- Will cinemas still enjoy an exclusive release window for movies?
- How will cinemas compete in the post PC era ?
- What business model will ensure a cinema's success?
In my capacity as a media consultant I have been asking myself these and other questions regarding the cinema, and have come to believe that they not only need answers but that they are time critical.
In this first of a four part series on the Cinema 2015 I'm going to provide perspective on the current landscape of the industry, and insight into what moviegoers will demand in the future.
THE LANDSCAPE
Currently the cinema is split into two very distinct areas: the U.S. vs. rest of world.
THE U.S. CINEMA
The plunge in movie ticket sales over the last eight years in the U.S. is a very disturbing trend given an increasing populace coupled with Hollywood's re-introduction and intense marketing of 3D. This decline in admissions evidences a real dissatisfaction by the public who no longer consider a visit to the local cinema a value-based entertainment activity.
From its 2002 peak at 1.56 billion admissions, U.S. ticket sales have steadily trended down to where 2010's 1.34 billion admissions were 220 million below the '02 peak. In contrast, over the same period the average ticket price rose from $5.81 to $7.89 or 36% as box office grosses increased from $9.10 billion to $10.57 billion. Therefore the upward glide in box office gate. over the last decade, is solely attributable to higher base admission prices coupled with the recent 30-40% admission up-charge for 3D movies.
THE INTERNATIONAL CINEMA
In sharp contrast to the domestic market, the international cinema has increased by a breath taking 30% in just the last 4 years and totalled over $21.2 billion in 2010. This represented 67% of the global total and it is anticipated to exceed over 70% this year.
I estimate that the international box office, will grow at a compound rate of 5% through 2015 and by then represent over 73% of worldwide box office, as the U.S. remains static. However, the reasons for the international growth are fueled by economic and not structural dynamics, such as the:
- On-going globalization of the world economies
- Economic strength in emerging markets
- Only 5% of world population is in U.S.
- Earnings are growing 5x faster in overseas markets
So, even though there will be growth internationally the public's perception of "going to the movies" is changing.
PUBLIC'S PERCEPTION
There have been numerous studies and extensive research conducted on the public's perception of the movie going experience. Polling conducted by groups as diverse as the Motion Picture Association of America to Coca Cola have evidenced the public's sentiments which are endemic to all markets. For example, the Mitel Company, Ltd., a London-based consumer research group, published a study in May 2011 on the views of British consumers regarding the cinema. The study found that:
- 87% of consumers believe movie concession is overpriced.
- 76% believe admission pricing is too high.
- 59% indicated they would go to the cinema more if prices were lower.
- 51% wait for the DVD or pay-for-view releases for home viewing.
- 43% prefer watching movies at home.
These sentiments are stunning and reflect a universal belief that the current movie going experience is under-whelming and over-priced and highlight a growing tendency by consumers to view movies in more convenient and less expensive ways. The in-home movie viewing experience is getting better and more immersive and when coupled with the virtual explosion in content streaming the future of cinema exhibition does not support a steady state business model.
WHAT MOVIEGOERS WATCH AT CINEMAS
Moviegoers are very specific in their cinema attendance, which is highly skewed toward specific genres: action/fantasy, animation, and comedic films. For example, over the last 5 years the top 10 films averaged over 30% of the annual U.S. box office - but these films represented only 2% of the total released. This skewing is also seen in the international market where, over the last 5 years, the top ten films accounted for 26% of total box office.
Even more pronounced, the top 25 films averaged a whopping 42% of the U.S. and 40% of the overseas box office over the last 5 years! Film releases over the same period averaged 580 per year.
To win you have to be on the right side of change. You must start projects the second you see disruptive potential - and you should be seeing this now in the cinema industry.
Cinemas require a new business model that, for example, embraces modern sales and marketing techniques. Currently, cinemas charge the same price for all movies. Well, movies are products and like all other products are not created equal and their admission pricing should reflect this. Avatar and the 45th version of Harry meets Sally should not have the same price tag.
In short, the Cinema of 2015 will need to offer consumers a unique out-of-home entertainment experience, which must be centered around 5 must haves: quality, convenience, participation, value, and sensory stimulus.
In the next installment of Cinema 2015, I will discuss what current and future technologies are going to impact the cinema and if there is going to be a cinema - as we now know it - in the future.
Best and Happy Movie Going!
Jim Lavorato
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