The Reel Blog

NPR's Morning Edition aired a curious segment Monday morning. While audiences have been showing up in droves for the likes of Paul Blart: Mall Cop, they've apparently been immune to the aroma of freshly-popped popcorn as they head to the auditorium.

More than $4 billion has poured into the movie box office so far this year. That's up 12.5 percent from this time a year ago. Though the lagging economy has slowed sales some, Hollywood is still enjoying a good year. But that's not the case at concession stands.

Imagine my surprise. The story goes on to feature Jeff Bock from Exhibitor Relations, saying that, while box office was up strongly this year, concession sales were down as much as 10%. Now, as anyone who know theater owners can tell you, they are not exactly free and easy with revenue data on concessions, good year or bad. So, considering news this bad, I had to find out where Jeff had gotten his data. And it turns out he hadn't.  Gotten data.

He did, however, have an anecdote. He had been told by an exhibitor at ShoWest that concessions were down by the amount he had cited. A couple of other people in the industry had told him concession revenues were flat.  Where they got their data we don't know. Perhaps it was their own company's revenues. Maybe somebody had told someone who told them.

Here's where I get my data. There are five U.S. theater companies that are publicly traded, AMC, Carmike, Cinemark, Marcus and Regal (to be precise, AMC is not publicly traded, but some of its debt is) and must file quarterly statements with the SEC. There you will find, lo and behold, actual revenue figures for box office, concessions and other operations. They tell a very different story than the indifferently-sourced NPR report. The quarterly 10Q and annual 10K SEC filings can be found on the websites of each of the exhibitors named above.

For the first quarter of this year, the five companies show concession revenues up between 5.13% and 8%, which is higher than the box office increase for three of the companies. Those five companies comprise 17,000 of the 38,800 screens in the U.S. and operate in every region of the country, urban and rural. We can, I think, consider their concession numbers fairly representative of the industry as a whole.

The report also noted that box office is up 12.5% year-to-date over last year, which is also incorrect. Major news outlets have consistently gotten this number wrong all year. The real figure is 10.9%. If you account by an  "iindustry year", as Nielsen EDI does, the revenue from the first four days of this year are not counted as 2009 revenue, which leaves us 6.9% ahead of 2008.

Interesting little quote from Blockbuster CEO Jim Keyes:

As if crushing debt, the recession, Netflix and Redbox weren't enough, Blockbuster Inc. has a new foe: the booming box office.

That's according to Jim Keyes, chief executive of the struggling but still massive DVD rental chain, who on Thursday blamed much of his company's weak performance last quarter on the growing number of people watching movies in theaters and not their living rooms.

"We estimate nearly 3 million more people are going to the movies each week in 2009 [than 2008]," he said on a conference call with analysts. "This has been pulling traffic from Blockbuster stores."

The industry-wide digital cinema roll-out moved a step closer with Sony's announcement that it had signed a VPF agreement with Digital Cinema Implementation Partners (DCIP), the consortium formed by AMC, Cinemark and Regal to manage their transition to digital. That leaves only Warner Bros. among the major studios to be without a VPF agreement for the second phase of the digital cinema conversion.

"We're in the middle of negotiations," Warners domestic distribution president Dan Fellman said. "We're close. So we might be the last one, but we're going to get there."

Sony signed its VPF pact with Digital Cinema Implementation Partners several weeks ago, but the news was delayed pending internal review of the formal announcement.

Through VPFs, studios volunteer to pay the equivalent of print costs for years after switching to digital distribution as a means of defraying most exhibitor costs to convert auditoriums. Sony refers to its VPF as a "digital conversion fee."

For Warners, set to release more films this year than any other distributor, the cost of a VPF is likely to run considerably higher than that for studios with lower annual output. Sony also is among the most prolific film distributors.

Of course, the roll-out will depend on the unlocking of the credit markets as the DCIP 14,000-screen deal alone will cost in the billion dollar range. Then comes the Cinema Buying Group's (CBG) approximately 7,000 screens - a more complex deal despite the smaller size owing to the number of companies, the diversity of markets, and types of theaters involved.

BusinessWeek has an article today explaining to its readers that movie theaters just might be a good investment.

"People have assumed for years that home theater and DVDs were killing off the business," says money manager Steve Birenberg, president of Northlake Capital Management and the media sector blogger for market research firm SNL Kagan. "Now we're seeing that's not true and it's much more stable and sustainable than investors thought."

Over the recent Easter weekend, the top 12 films brought in $130 million, up 61% from the same weekend last year. The previous weekend, which took in $148 million, was the biggest draw ever in April. And that comes after first-quarter receipts rose by 10% to 15% from the same period a year ago.

Now they're seeing that's not true. So are DailyFinance and Barron's (subscription req'd). Barron's published an investment note from Wall Street analysts at Piper Jaffray, which says, in part:

Year-to-date the domestic box office is up nearly 15% despite the battered consumer, lending credence to our thesis that solid content, escapism and low ticket prices relative to most other forms of out-of-home entertainment will combine to fuel solid box-office performance throughout 2009.

Double-digit increases in box office certainly do lend credence to that thesis. So do three straight years of gains at the box office. To be fair, though, it took the three previous down years for analysts to begin predicting the untimely demise of the movie theater industry. Both perspectives ignore the fact that the movie theater industry is on a three-decade path of modest, sustained growth.

The current ride of big box office and attendance increases is great fun and a rare bright spot in a tough economy. It's important to remember, though, that it will not always be this way. There will be years of slower growth and there will be years when attendance shrinks, but it's the long term trends and fundamental strengths of the business to keep an eye on. Trust me: the movie theater industry has been dying for 40 years and will continue to do so for as long as I can imagine.

What a way to go.

As you may have noticed, there's a bit of a controversy right now over who will shoulder the costs of disposable 3D glasses.

Marketplace has the story.

Some people think the future of the movie industry is in 3-D films. But a battle is brewing between Fox and theater chain Regal Entertainment Group over who will pick up the tab for 3-D glasses. Jill Barshay reports.

Our good friend George Solomon continues to tell it as he sees it.

Listen in.

A little imagination, that's all I'm asking for...

I look forward to "elbowed with a PG-13," "noogied with a PG," "tickled with a G," and "defenestrated with an NC-17".

Quite, seriously, if you're not a parent, why do you care what the rating is at all? The ratings really aren't talking to you. If you're under 18 - or 17 - I get it. Every rating that doesn't let you into the movie of your chocie is unjust. And who wants to go see a movie with your parents that you'd rather see with your similarly under-aged friends? I'm nearly 50 and I still don't want to see movies with my mother.

But this is the bargain movie theaters and distributors made with America's parents. The Ratings Board rates a film as honestly as it can (and being composed of humans, it will make decisions that other humans, being humans, will disagree with), the distributors and movie theaters post those ratings clearly and the movie theater does its best to enforce them.

This system, of necessity, is not perfect. It requires an imaginative empathy with the concerns of a diverse population of parents with concerns that vary by region, income, education and religiosity. It also requires a certain degree of movie literacy from parents. They need to understand the broad range of films that may come under a PG-13 rating, or an R, and use that knowledge to compare the rating reasons that accompanies each rating. An R for "some sexual humor" will not be directly comparable to a film rated R for "sequences of grisly bloody violence and torture throughout, and for language".

The question I asked earlier, though, still stands. If you're not a parent - and not under 18 - why do you care what a movie's rating is?

I would be deeply remiss if I didn't bring your attention to this post on the digital cinema self-financing panel at ShoWest.

Sperling Reich must have the fastest typing fingers in the West to nail down as much detail as he does here from a fast-paced lunch-time discussion.

When Macdowell turned to Solomon to get an exhibitor's opinion the discussion turned somewhat acrimonious, in a friendly sort of way. "I happen not to be a proponent of 2K [projector resolution] and I have not been a big proponent of integrators," said Solomon. "I believe we should be able to band together and form our own consortium and go negotiate for our own VPFs. I don't believe in giving a cut to an integrator."

CBG's Campbell, like Christiansen, isn't as down on integrators as Solomon and is of the opinion such third parties might be necessary, especially in the short-term. "Self financing is not going to happen for a long time," said Campbell. "I think self-financing is going to be done through the integrators and if we have to pay a small fee of the VPF then so be it."

Solomon, whose smooth New Orleans drawl had Macdowell comparing him to a slick southern lawyer, is not the retiring type and is almost always quotable. Given the chance to air a few thoughts, he let his grievances fly. His comments received the biggest audience reaction by far. "If 2K is the way we're going, then 35mm is better," he argued. "Apparently digital helps distribution, but it doesn't do a thing for exhibition. If distributors want to go with 2K then give us the money and we'll get on with it, otherwise we're going to have to go at our own pace. If distribution wants 2K, give us the money!"

Solomon went on to get a huge laugh when he recounted asking one of his regional managers, "What's the difference between a 35mm film print and a digital cinema hard drive? He said, 'about 40 pounds'."

Levin attempted to diffuse Solomon by pointing out that two of the studios were present and on stage, ready to talk about giving Southern VPFs, but Solomon got the last word in during this exchange as well by snapping back "I know, but I have to figure out how I'm going to pay for [3D] glasses with one of them."

In one instant Solomon made public the rumor that Fox had been telling North American exhibitors that after "Ice Age 3" the studio would no longer be paying for disposable 3D glasses. Presently none of the studios pay for disposable glasses in Europe, though they have been footing the bill in the U.S., Canada and at times Mexico.

 Read the whole thing. It will be well worth your time.

Paul Dergarabedian chats with some ShoWest award winners.

ShoWest 09 marked a change in  programming. Monday has in recent years been "International Day," but with the increasing interconnectedness of the industry, it no longer made sense to separate out the international programming. Hence, Monday became the official opening day instead of the traditional Tuesday.

Fox's Jim Gianopulos kicked off the Opening Day luncheon with an overview of the health of the exhibition industry:

Gianopulos' Keynote Address was a speech laced with charts and graphs showing how the theatrical moviegoing experience continues to grow despite the recent economic upheaval and recession. He noted that despite the dramatic increase in home technology like HD televisions and Blu-ray, those who own five or more pieces of home theater technology are still more likely to go to the movie theater every weekend than less. He mentioned that movie attendance continues to be the #3 choice for most people going out for their entertainment and that it made up a larger audience of those going to sporting events, Broadway theater and other activities, which tend to be more costly. International growth was also a large factor, noting that North America made up roughly half of the over $18 billion grossed at the box office worldwide in 2008, and that there was a lot of room for growth.

A picture of James and the Giant Graph is here. A chart showing how people who use 5 or more home entertainment technologies go to more movies is here and another one showing what the inside of my brain looks like is here.

Wednesday saw a bit of fireworks with a luncheon panel discussing digital cinema financing:

Moderated by G. Kendrick Macdowell, VP, general counsel and director of government affairs at NATO, the panel featured two studio execs who have pledged support in the form of virtual print fees to individual exhibitors. Mark Christiansen, executive VP of operations at Paramount Pictures, deemed his studio’s plan “incredibly easy…something you can do now.” But Fox exec VP of digital exhibition Julian Levin, who is also reaching out to individual cinema owners, bluntly criticized the streamlined Paramount offer document as having “a lot of holes,” contrasting the Fox approach as that of “a grown-up business.”

Even more contentious was exhibitor George Solomon, CEO of Southern Theatres. Dismissing the role of third-party integrators like Cinedigm and Digital Cinema Implementation Partners, he declared, “I believe that mid-size circuits should be able to negotiate virtual print fees directly or have their own consortiums… I don’t believe in giving a cut to an integrator.”

The plain-speaking Solomon, whom Macdowell at one point compared to a crafty Southern lawyer, proved not much of a champion of the digital revolution. “35mm is still better,” he contended. “What’s the difference between a hard drive and 35mm film? Forty pounds!” Arguing that the benefits of digital accrue mainly to the studios, he challenged, “If distribution wants 2K, give us the money!”

And as ever, the Closing Night awards were star-packed and festive. Lots of pictures here.

Patrick von Sychowski at Celluloid Junkie has a marvelous post about ShoWest:

I will personally never forget my first ShoWest, unsuspectingly getting dragged into a 15 minute demonstration of the miracle that was spray-on substance made from oranges to remove chewing gum from carpets. I was too timid to explain that I was just a cub reporter/analyst for a statistics based media research publication with zero purchasing influence over my nearest fleapit, let alone cinema chain. I got the full demo, though sadly not a free sample of the Orange Miracle product.

We may all think that ShoWest and the exhibition business is all about Rachel McAdams and Zac Efron flashing their million dollar grins from the stage as they accepts the award for cinema’s ‘breakthrough performer/star of the year‘, but after everyone has left the multiplexes someone still has to scrape the gum off the carpets. And for that reason cinema trade shows will be around for a long time still.

Read the whole thing.