excellent popcorn has as many calories as a Big Mac, I’m not fat, where’s MY option? – and I’ve been subjected to fucking ads for years now!

I love the movie experience, almost as much as I love the musical experience. My brother hasn’t seen a film in a theatre for eons. He waits for the DVD. Truth to tell, he hasn’t seen a movie at a theatre in so long that he used to wait for the VHS – and that was BEFORE decent home theatre units…

The point is well taken; shouldn’t the addition of advertising before a film bring the cost of the feature DOWN? I do believe that was the original idea. Pretty much in the same ballpark as the old record company saw about "when there are enough manufacturing plants to meet demand, CD prices will come down," as they should have. That was a big fat lie too. Hopelessly sad and spectacularly short-sighted at the same time…

Music and movies both moving into the realm of the virtual experience. I’m sure you’ve been in more than one place where the appetite for the tech experience has known no financial constraints. It’s pretty amazing. I can’t drop $25,000 on a home system that takes full advantage of what’s currently available but if I could, maybe I’d go for it. It must be tantalizing. The idea that you could hang out in an environment, that you were totally comforable in – if you smoke, you could smoke (anything you wanted to smoke) – the popcorn wouldn’t have to suck, you wouldn’t need babysitters, you wouldn’t need to have someone killed to find a place to park, there would be decent music before the feature. Bliss.

You’ve hit the nail on the head again – greed, plain and simple – will be the downfall of this, otherwise, brilliant run at another chance for the current human cilvilization to prove it’s more than another momentary blight on the global landscape. Sadly, the handcart to Hell is voluminous and picking up speed daily. I sure hope the kids with the iPods can suss this out and put a stop to it before the Woodstock generation finishes fucking up their own previously Utopian ideal. Wankers…

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John Bertsche:

the arrogance of our big business is hurting all of us

the US is so hopelessly behind the curve that we’ll probably never 
catch up.

what do we actually make, other than  entertainment?

germany has liquid-hydrogen powered BMW’s

china is making fuel-cell powered cars

does anything we really NEED say "made in USA" ?

OK, I need a new pair of Tony Lama’s….I know I can’t get those 
anywhere else…

but I think I’ll wait till I’m in Nashville…they’re too expensive 
here…

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James Lee:

as usual bob, you hit the nail on the head.  $10.50 per ticket and then i ‘ve got to see commercials?   and stand in line to buy a eight dollar bag of popcorn on which they are making a profit of $7.75.    what the hell is going on here.    we don’t go anymore.  and it’s their fault.

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Alan:

POSSIBLE FUTURE?

I walk into my favorite restaurant. The hostess asks for my ticket.
"Ticket?", I ask?
"Oh, you haven’t heard about our new policy…It’s $15.00 for a seat near the kitchen, $25.00 for a seat near the door and $50.00 for the "preferred" tables. "OR", she goes on, "you can get a table for half-price if you’re willing to sit in our waiting room and watch a short entertaining commercial from our corporate partners."
I go for my wallet and my party is seated near the door.
The waiter arrives in a vest festooned with patches and buttons advertising Coke, AOl and Sony Music. He wears a Microsoft ballcap.
"Hi, I’m Todd, I’ll be your meal facilitator tonight.  Everyone want Coke?", he asks cheerily.
No, no one wants Coke…"What kind of beer and wine do you have?"
"All our beers are Budweiser, all our wines are Gallo but you have many choices within those brands. May I suggest the White Zin, it’s on sale?"
We make our choices and he hands out the menus.
They are unusually heavy with thick plastic pages.
"What’s this?, I ask.
"Oh, those are our brand new, improved, Interactive Choice Selectors from Microsoft."
I open the menu to the first page.
It’s a brightly lit list of the restaurant’s specials for next week.
I try to turn the page. It won’t turn.
"You have to read it first and vote for your favorite", Todd explains. "Then you can read page two."
I don’t even think I’ll be here next week", I tell him.
"No problem! Just vote anyway. It’s fun!"
I choose yellowfin tuna with the wand and hear a click as page two is released.
It’s a listing of what’s on TV tonight. "Vote For Your Favorite Show" it says.
It seems I can also vote for my favorite American Idol.
I go through three more pages of advertisements for Anti spamware, Computer Pop-up protection and a contest to name Brittny’s baby, sponsored by the Advertising Council of America.

I could go on but you get the idea…
It’s an ad, ad, ad mad world and it’s getting worse.
The golden geese of music, movies and who knows what’s next have been covered in posters and flyers and will die from suffocation.
The long run health of industries have been sacrificed for the fast buck.

You are correct again Bob. You, me, the public, we get no respect…We are Rodney Dangerfields all.
They love us only for our purchasing power and they treat us like we’re stupid.
Seeing the ironic truth that it is they who are stupid and shortsighted does not provide enough satisfaction to make up for what they have taken from us….the joys of a great concert experience and movie experience.  Fuck ‘em all.

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Joshua Freni:

I stopped going to the movies regularly when I got surround sound with a bass cube at home.  Why bother with the crowds, the cost and the commercials?  So I can see it on a big screen?  Plus, u can’t watch a movie in your underwear while drinking a six pack at the theatre.

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Comments courtesy of Lefsetz Letter [10]


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Sources:
Now Playing: A Glut Of Ads [22]
The Big Picture
Patrick Goldstein
L. A. Times, July 12, 2005
http://www.latimes.com/business/custom/admark/la-et-goldstein12jul12,1,35978.story

Lefstz Letter
June 5, 2005

‘Apocalypse Now’ for America’s movie theaters? [4]
William Bunch
Knight Ridder Newspapers
http://www.macon.com/mld/macon/entertainment/11967028.htm

Hollywood has been cruisin’ for this year’s box-office bruisin’ [3]
Michael Heaton
Plain Dealer Columnist, Friday, June 24, 2005
http://www.cleveland.com/entertainment/plaindealer/index.ssf?/base/entertainment/1119605870191140.xml&coll=2

Hollywood is lacking its usual summer sizzle [2]
By David Germain
Associated Press
http://www.fortwayne.com/mld/journalgazette/living/12022602.htm

DVDs producing renaissance for R-rated comedies,
Video sales bring in the big bucks
[24]
Patrick Goldstein
Tribune Newspapers: Los Angeles Times
http://metromix.chicagotribune.com/movies/mmx-0507100394jul10,0,5742633.story

Film revenues in decline: This season’s disaster movies [1]
Andrew Gumbel
Independent UK,  28 June 2005
http://enjoyment.independent.co.uk/film/news/article295292.ece


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/07/why-is-movie-theatre-revenue-attendance-declining/

URLs in this post:

[1] plenty: http://enjoyment.independent.co.uk/film/news/article295292.ece

[2] chatter: http://www.fortwayne.com/mld/journalgazette/living/12022602.htm

[3] declining: http://www.cleveland.com/entertainment/plaindealer/index.ssf?/base/entertainment/1119605870191140.xml&coll=2

[4] revenue attendance: http://www.macon.com/mld/macon/entertainment/11967028.htm

[5] piracy: http://www.jamaicaobserver.com/magazines/Business/html/20050709T220000-0500_83882_OBS_MOVIE_PIRACY_COSTING_CINEMAS_BIG_BOX_OFFICE_LOSSES.asp

[6] Batman Begins: http://www.imdb.com/title/tt0372784/

[7] Wedding Crashers: http://www.imdb.com/title/tt0396269/

[8] Revenge of the Sith: http://www.imdb.com/title/tt0121766/

[9] War of the Worlds: http://www.imdb.com/title/tt0407304/

[10] Bob Lefsetz’: http://www.lefsetz.com/

[11] below: http://bigpicture.typepad.com/comments/2005/07/declining_movie.html#more

[12] Now playing: A glut of ads: http://www.latimes.com/business/custom/admark/la-et-goldstein12jul12,1,35978.story?coll=la-headlines-business-advert

[13] Hamburger Helper: http://bigpicture.typepad.com/comments/2004/12/what_is_radio_s.html

[14] has so painfully learned: http://bigpicture.typepad.com/comments/2004/07/clear_channels_.html

[15] lowest common denominator: http://www.imdb.com/title/tt0299930/

[16] Netflix: http://www.netflix.com/Default

[17] Long Tail: http://longtail.typepad.com/the_long_tail/

[18] decreased attendance on increased revenue: http://www.slate.com/id/2123286/

[19] Summer Fading, Hollywood Sees Fizzle: http://www.nytimes.com/2005/08/24/movies/24slum.html?ex=1282536000&en=6eb6e8c28e216626&ei=5090&partner=rssuserland&emc=rss).

[20] "Stealth": http://movies2.nytimes.com/gst/movies/movie.html?v_id=295815&inline=nyt_ttl

[21] "Bewitched.": http://movies2.nytimes.com/gst/movies/movie.html?v_id=295630&inline=nyt_ttl

[22] Now Playing: A Glut Of Ads: http://www.latimes.com/business/custom/admark/la-et-goldstein12jul12,1,35978.story

[23] Summer Fading, Hollywood Sees Fizzle: http://www.nytimes.com/2005/08/24/movies/24slum.html?ex=1282536000&en=6eb6e8c28e216626&ei=5090&partner=rssuserland&emc=rss)

[24] DVDs producing renaissance for R-rated comedies,
Video sales bring in the big bucks: http://metromix.chicagotribune.com/movies/mmx-0507100394jul10,0,5742633.story

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