Movie Trends and Box Office Trends in the US

Executive Insights | SPOTLIGHT ON MEDIA & ENTERTAINMENT
BOX OFFICE TRENDS
Video Killed The Radio Star:
But It Hasn’t Killed Movie-Going
20
With new innovations and
choices in home entertainment
over the past 50 years, you
might guess that moviegoing is
waning. However, despite the
introduction of video in the
1970s, DVDs in the 1990s,
growing broadband penetration
and DVRs, Americans go to the
movies about as often today
– 4-5 times per year – as they
did in 1965.
Domestic Box Office Admissions per Capita
(1965-2013)
Admissions per Capita1
15
Admissions per cap
Home entertainment
advancements
Cinematic experience
advancements
10
That’s not to imply that the film
industry is a steady business.
While annual box office
admissions have held between
4-5 for 50 years, a shift of even
one movie admission per capita
is significant. Box office
admissions are currently on a
downswing, having declined
~2.6% per year since 2002.
1998:
20% of Adults use
Internet at home
1975:
Jaws begins trend
towards blockbusters
1972:
Pay cable
introduced
2000:
Broadband
Penetration > 5% HH
1997:
Introduction
of DVD
1978:
Introduction
of VHS
Non-anaglyph
3D theatrical films
and digital
cinema penetrates
5
1968:
78 million
TV sets in US
0
1965
1970
1971:
Dolby sound
introduced
1975
1978:
TV penetration: 98%;
Color TV penetration: 78%
1980
1985
Early 1990s:
Digital
developed
1990
1995
Late 1990s:
Megaplex
rollout
2004:
DVRs > 5% HH
2000
2005
2010
2015
Note: Per capita admissions calculated using entire U.S. population; MPAA-reported admissions per cap calculated using age 2+ U.S./Canada population
Source: NATO, Box Office Mojo, MPAA, National Academy of Engineering, L.E.K. analysis
1
How have box office revenues fared?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Up The Down Staircase:
Movie Receipts Rise 20% – Movie-Going Falls 15%
11
North American ticket sales
have dropped from 1.57 billion
in 2002 to 1.34 billion in 2013,
a cumulative decline of
approximately 15% in just over
a decade. (There’s even a slight
acceleration in annual decline
in recent years.) But box office
revenue has increased, rising
from 2000-2009 and remaining
stable from 2009-2013.
10
10.6
U.S. Box Office Revenues
And Admissions (2000-13)
9.1
9
9.2
10.9
2.0
10.2
9.6
9.3
9.6
9.2
8.8
8.1
8
10.8
10.6
1.5
Billions of Tickets
7.5
7
6
You probably know why box
office is up – it’s higher ticket
prices. Some have attributed
the admissions decline to
increasing prices, but a 3%
increase a year is in line with
other products. So what is it?
0.5
Box Office
Admissions
5
4
3
1.0
Billions of Dollars
2
1
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
0.0
Source: Box Office Mojo, MPAA, the-numbers.com, L.E.K. Analysis
How does the economy affect ticket sales?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Does A Recession Affect Ticket Sales?
If You Film It, They Will Come
Despite recent declines in box
office admissions, evidence
shows that recessions don’t
really affect the cinema business.
In this chart, the yellow bars call
out the recessionary periods in
the last 45 years. The gray line
is the GDP per capita, showing
a relatively steady increase of
1.8% per year since 1970.
The erratic red bar shows the
number of movies attended
per person in North America,
clearly indicating no correlation
between admissions and
GDP, or even admissions and
recessions.
50
7
Admissions per Capita1
And Real GDP per Capita
(1970-2013)
6
Real GDP per Capita
(right scale)
40
Recessionary Period
2002-’13 Trendline
30
5
Avg = 4.7
20
4
Admissions Per Capita
(left scale)
10
3
Admissions
per Capita
We all tighten our belts a little
and watch our spending in
tougher economic times. But
if that alone is not the major
factor impacting the recent
decline, what is?
Real GDP
per capita
$K in 2009
dollars
0
2
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
Note: 1Per capita admissions calculated using entire U.S. population; MPAA-reported admissions per cap calculated using age 2+ U.S./Canada population
Source: MPAA, Box Office Mojo, NATO, BEA, U.S. Census Bureau, L.E.K. analysis
What other factors affect ticket sales?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
It’s A Mad, Mad, Mad, Mad, World:
Despite Less Admissions, A Mad Increase In Movies and Movie Budgets
Movie production is up from
557 in 2009 to 773 in 2013 (8%
growth per year). But major
studio releases are down from 111
to 84, and all the growth came
from independent and mini-major
releases. The vast growth in nonmajor studio films did not replace
the lack of major releases.
800
700
773
U.S. Film Releases by
Studio Type (2009-13)
Other
Major Subsidiary
Major(MPAA)
1
Number of Films
677
609
600
557
563
500
659
400
Note also that the studios spent
far more per movie in this period. The number of movies with
production budgets over $100
million rose from 72 in 2009 to
108 in 2013.
549
399
300
200
47
37
37
34
111
104
104
94
84
2009
2010
2011
2012
2013
72
90
97
95
108
100
The bottom line: Lifts in
production budgets and the surge
in independent films has not made
up for the cuts in major studio
releases.
422
468
30
0
# of Films with Production Budgets > $100M
Note: 1Includes independent and mini-major studios
Source: MPAA, the-numbers.com, IMDB, L.E.K. analysis
How have exhibitors counteracted the declining volume of their product?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
A Star Is Born:
Why Movie Ticket Prices Shot Up Between 2001 And 2009
9
Rising ticket prices have been a
key factor in higher box office
revenues, and 3D releases are
an important contributor. At
one point, 3D was heralded as
the savior of movies at the box
office. Recently, though,
admissions have been declining
and growth in ticket prices
has tapered off over the last
3-4 years.
Average Ticket Price
(2001-13)
8
Dollars
7
6
3-D movie ticket sales
decreased in 2011,
resulting in limited growth
in average ticket prices
5
4
While there is no denying 3D
has a significant impact on the
industry, what exactly has this
impact been and what does it
look like going forward?
3
2
1
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Note: Forecast CAGR assumes growth consistent with years 2001 through 2013
Source: National Association of Theater Owners, Morgan Stanley, L.E.K. analysis
1
How has 3D affected the industry?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Houston, We’ve Got A Problem:
The 3D Growth Run May Be At Or Near Its End
40
The increased availability of 3D
movie releases helped drive
movie ticket price increases,
but the upside potential may
be limited. In the five years
prior to 2011, exhibitors added
nearly 13,000 3D screens in
anticipation of demand. Since
2011, exhibitors have only
increased capacity by ~1,500
3D screens.
Non-digital
35
U.S. Theater Screens
(2000-13)
30
Thousands of Screens
25
Digital,
non-3D
20
15
International markets may
exhibit different dynamics,
given some under-penetrated
markets. For a full debrief,
visit our series on international
trends coming shortly.
10
3D
5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
N/A
N/A
N/A
N/A
N/A
0%
9%
21%
26%
44%
53%
50%
41%
39%
3D as % of Digital
Source: MPAA, The Hollywood Insider, L.E.K. analysis
Where does 3D go from here?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Ground Control To Major Tom:
3D Movie Production Skyrocketed, Then Faltered
7.5
Studios and producers ramped
up production of 3D movies
significantly in 2009-2010,
reaching a peak in 2011 with
45 releases (7.4% of all film
releases).
7.4
7.0
3D Percent of All Film Releases
(2002-13)
6.5
Percent
6.8
From 2010 to 2011
box office revenues from
3D films declined 20%
to $1.8 billion even though
the number of 3D
releases increased nearly
75% from 26 to 45
6.0
5.5
5.0
As you can see, 3D releases are
down from 2011. What are
consumers saying about the
value of 3D and whether 3D
will grow going forward?
5.9
4.6
4.5
From 2009 to 2010, the
amount of box
office revenues from
3D films doubled,
rising from $1.1 billion
to $2.2 billion
4.0
3.5
3.0
3.6
2.5
2.0
1.5
1.2
1.3
1.3
1.0
1.0
0.5
0
0.4
0.4
2003
2004
0
2002
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: MPAA, the-numbers.com, IMDB, PWC: Entertainment & Media, L.E.K. Research and Analysis
What’s the value and growth potential of 3D?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Caught In A Celluloid Jam:
3D Is No Longer The Box Office Draw It Once Was
120
Studios’ enthusiasm for 3D in
2009-2011 has since cooled.
As illustrated in this chart,
opening a movie in 3D used to
be an enticing proposition for
audiences as approximately
60% of opening weekend
(when opened in 2D and 3D)
was 3D; that figure has
recently ebbed to a more
temperate ~30%.
100
3D Share of Opening Weekend
Theatrical Revenue1
(2007-13)
Percent
Piranha 3D
Saw 3D
Life of Pi
Harry Potter
(final film)
Tron
80
Glee the 3D
Concert Movie
Finding Nemo
Immortals
Iron Man 3
The Amazing
Spider-Man
The Avengers
Avatar
Oz the Great
and Powerful
Frozen
Gravity
Animated in
3D Avg.
60
Overall Avg.
Live Action
3D Avg.
Many in the industry believe
3D is here to stay but has likely
achieved or is near achieving
its steady state. 3D was a
much needed infusion to the
industry…what’s next?
40
Animated in 3D
Live Action 3D
20
0
07/2008
03/2007
07/2010
12/2009
01/2011
01/2012
11/2013
12/2012
Note: 1Data includes all films whose 3D share of opening weekend box office was published
Source: Box Office Mojo, L.E.K. Research and Analysis
What’s next for the movie industry?
L.E.K. Consulting / February 2015
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BOX OFFICE TRENDS
Our Outlook:
Back To The Future?
In summary to our series of
posts on box office trends
where we discussed the decline
in admissions, increasing ticket
prices, and the leveling off of
3D’s impact, we ask: what’s
next for the movie business?
EXHIBITORS
•Continued pressure from declining
•Continued focus on tentpole releases
•Decreasing benefit from 3D
•Increased focus on driving dollars per
•Continued acquisition of libraries and
traffic and flat box office
visit (e.g. dynamic pricing, premium
features and benefits)
While it is impossible to forecast
outcomes with certainty, it is
likely that exhibitors will
continue to face pressures that
will require a break from the
norm. In addition, studios will
find that recent successes in
franchise management may
cause an uptick in acquisitions
of mass-appeal franchises.
STUDIOS
•Subscription pricing a future game
changer?
with established fan bases
franchises as studios seek next big thing
•Action/adventure, horror/thriller and
animated titles are studio favorites
•Increased gigantism in movie selection,
more special effects and fewer releases
Our takeaway: while studios
can prosper with more special
effects, exhibitors will need
new ideas.
Source: L.E.K. analysis
L.E.K. Consulting / February 2015
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