ARE WE WITNESSING THE COLLAPSE OF THE CINEMA

SINCE EARLY 2010 I'VE BEEN HARPING on the issue of boxoffice fatigue by the public.  Could we now be witnessing the tipping point in boxoffice attendance. Has the price for a movie ticket and concession products reached a point where it is no longer viewed as  "valued" entertainment but merely high priced same old ?

YTD the boxoffice is 20% below last year, equating to a downside figure of approximately $500 million. The question is whether this boxoffice disaster is merely a bump in the road which can be chalked up to a slate of lousy releases or are we witnessing the beginning of a structural shift taking place in the movie exhibition business?

Being so far behind 2010's results this early in the year -  and last year's performance was nothing to cheer about as ticket sales were down 6% from 2009's level - it will take a string of summer blockbusters and an over-the-top holiday season for ticket sales to reset on an upward trajectory.  And, unlike last year, when premium 3D admission pricing pushed the boxoffice gross slightly  over 2009 results the recent roster of 3D offerings have not garnered the public's enthusiasm nor wallet opening.

At the current pace 2011 will end the year at 1.04 billion admissions, which is tandamount to a drop of over 280 million as compared to 2010 and which will be at a level not seen in over 15 years.

 It's time for a revamp of the cinema exhibition business. This should be clearly evident to anyone and certainly for those, like myself, that make their living from this industry.  For over a year I have been pushing the notion that all movies are not created equal and thus should not have equal pricing.  There is no logical reason for boxoffice pricing to be a "one price fits all" scenario. The studios (and the exhibitors falling in lock step) should be tiering their pricing for films AT THE BOXOFFICE! And please, for the love of all that's holy, stop comparing the cost of going to the  movies with that of attending a football game or broadway play (as the folks at the National Association of Theatre Owners are always postulating) this argument is specious. As is the inflation adjusted speil. If computers were priced on an inflation adjusted basis the now gigantic desk top I purchased in 1995 ( which was way less powerful then a smart phone of today) would cost over $45,000. Some products can not be inflation adjusted and movies are one of them.  The trick (and it's really not a trick at all but run-of-the-mill marketing strategy) is to increase the volume of sales, ie more butts in seats at the cinema.

The current utilization rate at cinemas is about 13-15% or on average 85% of the seats are empty while a movie is being played. A concervative count puts the number of seats at cinemas in the U.S. at 9.6 million (275 seats times 35,000 screens). This means that on any given day movies are exhibited to over 8 million empty seats! It's no wonder that movie exhibition is such a marginal business. No industry could sustain this level of performance on a continuous basis. The volume of business MUST increase and the best, easiest, and most efficient way to accomplish this is by lowering the price of admission and the consequent lowering of concession pricing because the volume of business would be increasing, you know -  sell more popcorn but at a lower price and make more profit.

Given the current economic  situation, people (I truly believe) feel that attending a movie is too expensive and only of value with films that provide them a real out of home experience. Reducing the boxoffice admission price of the average film would increase attendance. And then it would be up to the exhibitors to lower concession pricing given the higher attendance volume. I may be naive, but this is one of the ways , and a must do, for the cinema to survive going forward.


Best and Happy Movie Going
Jim Lavorato