In this article, I thought it would be interesting to shed some light on the movie sector due to the Global pandemic.
Movies are of HUGE value to the global film community. Global box office revenues totaled $42 billion in 2020— showing a contribution of almost one-third of the estimated $136 billion in the value of worldwide movie production and distribution.
Hollywood does support more than 2 million jobs and suports 400,000 American businesses each year; With British film & TV is worth around £60m each day to the British economy.
Other, countries like China are taking big steps to grow their creative output.
The coronavirus pandemic has halted film production and with the closing of cinemas globally. Normality should hopefully resume; movie production has restarted in some countries and the industry has adopted remote-work where this is possible for many.
But the virus creates huge uncertainty, and the biggest short-term risk seems to be consumers’ lack of confidence in the physical venues.
- COVID-19 has upended the global movie industry, halting film production, and closing cinemas in many countries.
- Even before the pandemic hit, however, streaming video-on-demand (SVOD) was having a huge impact on the industry.
What is the transformation of the global movie industry!
Firstly, there is a big decline in movie attendance. But, except for China — where audiences grew to over 860% from 2009–2019.
All other markest and declined!
In North America, the number of tickets sold has barely changed really, since 1995, while in the UK, admissions have been around 170m per year since 2005.
This is likely not attributable to the movie-going experience. Most operators have invested in theatres, upgrading audio-visual technology, making seats more comfortable, and introducing consumer-friendly subscription offers.
India specifically, demand is believed to be strong, but the country suffers from a relative shortage of screens.
“The problem we have in India is a constraint on the supply side of new cinemas, as there is a huge demand for theatres which are able to offer a vast range of bespoke experiences to those looking for great value family and corporate entertainment,” explains Siddharth Jain, Director at INOX Group.
The venue operators have also been challenged by the shrinking theatrical window, the number of times a studio shows movies exclusively in theatres before releasing them for sale, download, or via streaming platforms.
Since the turn of the century, the theatrical window has narrowed by more than two months.
This change reflects consumer preferences for content, which increasingly favor the streaming video-on-demand (SVoD) of today.
Many SVoD services are now owned or invested in by the movie studios, which does mitigate the incentives to maintain a long theatrical window.
This has led many of the studios to prioritize releases for their own services, leading to a reduction in movies shown in theatres.
According to analyst Matthew Ball, around 15 years ago, the “big six” — Warner Bros, Walt Disney, 20th Century Fox, Paramount, Sony, and Universal — released around 25 major films.
By 2019, only releasing as few as nine movies, which is a significant drop.
Well-funded SVoD providers with substantial budgets for content are shifting the power balance.
Netflix, Amazon, and others acquire movies made outside the big six studios, releasing them directly to consumers and further limiting the pool of movies available to distributors.
So, what is ahead for the industry?
The movie industry is on the edge of probably the “biggest shift in the history of Hollywood.”
First, the business model is moving from third-party distribution and single-ticket sales towards owned distribution with recurring revenues.
This is seen by investments in SVoD services, where a single movie or TV series is rarely a profit driver; rather, recurring subscriptions (and, in some cases, advertising revenue) produce positive value to the overall revenue generator!
As a result of this, media companies no longer optimize releases for fixed schedules, primetime TV slots.
Instead, the goal is increased engagement, thereby improving user retention and data on content popularity. Tencent’s recent purchases of iQIYI and Iflix is the latest manifestation of this trend.
And within its $4 billion investment in HBO Max, AT&T is accounting for lost earnings from the content it otherwise would have licensed to outside buyers;
HBO Max is expected to become an engine for bundling subscriptions to AT&T’s wireless and data services.
The SVoD model also normalizes the release of movies directly to consumers, which eats away at the market for the theatre operators.
Theatres take up to 50% of ticket sales; now, this income stream is under threat. Perhaps the most aggressive reaction has been from AMC, which announced a boycott of Universal’s films after the studio bypassed a theatrical release.
Independent movie theatres are expected to be heavily impacted.
Even before the pandemic hit, studios would often give exclusive rights to larger chains or mandate that smaller venues block screens regardless of demand. Some though are warning of consolidation among theatre operators.
Consolidation may deliver economies of scale for theatre operators, but it also strengthens the biggest movie studios. With fewer films available, blockbuster franchises take a growing share of box office revenue.
The portion of sales attributed to franchises has increased from around 30% in the 1980s to 40% today.
Disney is playing a greater role in franchise growth. Since 2000, the share of box office revenues taken by the big six has grown over 10%; Disney’s share in the same period has more than doubled, with most in the last decade.
Although if you look at the history books, Hollywood does love an underdog, so it’s not yet that time to write off the movie industry just yet.
The fairy-tale ending may still be possible for the film sector, mmm maybe, just mayby!
By Pete Moore