The
Hollywood Economist
The numbers behind the industry.
The Vanishing Box Office
A terminal condition
By Edward Jay Epstein
Despite the weekly chorus of doom about the decline of the
Hollywood box office, the six major studios—Paramount,
Warner Bros., 20th Century Fox, Disney, Universal, and Sony—actually
took in more money from their movies in the first half of
2005 than they did in the same period in 2004. These studios
(and their subsidiaries) earned $3.2 billion at the box
office from Jan. 1 to June 30 in 2005 as opposed to $2.7
billion the previous year .(See Table)
To be sure, there was a 7 percent decline in overall
U.S. ticket receipts, but the loss came mainly at the expense
of independent distributors and studioless studios, which
account for more than half of the films released in the
United States. So even though fewer Americans went to the
movies in 2005, the big studios did not lose out.
Now the bad news: Whatever the box-office blips, the regular
movie audience has been so decimated over the past 56 years
that the habitual weekly adult moviegoer will soon qualify
as an endangered species. In 1948, 90 million Americans—65
percent of the population—went to a movie house in
an average week; in 2004, 30 million Americans—roughly
10 percent of the population—went to see a movie in
an average week. What changed in the interval was that virtually
every American family bought a TV set, and home entertainment
largely replaced theater entertainment.
More
important than mere numbers, the nature of the audience
changed in this secular decline. When talkie movies arrived,
weekly moviegoing became the true national pastime. In 1929,
the year of the Great Depression, 95 million people a week
went to the movies. Most of these people didn't arrive at
the neighborhood theater to see one particular film. They
went to see a three-hour program that included newsreels;
short comedy films, such as The Three Stooges; cliffhanger
serials, such as Flash Gordon; a "B" feature,
such as a Western; and finally, the main attraction. Best
of all, this huge regular audience needed no advertising
to prod it. The new film's title on the marquee, the lobby
posters of the stars, and the listings for it in the local
newspapers constituted all the advertising necessary to
sell most movies.
In
1948, when home TV was still a rarity, theaters sold 4.6
billion tickets. By 1958, TV had penetrated most American
homes, and theaters sold only 2 billion tickets. The Hollywood
studios tried to counter television with widescreen (CinemaScope),
noisier (surround sound), and more visually exciting (special
effects) movies, but technology did nothing to stem the
mass defections. They also tried epic, three-hour movies,
such as Ben Hur, Lawrence of Arabia, and Dr.
Zhivago, that, although they succeeded individually,
had little effect on the weekly movie audience. Even the
much-heralded fantasy bonanzas of Spielberg and Lucas could
not halt the decline. By 1988, ticket sales hovered at 1
billion.
The studios, realizing that they could no longer count on
habitual moviegoers to fill theaters, devised a new strategy:
creating audiences de novo for each movie via paid advertising.
Audience-creation is a very expensive enterprise—in
2004 the studios' average cost for advertising a film was
$30 million. Studios justified this expenditure on the grounds
that huge opening-weekend audiences would help turn a movie
into an "event," generating word-of-mouth and
other free advertising that would continue to bring moviegoers
into theaters, and, later, into video stores. Titanic, for
example, took in only a modest $28 million over its opening
weekend. Two weeks later, after it had become a word-of-mouth
event, the movie had earned $149 million. It wound up grossing
a phenomenal $600 million at American theaters. While no
other film has equaled the success of Titanic,
such "event" films are what studios depend upon
to pay the bills.
What terrifies top studio executives this year is not the
7 percent decline in the overall box-office receipts, but
the dearth of word-of-mouth event movies. Even George Lucas'
heavily advertised Star Wars—Episode III: Revenge
of the Sith, which debuted on more than 3,600 screens
in America, fell to $25 million in just two weekends (after
a $108 million opening). The studios' marketing chiefs look
at these numbers and see that they can still drive teens
to the multiplexes with ads, but these manufactured audiences,
while they may produce pseudo-events in the entertainment
media, no longer create the event movies that the studios
need.
Meanwhile,
with home entertainment poised to make a quantum leap in
quality with high-definition television, TiVo-type digital
recorders, and high-definition DVDs, the studios recognize
they have as much of a chance at stopping the secular shift
of audiences from the theater to the home as King Canute
had in commanding the tide.
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