Will the industry learn the right lessons from its successes and failures this summer?
It’s a tradition at the end of summer to weigh in on what’s been learned from the genres of successful films and why they’re successful, and to conclude from that “what audiences want.” But that focus is too narrow and tries to prove too much. It also leads to a frenzied pursuit of what worked or didn’t work this season as an indicator of what will or won’t work in the future. Never mind that every film is different, even those carefully crafted to fit the mold of recent hits and regroup the same lucrative audience.
This leads to foolish generalizations—not least that “audience shrinkage” means America is “screen-locked.” But no one can tell you how many. Where? Across the vast expanses of the Great Plains and the South that made Twisters a success? Manhattan? Is 10,000 (Katzenberg’s constant) or some other number? That’s just nonsense, driven by anecdotes or self-serving corporate propaganda.
Instead, I will focus on the larger issues affecting the theatre industry each season.
The first problem is that not enough films are getting wide release, especially those that target a wide audience. This has been true throughout the pandemic recovery, with a near-even relationship between wide releases compared to 2019 and box office percentage compared to that year. This was true in 2022 and remains true today, exacerbated by the strike delays of 2023. This faltering release should be at the forefront of any analysis—it’s often part of the analysis, but it usually follows an obsessive focus on the fortunes of any film in the marketplace and a desire to tie it to the zeitgeist.
But that obscures the fact that there weren’t nearly enough wide releases in 2019 either — especially ones looking to make in the $50-$100 million range at the box office. In 2019, there were 39% fewer wide-release titles (1,000 screens or more) in this category than 2004, which brought in — wait for it — 39% less box office gross ($1.68 billion in 2019 vs. $2.75 billion in 2004). It’s important to note that the films remaining in the theatrical market in 2019 made the same average box office gross per title as they did in 2004.
Keep in mind that the 2004 numbers were at the height of the DVD boom—people were going to theaters, buying movies, and renting them at home. The decline in movies was a conscious choice to prioritize one market over another, not because studios were following audiences. They were trying to drive them to places the studios controlled. This has continued in the streaming era, and it costs everyone money.
But what’s even more shocking is the potential revenue that’s left on the table. Attendance in this category fell by 261 million people in 2019 compared to 2004. Using the average ticket price in 2019, that’s roughly $2.4 billion in lost revenue, not to mention the increased viewership and retention of films once they’re released on streaming platforms.
The major studios have a very high market share, giving them a lot of power over supply—73% in 2023, though down from its peak. This decline in share is partly due to the decline in the number of wide releases from the majors, forcing exhibitors to look elsewhere—something they should have done for their own benefit years ago, before they became so dependent on Hollywood to drive their success.
The results in the domestic market are expensive terms for films, limited flexibility in film scheduling—with distributors demanding every time a film is shown on a reserved screen whether another film might do better at a particular time during the week, no flexibility in pricing due to regional caps on theatrical revenue that set the de facto minimum that exhibitors can charge, and excessive minimum screenings that drain potential audiences in smaller markets and wipe out profits by the third week. With their market share and supply short, studios no longer really compete with each other on any given weekend or in general, leading to uniformity in booking terms, pricing, marketing expectations, and more.
In contrast, European theatrical markets with strong domestic film industries are back to positive EBITDA and cash flow, with many regions fully or nearly recovering based on box office in 2023 compared to 2019. Why? Because studios aren’t as strong and have to compete.
Domestically, we have a fragmented and inefficient film industry (outside of the majors). Too many films, from too many distributors, with too few resources trying to overcome too many gatekeepers, expenses, and other barriers to entry are the hallmarks of independent filmmaking today. This leads to a saturation of films in certain markets (with films only showing in New York/Los Angeles, for example), with many parts of the country underserved.
This was presented as a welcome surprise, but the fact that Twisters failed to do well by 60% underscores how much the industry underestimates its potential audience. If this is happening at this level of budget and resources, how much potential audience is missing out on a smaller film? The data is available, but it is not being used to target films to audiences and in the markets they live in. This data could connect theaters to distributors, films to audiences, and marketing dollars to support them. Instead, the industry relies heavily on “comparisons” as the primary data that drives distribution decisions and box office projections. This data is necessarily backward-looking and fails to take advantage of a wealth of consumer data that could be used to motivate audiences and improve expectations.
In short, the theater industry, at all levels, needs to experiment, iterate, and compete in programming, amenities, and pricing that will increase audience numbers and revenues.
And movies. Lots and lots of movies.
Patrick Corcoran is a former vice president and chief communications officer of the National Association of Theater Owners. He is a founding partner of The Fithian Group, which provides strategy and insights to the film industry.
