Year End 2011: Box Office, Multiples
I’m just going to attack the year in pieces, as the mood takes me.
Tonight, i am taken by a Los Angeles Times piece in which, after over a decade of me droning on about it, a major paper acknowledges the terribly significant issue of multiples. It’s not a bad piece, overall. But of course, the discussion of multiples, which have been in decline, by design of the studios, since the start of sell-thru VHS 22 years ago, is used to attack, yet again, this year’s box office… which is a bit asinine.
Regardless, since the LA Times deigned to touch upon a truth they may some day be willing to really deal with in depth, here are some details about this year… not just big overreaching numbers and a couple of convenient examples.
There were – so far – 12 wide releases that started as wide releases in 2012 that have done as much as 4x opening. They are…
So… please consider… what consistent theme is there amongst these 12 movies?
I can see one theme? They all did 4x opening or better.
There are movies for adults on here… probably 5 of them. 3 family films. 4 from independent studios. About half were hugely profitable… the other half, not so much.
One thing that is interesting is that aside from the two animated films, none of these titles cost over $100m – many a lot less – to make. So no superheroes. No big effects films.
If you’re interested, the leggiest superhero was Thor, which did 2.75.2x opening. Captain America did 2.72x opening. The two were almost identical twins at home, closing within $4.5 million of one another.
Wait… I probably should mention The Green Hornet, which did 2.95 opening.
I guess my point is… multiples and the studios’ interest in pushing for them IS an important issue.
It just doesn’t have shit-all to do with this year’s box office being down by $500 million or so.
I believe – and I don’t think this is a reach – studios could increase domestic grosses by 20% or more in less than a year by pushing the post-theatrical window back by to 8 months as the start of DVD sales and pay-tv/streaming windows back to a 14 months. They would also improve the DVD business, which they have done all but put on an ice flow to die at this point.
But as I keep writing, it’s not about studios trying to improve the theatrical box office, at least domestically, where it is taken for granted. The studios sacrificed at least 15% of theatrical on an average wide release film – probably more – to earlier DVD sales more than 7 years ago. It just wasn’t worth it to them to keep films in theaters if it might slow down the DVD bonanza.
And here is an ugly lesson about the film business… they don’t shift back unless something significant shifts them back. So to get the distributors to think about the upside of longer-legs seriously now, they would need to see a trend line happen without them lifting a finger. But that is, I am afraid, impossible, since the deck is stacked so much against theatrical after the third weekend.
And it’s not just the short window… it’s also the distribution and exhibition response to the short windows. We now live in a time where everyone who wants to see a movie on opening weekend can see that movie if they are willing to not go to the one or two primetime shows that sometimes sell out for a hot title. But that opportunity is, in part, based on accordion screen count. And often as early as the second weekend, that accordion closes. And by Weekend Four, the option of seeing Big Dumb Movie That Friends Told You Wasn’t That Bad is pretty narrow.
But when a studio does try to chase legs in this atmosphere, as Paramount did when they kept running Star Trek ads into weeks 3 and 4 a few years ago, they still ended up with 3.43x opening… in spite of a lot of rave reviews and older audiences with Trek nostalgia. Super 8, this summer, did 3.58x opening. Both did good numbers. But both couldn’t break out with 5x+ numbers. The infrastructure does not allow for it except in the rarest of cases. And as thrilled as DreamWorks and Universal were with The Help (6.5x) and Bridesmaids (6.4x) breaking through… neither of them had any real hopes of those kinds of multiples. They would have been giddy with the films hitting 4x, just cracking $100m.
I believe – still – that reviving second run cinema as a business would be good business for everyone. There is only one real bite of the theatrical apple, which will soon be the sweetest apple in the food chain again before long. People will be buying post-theatrical by subscription only before too long… and I think the studios know it. So how can an extra chunk of box office at $5 a ticket vs $10 for first -run (as an example) be bad if the end game revenues can truly be taken for granted? And how much wider would the basis of moviegoers be in this country if a quality $5 experience, 4 -5 weeks into a theatrical run of a wide release was available? Forget the mega-titles… how many people would give a movie like Contagion a look in a theater if they got to have that experience in a room full of people for a price that felt affordable?
Sometimes, thinking about how studios approach this issue is like listening – with all due respect to those of you who disagree with me politically – the Republicans going on about how an unfettered market would be good for the average American when 20 years of Bushes and Reagan have so clearly suggested otherwise. Perhaps the Democrats are too far on the other side of it at times. But if financial gain is the only thing leading, then most industry will tend to think narrowly, selfishly, and without daring.
I do think the studios can eventually kill theatrical. That is the story here. And if 2012 is an up year at the box office and maybe even with ticket sales (one of my least favorite dumb stats), that will still be a central story. Assigning blame – or praise – after a given year is just stupid. It’s bigger than any year (or any 2 quarters). It always is.
As an avid movie goer, about 50 films at a regular multiplex in 2011, I think the idea of second run cinema is superb. However, I think it would need to be 3-4 months after opening or it would further accelerate the desire to wait if you are not into seeing it opening weekend. For most average movie goers, $5 is too much a discount not to wait 4-5 weeks. And why not bring back films a year later or 18 months? Especially popular films? Promote the theater experience, which I still say has many advantages.
On multiples generally, as a Wall Street money manager, I have to wonder how much of this is driven by the quarterly earnings calendar. The street is all about meeting or beating estimates and raising forward looking guidance. Could this lead studio executives and their CEO bosses to push too much on the front end? It is not the sole factor dictating studio behavior toward windows but I believe it is one.
Finally, I don’t think we can discount the role that modern communications technology plays in how we act and spend money. I’m not talking social networks and tweets. We just do things and form opinions more quickly because information is at our fingertips instantaneously. No denying that and in impacts how we spend money on movies, including theatrical.
Does anybody really want to see Contagion in a room full of people?
As an advertising man, back in Trinidad I used to handle the accounts for a film distributor whose films would run at a particular chain of theaters. Here in Canada, there is a second run chain called Hollywood 3 and I found them quite by accident. Most of my friends here also did not know that they exist, or at least that the admission prices were substantially cheaper, and particularly friends with families of four or more who may find it hard to pay the $12CAN per ticket, but at $3.75 $ %4.75 for kids and adults respectively, they would be taking their kids to the movies a lot more. And they are not the kind of people who need to be first in line to see a movie.
All that preamble is to make the point that if there was an advertising budget for these second run theaters, I am sure that a lot of films could have a second life that warrants the advertising spend. Currently Hollywood 3 in my area is showing Happy Feet 2, The Smurfs, J Edgar, Jack & Jill, Twilight, Puss in Boots, and Tower Heist. All movies that are still playing in first run theaters.
LOL Melquiades
So, you’re saying, Dave, that folks willing to wait 3-4 months post-theatrical for DVD/VOD would go to the theater if the wait were more like 8 months? Where is the evidence of that?
There are many titles I won’t see theatrical, period, but I do seek out On Demand…whenever they hit that window, doesn’t matter when (I browse selections and make choices based on what is available).
And the next generation of movie-goers (today’s teens & twenty-somethings) have many, man other options and distractions to make going to the movies as much of a priority as it was even a decade ago. For young males, video games have definitely supplanted the theatrical experience, and they are becoming accustomed to watching content on their laptops via Hulu, etc., everything from Breaking Bad to the Comedy Central library.
Did studios shorten the windows when theatrical fell off, or was it the other way around…they shortened windows in response to declining theatrical, trying to boost post-theatrical revenue while marketing is still (relatively) fresh in the minds of consumers.
This is the most interesting article I have read in a while. Maybe the theatre turnover is down because of the second run cinema business being put in retirement by DVD and digital cinema. I have not seen any other writer mention this in their articles. So thank you for thinking out of the box and putting your thoughts on paper.
In the past I always heard that windows have not affected the box office but now I disagree. And now I think that the windows should possibly be moved back to 5 or 6 months. As that will protect jobs in the industry and other retail relying on cinemas in shopping centers.