US Movie Market Summary 1995 to 2012
source: http://www.the-numbers.com/market/
Movie Industry Revenue The opportunities and challenges present for the movie industry in the United States affect revenues in multiple ways. The availability of new technologies for both big screen and home streaming events create avenues that both put pressure on distributors and offer new additional revenue opportunities.
Revenues for the movie industry in the United States have increased year over year in every instance from 1995 to 2009 except for one year: 2004 saw a decline over 2003. Since 2009 revenues have been in a slight decline. Various reasons exist for the recent decline.
The primary influencer over revenues is the perceived quality of movies. Recent movies such as Avatar, Transformers and the Harry Potter series drive consumers to the box office but a blockbuster or two within the same year is generally not enough to strengthen the whole industry. Market depth is as important as front runners in increasing revenues year over year. It takes five or six big movies and another seven or eight successful ones to push revenues higher the next year. Pressure to bring in the bucks in Hollywood is higher than ever.
Technological advances influence revenues significantly, and not always to the upside. While 3D technology provides for a more robust movie experience and higher ticket prices, it doesn’t necessarily increase overall revenue. A majority of movie goers remain skeptical about paying $2-4 more per movie simply because it is 3D. The movie industry is banking on theaters outfitting for a better 3D experience but consumer demand lags. Some research suggests that the new availability of 3D may actually keep consumers away from the theaters due to the higher prices.
The streaming of home entertainment brings movies to living rooms more economically than the movie theater where overpriced popcorn and soda pop is replaced by cheap chips and home-made tea. Providers such as Netflix are making the watching of movies routine with increased availability and affordable pricing. Netflix and other companies entering the streaming market pay huge licensing fees to movie publishers, creating a nice revenue source that can balance out the decrease in filled theater seats.
The streaming trend though will continue to put pressure on overall movie industry revenues as the availability of flicks increases. When the consumer has $8 to spend on entertainment and can choose between one theater ticket and a month’s worth of movies for the entire family, box office revenues have to give.
Throw in the convenience of home theaters and you see why home is becoming a preference for many consumers. You don’t have to drive anywhere. You don’t have to put up with screaming children or necking teenagers. And you are not getting all sticky and dirty from spilled soda on worn seats. Nevertheless, the movie experience in a theater setting cannot be replicated at home, so good movies will still put paying customers in the seats.
Another technological advance is changing the way viewers make their choices. Vending machine movies distributed by Redbox and others are capturing the pocketbooks of millions of movie fans. In the past decade, DVD sales were a boon to the motion picture industry but those sales are being replaced by the influx of cheap rentals. Redbox popularity has skyrocketed so much that a consumer knows where all the machines are located within the community, altering routes slightly to pick up a movie for the evening. Quality is sometimes compromised and availability of new movies lacks but $1-2 is worth the minor hiccups.
Ticket prices relative to other entertainment have also increased, putting pressure on revenues. Gone are the days when you could take in a movie for a few dollars. Now even matinees are going for $6-7. Ticket prices have increased due to basic inflation, the promotion of 3D and theaters trying to recoup the costs of venue upgrades. In the past, a consumer knew that tickets would be affordable and didn’t think about price. Now the price is taken into consideration, with the consumer comparing the $9-10 ticket with a nice meal out or a bag of groceries.
The recession of recent years has no doubt put additional pressure on ticket prices. Entertainment becomes less valued when money is tight and cheaper forms of entertainment prevail.
The increase of gasoline prices has a direct effect on the decrease of viewers streaming to the theaters. Consumers become reluctant to drive five or ten miles to the movie theater with the cost of $3-4 for a gallon of gas, particularly when home entertainment continues to proliferate.
The movie industry needs to continue to find new revenue streams as it takes advantage of its big screen competitive advantage. The tension the industry faces is creating a higher quality experience for the niche viewer versus providing affordable entertainment for the masses.
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