The Cinema - An Expose'

What is the cinema's future? And who is going to lead the major studios in this era of the changing Hollywood business model?  Yes, the box office has grown year-after-year in the U.S. and globally but, if you pull back the curtain, the view is that of an industry under siege.

Paramount, Sony, and Fox all removed or replaced their top executives last year.  Warner Bros., Disney, and Lionsgate also had shake-ups in high management positions. Yes, consumers are still going to the cinema but less often, instead staying at home to view premium TV, stream media, or play video games.

To be fair, the cinema has survived other periods of technological upheaval and disruption - the end of silent movies, the introduction of television, the invention of the VHS tape, the VCR, and DVDs. Yet, all of these cinema killers proved to be victims themselves while the cinema survived. Now, emerging digital platforms and mobile technology are fostering new anxiety regarding the life of the silver screen. It is only blockbusters and franchise films coupled with higher admission pricing  that has kept the cinema in the black as admissions remain static.

The job of managing a major Hollywood studio has become very difficult. For example, last year only Disney made any real money. According to Cowen Co. an entertainment consulting group, total profits for the seven major studios declined by 15% or $700m vs. 2015. Paramount lost $445m and Sony took a $1b write-down on its movie business.  According to Cowen the problem is audience behavior - people are going to the cinema less frequently, and when going, they all go to see the same movies.

Today, for a film to be successful it must have a global audience. It must have over-the-top visuals and  totally engaging sound. This type of movie is not only expensive to make but to market. Studios routinely spend $120-150m to market a potential blockbuster.  When these high-cost movies flop, the studio heads feel the pain. Hollywood releases lots of what I call 'marquee fodder' or to phrase it differently, 'get-around-to-movies' - those movies that people don't get around to watching until its on home pay-per-view or one of the movie streaming services.

To make matters worse, the studios have lost a great portion of DVD sales - which have declined by 50% over the last 10 years. This shrinking home video market has forced the major studios to reassess movie distribution to an on-demand generation. Pushing studios to rethink the theatrical release window timetable.

Not all is bad and scary for the movie business. Admissions, while static, are constant and people still enjoy going to their local cinema - if it is comfortable, clean, and its on-screen presentation first-rate. For their part, the studios have only to look at Disney, which has bet, big-time, on its brands - Marvel, Pixar, and LucasFilms - and got huge payoff.

The cinema will survive the current onslaught but it will be different. Much more customer-centric and much more inclusive in the content it screens. Cinemas must use the latest image and sound technologies and lure moviegoers with showmanship and inclusiveness.