On A Short-Term Slump
by John Fithian
I am rather exhausted with the barrage of reporters
who have in the past few weeks forecast the imminent death
of the movie-going experience based on box office numbers
so far this year. We have had a mild slump, no doubt. I wish
it were otherwise. But that slump reflects the nature of
the recent product supply, rather than portends some structural
problem with the industry.
A recent headline from the New
York Times is
typical: “With Popcorn, DVDs and TiVo, Moviegoers Are
Staying Home." The Times reporter, and others like her,
cite 14 weekends in a row where box office receipts have
been down when compared with a year ago. To be sure, our
tracking suggests that, as of the first of June, box office
receipts in 2005 trail 2004 by approximately $200 million,
or a little less than 6 percent. With ticket prices up a
few cents from a year ago, admissions are down roughly 7
percent from last year. But what the Times reporter,
and so many others like her, miss (despite the fact that
her the data, which she promptly ignored), is that long-term
trends in moviegoing are very strong indeed.
Let’s first consider the past few months. Are DVDs
killing the movie theatre, or have the movies just plain
stunk? During the 14-week period, there were seven fewer
wide releases in 2005 than in 2004. In other words, we have
had less product to attract patrons to theatres. Second,
among the wide releases we’ve had, there have been
a couple real dogs (I’ll cite no titles here; I like
my job too much). Third, in 2004 we had a little surprise
in a picture called “The Passion of the Christ.” We
thought some film-buyers were too optimistic when they predicted
a $100 million for that picture. It came in at more than
$370 million. In other words, take out one dog, put in Jesus,
and 2005 would be way ahead of 2004.
On the flip side of the coin, video and DVD
sales will follow similar trends, but delayed by a few months
in accord with
release windows. After a record first quarter, home video
sales were down seven percent in April 2005 versus the previous
year. Though I haven’t seen the final numbers, home
video experts have predicted a down May and summer as well.
When movies stink, they stink. It doesn’t matter where
you try to sell them. I wonder if the press will be predicting
serious problems in the home video market after this summer.
The doomsday reports also miss the fact that
our business is cyclical. We have had many slumps before
and come back
every time. On five separate occasions in the past 20 years
we have had slumps of 10 consecutive weekends or more. In
1985, for example, we had seventeen down weekends in a row.
By 1987, we were back to record box office receipts. In 1991,
we had 14 down weeks in a row. By 1993, another record year.
These cycles simply suggest that product drives our business.
That’s no big surprise to our members. But it’s
a point lost on reporters who would rather affix the “endangered” label
to our industry.
Even if our business is cyclical, is it still
possible that DVDs are devastating movie attendance in the
long run? Once
again, the numbers don’t support the reporters’ doomsday
scenarios. Metaphorically speaking, television hit theatres
in the gut in the 1960s, as box office revenues and admissions
tanked. Beginning in the 1970s, however, Americans started
going back to the cinema. And that trend has continued through
the advent of video cassettes, DVD, and video-on-demand.
Theatre admissions increased 66.86 percent from 1970 to 2004.
During the same time frame, the U.S. population increased
43.38 percent. In other words, movie ticket sales have grown
faster than the population.
Investors understand our business,
even if the Times and the Wall
Street Journal do not. Acquisition offers are being
made at multiples never before witnessed. The movie theatre
industry is alive and well. We just need a few more movies,