3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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Why Theaters and the Moviegoing Experience Need an Overhaul(Guest Blog)

MOVIES | By Dan Schechter on March 3, 2016 @ 8:30 am

Home entertainment steadily improved as box office admissions declined 16 percentfrom 2003 to 2015

Innovation in home entertainment over the past 50 yearshas been tremendous. But despite all these innovations– the introduction of video in the 1970s, DVDs in the1990s, growing broadband penetration and DVRs –

3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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Americans go to the movies about as often today asthey did in 1965.

That’s not to imply that the film industry is a steadybusiness. While annual box office admissions have heldbetween four and five movies per person for 50 years, ashift of even one movie admission per capita issignificant.

Also Read: Oscars' Real Best Picture Winner: Which Contender Delivered BiggestBang for the Buck?

Box office admissions are currently on a downswing; North American ticket sales havedropped from the peak of 1.57 billion in 2003 to 1.32 billion in 2015, a cumulative decline ofapproximately 16 percent in a little more than a decade (despite a recent uptick from 2014to 2015). But box office revenue has increased, rising from 2000 to 2009 and remainingstable from 2009 to 2015.

You probably know why box office is up – it’s higher ticket prices.

3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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Some have attributed the admissions decline to increasing prices, but a 3 percent priceincrease per year is in line with other products. So what is really going on?

Also Read: Time Warner's Q4 HBO Growth Can't Offset Company's Box Office SalesDrop

Despite recent declines in box office admissions, evidence shows that recessions don’treally affect the cinema business. In the below chart, the yellow bars call out therecessionary periods in the last 45 years. The steadily rising gray line is the GDP percapita, showing a relatively steady increase of 1.8 percent per year since 1970. The erraticblue line shows the number of movies attended per person in North America, clearlyindicating no correlation between admissions and GDP, or even admissions andrecessions. But the sobering final takeaway is the dotted green line that shows that admitsper capita is steadily declining at 2.7 percent per year for the last decade, in both goodtimes and bad.

3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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So, what is causing the recent decline?

Unfortunately, the cost of watching a movie in theaters continues to increase (growing atabout 4 percent CAGR from 2003 to 2014) while the price of the in-home alternatives likeNetflix and pay-per-view continue to fall (decreasing about 12 percent annually over thesame period).

3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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Home entertainment, for its part, has not only gotten less expensive but has alsodramatically increased its quality. In 2003, home entertainment primarily consisted ofbroadcast dramas or DVDs on LCD TVs. Now, consumers can stream critically acclaimedshows from Netflix and Amazon Prime or pop-in a Blu-Ray on their 4K curved TVs.

Also Read: Viacom Revenue Misses Mark as TV Ratings, Box Office, HomeEntertainment Sales Drop

In order to remain competitive, exhibitors will be forced to address this divergence in costsin the near future. Consumer electronics companies are continually upping the ante on thequality of home entertainment; exhibitors and studios will need to reinvent the theaterexperience with new product, new pricing and other innovations that we will discuss infuture blog posts.

3/4/2016 Why Theaters and the Moviegoing Experience Need an Overhaul (Guest Blog)

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1 of 13

Our next blog post will continue to examine how the movie industry has adjusted itsbehavior to try and mitigate some of these pressures.

This is Part 1 in a series by Dan Schechter, Gil Moran, and Michael Kaufman from L.E.K.Consulting’s Media, Entertainment & Technology consulting practice.

9 Biggest, Baddest Box Office Showdowns of2016 (Photos)

TheWrap takes a look at the most competitive faceoffs of the year, like “AliceThrough the Looking Glass” opening against “X-Men: Apocalypse”

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BOX OFFICE BOX OFFICE ADMISSIONS BOX OFFICE REVENUES BOX OFFICE TRENDS CHANGING MOVIEGOING EXPERIENCE

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gbonkers666 • 11 hours ago

That's because the studios produced pure, unadulterated crap. △ ▽

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HOLLYBLOGSDAN SCHECHTERDan Schechter is a Managing Director and Partner at L.E.K. Consulting, and he leads the firm'sGlobal Media, Entertainment & Technology practice. He has broad experience within the media,

entertainment and technology sector, including TV, film, Internet content and commerce, radio, magazines,theme parks, advertising and news. He also has experience working with retail, consumer products, travel andindustrial clients. Dan was awarded his MBA from Stanford University and his BA, cum laude, from HarvardUniversity.

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WHY THEATERS AND THE MOVIEGOING EXPERIENCE NEED AN OVERHAUL (GUEST BLOG)DAN SCHECHTERMarch 3, 2016 By Dan Schechter about 22 hours ago

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