Disintegration of the Movie Theater

Part one of a three-part installment, “Revival of the Fittest: Evolution of the Movie House Experience.”

At the rate movie houses are closing, it is evident the economic downturn has affected the film industry greatly.  However, another large factor affects this trend: market evolution.  With more consumers turning to “Video On Demand” (VOD), the industry has no choice but to concede by moving their exhibition to an online format.  As a result, we have seen a significant drop in movie house ticket sales since it’s heyday in 2002.  So who is to ‘blame?’  How can it, or should the theater exhibition model be saved?  What is the fate of the movie theater experience?

There are 32,362 movie theaters in North America.  23,573 are closed; 11, 039 are demolished or scheduled for demolition; and 8,789 are still open for business.  Of the 8,789, only 7, 282 are showing movies; 263 are slated for restoration; and 388 are under renovation.  Wholesale revenue from distribution, the industries historical cash cow, dropped more than 45 percent between 2009 and 2010.  In May of last year, the MPAA expressed support of the FCC’s act to ‘green light’ digital transmission of newer movies.  This comes in defense of the piracy gap between new film premieres and distribution.  Additionally, the FCC and MPAA feel this move is in the best interest of audiences and their growing demands for flexibility.  Many fault big industry executives as a root cause and their resistance to splitting profits any more than necessary.  While that may be true, why is that a fault?  Successful business planning requires periodic evaluation of all ratios for productivity and asset deficiencies.  It is a key business strategy to control success through controlling cost and determining relevant trends to follow.  But it sure doesn’t help hearing executives weakly defend their position with excuses. (i.e. disabilities and children keep families from going to the theater).  Call a spade a spade: it’s costly to premiere a movie.   The profit loss margin is too great now, and it simply makes smart business sense to push for dual availability.   While true digital sales will not make up for loss in wholesale DVD distribution, and significantly lower future revenues are a stark reality, the market trend is already moving speedily down another track.

Film production and distribution companies are consumer-driven.  The consumer wants convenience, and the pirating won’t cease.  The fate of film exhibition is already sealed: the theater experience is an endangered species.  That is, unless executives find another way to bolster the movie house business model.  But is that really their responsibility?  I’d argue that it is not.  In the next installment we will examine exhibition responsibility and accountability throughout history verses now.  Every creative industry is marked by change motivated through transformation and adaption.  Filmmaking is no different.  Whether we like it or not, the digital exhibition model is a way ahead for the industry.

Part two of three in the “Revival of the Fittest…” series:  Who’s Fault Is It, Anyway?  Examining Root Causes to the Movie Theater Industry’s Deconstruction


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