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Monday, January 31, 2011


Have you ever gone to a department or grocery store where all the products have the same price? That would be crazy, right? But that is just what happens when you visit your local cinema. All the movies have the same price. Avatar costs the same as the hundredth version of Harry Meets Sally. Why?

For films, the studios do not complete on price but on content. The more people that visit the cinema to view a movie the more successful it is. But isn't this contrary to all basic marketing principals! Why should I pay $9 admission for Avatar ( which cost $150 million to produce) and $9 for a film that cost $15 million to produce. Why shouldn't films be priced based upon their preceived value to the marketplace - where some films cost less or more to view then others. Not all films are created equal and therefore all films should not be priced equally as they do not have equal value.

There were over 560 films released by the studios in 2010, of which the top 50 generated close to 70% of the total boxoffice. Obviously, the 560th film did not have the same worth as Toy Story 3, the number one film. Perhaps if the studios tiered there boxoffice admission pricing more people would be motivated to go to the cinema. You know, less price more volume. Does this concept ring a bell, studios? Isn't this marketing 101.

Film distributors and exhibitors need to re-think their business model from top to bottom and any reassessment, of any business, starts with pricing, product value, and competition. Charging the same price for very movie makes no logical sense in modern market and price driven economies.

Boxoffice admissions in the U.S. peaked in 2002 and have downtrended since (2010 admissions decreased 6% from 2009). This trend can not continue if the U.S. is to have a vibrant cinema as no industry can sustain this level of customer loss and be profitable. The exhibition side of the industry is already feeling the impact of this and until and unless all the players in the movie industry change their business strategy and tactics the downtrend will continue. Re-thinking the pricing of movies at the boxoffice is a good start.

Jim Lavorato, President
Entertainment Equipment Corp.

Monday, January 17, 2011


Panasonic Corp., the large Japanese electronics firm, issued a press release stating that it was "working closely with the Japanese government" in establishing an international set of rules to govern health issues surrounding 3D imaging and its potential negative effects on individuals.

Fumio Ohtsubo, President of Panasonic, said "We have already started the process of establishing broad 3D health and safety guidelines for electronics manufacturers, content makers, and broadcasters". Health issues, mainly regarding the use of active-shutter glasses (ASGs)- these are battery operated glasses which rapidly open and close slats to create the illusion of depth - has surfaced before, but now major players in the electronics industry are taking an active role. For example, Nintendo has put out a warning that prolonged use of their new 3DS 3D hand-held game console could cause damage to the eyesight of children six years and younger. And last week, LG Electronics, the large Korean display manufacturer, said it was changing its 3D technology to address concerns that the current industry standard regarding 3D imaging could be a contributing factor to 3D related illness and discomfort.

LG stated it was going to introduce an alternative method of production that involves placing a film on the screen and using polarized passive glasses to view 3D TV. This is in contrast to the present industry standard of using ASGs. Ten firms have signed up to use the new LG technology - termed FPR for film-patterned retarder - which raises concern that a 3D technology war may be in the making.

On the other side, Sony and Samsung, users of the ASG technology contend that ASGs allow for the best 3D on-screen imaging.

LG has stated that it will cease manufacturing screens that work with ASGs, which they contend casue blurred vision, dizziness, nausea and even more serious issues like photo-sensitive epilepsy experienced by some 3D viewers.

Panasonic's Ohtsubo further stated that "regardless of which technology approach the industry takes, it has to address the health concerns surrounding 3D as there are worries by the consumer that 3D makes certain people feel ill and that it may not be safe for children".

I believe Mr. Ohtsubo is correct, and that wide-spread acceptance of 3D by consumers for in-home entertainment will not take off until these issues are resolved. Luckily for the cinema the vast majority of theatres use passive 3D glasses - the ASGs were just too expensive.

Best and Happy/Healthy 3D Viewing at your Local Cinema
Jim Lavorato

Sunday, January 16, 2011


I really hate to beat up on the cinema (again) but current trends point to a none to rosy future.

Last year the domestic B.O. totalled $10.3 billion, down about 3% from '09. However of this total the top 25 films accounted for $4.7b or 46%. Since there were 561 films released this indicates that there is a skewing for certain types of films while the studios are producing a lot of films people just are not interested in viewing at a cinema - or anywhere else for that matter. Oh, by the way, the top 10 films accounted for 27.5% of the total B.O.

However, the average ticket price was up 7% to $7.95, due entirely to premium 3D pricing (of the top 25 films 11 were released in 3D) as ticket sales were down 6% to 1.29b. And that comes to the crux of this post - the decline in ticket sales which represents the biggest problem facing the cinema industry. A 6% decline in demand for any product is hugh and a really bad omen. U.S. cinema ticket sales peaked in 2002 at 1.58b and have basically seen a steady decline reaching their lowest level in 2010. Not good given a growing U.S. population and the re-intro of 3D films, which Hollywood touted as the best thing since sliced bread.

Where are all the eyeballs going? Well, that's easy to figure, to every mobile device, game console, and social network, in a nutshell, the cinema is losing it luster and lure. If the top 25 films generate roughly 50% of the B.O. why produce/release over 500 films. And those were the same 25 films that generate the bulk of the international B.O. as well - which is even more skewed than the domestic B.O.

Something is wrong with this "picture", no pun intended.
The studios need to reassess their entire modus operendi, from what gets green lighted to the B.O. pricing structure. Why should it cost the same price to view Avatar as it does the 99th version of Harry Meets Sally, it makes no sense (a lot more on this topic in future posts).

With the obvious downtrend in movie attendance and the skewing of the B.O. gross to kid flix and high-impact, fantasy films the need to release 500 additional films (and lets face it, these films have no real product value in the video or TV market, except as filler and perhaps to keep Hollywood in full employ) is ridiculous.

Do I have the formula for box office success - NO, but making and releasing more films people are interested in viewing at a cinema (and we know the kinds of movies these are) and less films that play in empty theatres is a start.

Best and Happy Movie Going
Jim Lavorato

Sunday, January 09, 2011


How do you organize an event attended by more people then a fair sized city - you don't With over 150,000 attendees the CES is best discribed as chaotic.
I attended several seminars sponsored by the Underwriters Laboratory and their meeting room was #28951 - it took me awhile to find it. But as over the top as the CES is it is a blast to attend.

If pressed, to boil down the 2011 CES to one word it would be "mobility".
3D-TV was in mass but underwhelmed, as there was nothing we haven't seen before and there is no real content available thus no motivation for consumers to support 3D-TV as yet. Audio wasn't even an afterthought, just more iPod docks and some auto goodies.

It was all about MObility, big MO, which is understandable as it reflects the on-going transition of humans moving from a wired to wireless world, spurred on right now by high-speed 4G connectivity. Mobile devices - smart phones, tablets, gaming platforms etc. - were center stage. I predict that in less then 7 years, most of what people and businesses do on PCs will be in the cloud so only web connected devices will be required. From accessing financial data, to transaction purchasing (phone or tablet will act as credit/debit card), emailing, texting, and data receipt and transmission will all be done on mobile devices.

This trend is looming large and moving fast and it will have profound impact in ways that we cannot imagine.

Jim Lavorato