Anyone who has ever read me knows that I believe in theatrical exhibition, both aesthetically and financially. Most of the barbs thrown in the direction of exhibition prove nothing but the lack of imagination on the part of the thrower.
I don’t want to bore you (or myself) with another long list of misunderstandings about the place of theatrical in the industry. This shorthand will suffice… theatrical is the rare segment of filmed entertainment that demands a payment for a single view and it is, by far, the most profitable such segment in filmed entertainment history to last more than a few years.
Physical media has had booms… and quickly became marginalized. And the current upswing in VOD, after decades of mediocre returns (on a wide release scale), is also clearly temporary, the segment of the business that has most benefited from the moment of COVID.
That said… exhibition has reconfigured itself repeatedly over the last 45 years.
Jaws is always given credit for the wide release. It arrived on 409 screens and never expanded past 675 screens. Two years later, Star Wars platformed on 43 screens and on its first run, went as wide as 1096 screens. There were 15,000 - 16,000 total screens in America in those years.
By 1987, there were almost 21,000 indoor screens in America and the widest release was Beverly Hills Cop II, on 2326 of them. We were also in the midst of the clumsy multiplexing of a lot of single screens around America. This is the first period I run into, burned into the memories of patrons, among people arguing against theatrical.
In the 90s, exhibitors used bankruptcies to dump a lot of those awkward multis and to build new multis, often with what were seen as huge numbers of screens (20-30). But many of those were being built with big rooms (over 250 seats) and small rooms (under 150 seats) and the small rooms had pretty small screens, some shockingly small. This was before the arrival of wide-screen TVs, but the joke already was that those screens were like watching a movie on your TV. Period 2 that I hear about from exhibition haters.
Between 1993 and 2002, in that rebuilding period, the domestic screen count grew from 25,000 to 35,000. The count has only gone up 6000 screens since. The system that was set up in by exhibitors in the 90s - building more theaters with bigger screens but smaller seat counts that can expand seat count for big demand - is still effective.
Another little-discussed part of that consumer-friendly transition was the very expensive switch from film stock and reels to digital delivery and projection. The cost of adding digital projection was in the billions… but annual saving to the distributors - not exhibitors - was estimated at $2 billion a year. This transition was hand-in-hand with The Accordion System of the new multiplexes, as the cost & physical demands of running, say, one title on 6 screens with showings every 30 minutes on opening weekend was not really possible with 35mm film… or at least it was a massive challenge every day you attempted it, even with 2 or 3 prints (which were rarely available).
This was also the period when VHS rental, driven by Blockbuster, was booming. We heard most of the same arguments we now hear about streaming. Blockbuster was sold to Viacom in 1994 for $8.4 billion and by 2000, it was valued at about $4.5 billion.
Domestic theatrical hit the billion dollar mark for the first time in 1979. It was at a then-record-high $4.4 billion in 1990. $7.5 billion in 2000. It made the biggest leap even in a single year in 2002 - from $8.1b to $9.2b - with the arrival of Spider-Man and the arrival of the CG era (which started with Jurassic Park in 1993, but was still a specialty act before comic book superhero movies became makeable at a price… a high price, but a price).
2002 also marked the first year in box office history in which the worldwide box office (as primarily defined by films that were generated by Western European countries, dominated by Hollywood), passed domestic box office. By 2019, the international box office would deliver more than 2.5x the revenues of the domestic theatrical market.
Between 2015 and 2020, the number of international theaters grew - almost all digital houses - from just under 100,000 digital screens to around 160,000. In that same period, the 10,000 analog screens almost all disappeared.
All that noted, an objective reader can see that exhibitors have dealt with change on a nearly constant basis since the mid-70s, from cable to new competition from home entertainment (VHS to DVD to streaming) to stadium seating to a near-100% turnover in how films are played in theaters to the internet to inexpensive big screen TVs in homes and so many other smaller challenges based in change.
No one (that I know) is claiming that streaming, which is really still in its early days, will not be the most dominant delivery system of content moving forward. The question remains… what does that have to do with theatrical distribution?
And from the content spending side, the only thing it really has to do with theatrical is that the amount of money that was being spent on television - which all semantic games aside, is what streaming is - has exploded massively. When a 10-episode season costs a streamer (who may also be in the film distribution business) over $100 million, suddenly, the value of a meant-for-theatrical movie, which has forever competed with all but the biggest TV hits costing under $2 million an hour, is seen in a very different light.
Obviously, there are thousands of variations. The first season of Squid Game apparently cost less than an hour of Dave Chappelle. Lucky for Netflix. Smart. Same as Universal, in relationship with Blumhouse, made the last 2 Halloween movies for under $20 million and they will gross almost $400 million worldwide. Lucky. Smart.
Did putting Halloween Kills on Peacock as bait cost enough in box office to make it a bad idea? No. Not in that case. Peacock isn’t big enough to disarm that theatrical run by much. Did the expense of putting Dune on HBO Max cost so much in box office and financial commitments to keep Legendary whole make that a bad idea? Yes.
Context matters. In every single case. Every choice.
There is still risk in every choice. The risk of taking a loss on the expenses of a theatrical release. The risk of losing out on a significant piece of revenue and brand building that can come from a theatrical release. Right now, it is not in fashion to think both ways… at least in the media.
But… and I can’t emphasize this enough… none of this is new. Because of the financial scale of television now, the line is much, much blurrier. But every major studio has been in the business of Film AND TV for decades. Has Sony ever made as much money on a single movie as they have on Seinfeld? Not likely. Disney has not only been a producer, but they have owned ABC and ESPN for a long time now and they have created a large chunk of the revenues for the company, even as Marvel has pushed the boundaries of revenue for a branded film series.
All of which brings me back to where I started on this piece… what is the future of theatrical exhibition?
Only someone delusional will tell you that they know the answer for sure. Hell, even guessing may be a fool’s errand. But I am just that fool.
Much as I believe in theatrical, I think we need to consider another period of change in exhibition. The ugly version has been speculated about many times through the COVID era. But all the chains were going out of business according to “experts” through much of 2020 and 2021. A few smaller players have. AMC got touched by an insane Wall Street event and is stronger now than when this all started.
I, myself, was speculating in conversation with industry friends about the potential of the entire exhibition business collapsing down to 10% of where we now are - 3000 to 4000 screens in America. Or, alternatively, suffering a 30% drop (28,000 screens), a number I don’t feel is likely… either we will be closer to current numbers of suffer a serious drop.
As audiences have slowly returned to the movie theaters, since the vaccinations started, there has been a distinct lean to premium theaters in the multiplexes. If people are going back, they want the highest quality experience. Noted. Even at a higher price. Noted.
So… is there a brand new theatrical paradigm about to thrust itself upon the exhibition world, replacing 25 years of The Accordion System?
Let’s look at, as an example, the AMC River East 21 in Chicago. 3281 seats between those 21 screens. Only 2 premium screens. Dolby and Real D 3D. No IMAX. But even the 2 screens they have, only Dolby is used every day. The RealD 3D won’t be in use until Eternals lands on Thursday this week… even though Bond has a 3D version for RealD available. Last Night in Soho is in the Dolby room.
This is a 20-year-old theater in downtown Chicago. Even with no matinees and showtimes being taken for a number of films with on-screen captions, they have 4 screens with films you’ve likely never heard of, a doc, and A Quiet Place II still playing and Ghostbusters… the original one.
So what should that theater look like in 2025 to be thriving? Would they be better as the River East 14 with 3 more premium screens?
Here is Los Angeles, AMC has recently taken over The Grove theaters. They were built for luxury by the outdoor mall developer, Rick Caruso, 19 years ago. And the theaters have done huge business in the past. There was a 4DX screen. But not now. No premium screens. No premium sound. 14 screens. 2939 seats. No space for a physical expansion beyond where they currently are. (A new space opened up, but it will be filled by a massive new Apple Store.)
What is the future of this space?
This is what I will start trying to project, in earnest, in the 2nd newsletter of this series.
Until tomorrow…
THB #20: How Cinemas May Be Reconfigured By COVID (1st Musings)