Movie theaters are back!

By Jeffrey Cole

Center Director Jeffrey Cole analyzes five emerging issues for theaters breathing sighs of relief after hits like Top Gun: Maverick and Super Mario Bros.

Movies theaters won.

If ever they were going to disappear, it was during COVID when all the theaters shut down, one major chain declared bankruptcy, we got out of the habit of leaving the home to see films, and even our grandparents learned how to stream.

The theaters survived disruption. The audiences won, too.

Something magical would have been lost if motion pictures had only survived on television sets (even large ones) at home.

Before the pandemic, studios and other producers wanted to experiment with different ways to release films. They wanted to try shorter than 90-day windows between theaters and the home, sell directly on the internet without a streaming service, sell directly to streamers (some of which they owned) as part of subscriptions, and sell via streamers with an extra fee (around $30). They also wanted the biggest experiment of all: releasing to the theater and the home on the same day (Day and Date) in order to understand whether the two environments could co-exist.

Nothing less than the survival of movie theaters, the locale of our first dates, and an essential part of our culture were at stake.

All of the experiments failed.

Led by Tom Cruise and Top Gun: Maverick, followed by Spider-Man: No Way Home, Avatar: The Way of Water, and, most recently, Super Mario Bros., people have gone back to the theater.

Movie theaters are here to stay. There cannot be billion dollar movies without theaters. As COVID ended, the movie house reclaimed its place at the apex of the film distribution chain. Movies are not the same on a television at home, even a very big one. The majesty of a great movie comes from watching it in a theater with other people.

Netflix understood this when it greenlit Glass Onion: A Knives Out Mystery for streaming in September of 2022. Before the original film appeared on Netflix, it opened in movie theaters for exactly one week and grossed $15 million. It could have made a lot more if it had stayed in the theaters. But Netflix never wanted people to see Glass Onion in a movie theater. It didn’t care about the $15 million it made there.

Netflix only put Glass Onion in theaters to boast to subscribers that they would see a major motion picture just days—not weeks—after it appeared in the theater. They were borrowing the status of movie theaters to boost the credibility of the streaming service. As Netflix’s reasoning went, a movie that appeared in the theater was better and more special than one that went directly to streaming.

Translation: the theaters won. Few industries face existential disruption and live to tell the story.

The movie theater faced oblivion and survived. That’s good news for all of us. Now that the existential threat has passed, exhibitors must be quick to recognize these post-COVID issues and problems. Confronting them head on will get the business on a firm footing and ensure they are around for another hundred years or more.

Regrettably, there is no time to take a victory lap.

To solidify this win, movie theaters need to address emerging issues that—while not the existential threats that COVID posed—represent a need for focus:

1. Everyone has not returned to the theater.

While there have been several blockbuster films since COVID, theater attendance has not fully returned to 2019 levels. Most reluctant to return are the over 60 audience. Before the pandemic this was the fastest growing part of the in-theater audience. They had the time, the money, and the legacy of going to the movies.

This audience is still reluctant to take what they see as unnecessary risks with their health. If you wanted to see Elton John in concert, you had to go in person last fall, COVID or not. The same is not true with movies. That audience is waiting to return. They don’t have to be convinced that theaters are where to see films. Many went to Top Gun: Maverick. More efforts like special pricing for 80 for Brady are the right idea. This audience wants to come back to the theater, but COVID will have to cooperate.

2. The decline of the mall.

About half of American movie theaters are in malls. In cities, the percentage is much higher. Theaters are one of the biggest magnets pulling people into malls where they shop and eat as well. But malls in America are in serious decline. Between 2010 and 2019 the number of malls dropped from 1,526 to 1,000. Many more closed never to return during COVID.

Theaters have already upped their game and maximized their advantage over the home with IMAX and Dolby, recliners, and better food. They need to be better integrated into the supermalls that will survive, creating their own entertainment eco-systems with e-sports, concerts, and other outside the home activities.

3. Movie passes.

The infamous Movie Pass service of several years ago was the right idea but poorly executed. A business school case can be made for the mistakes made: not cooperating with exhibitors or studios, pricing far too low, underestimating how often fans would go to the theater if they didn’t have to pay for individual films, how it would change the culture of moviegoing, and not having enough cash on hand to make it through the initial stage.

We have moved the movies we watch at home, music, and much else to monthly charges for “all-you-can-eat” (or close to it) models. AMC, Regal, and others saw the wisdom in movie passes and created excellent comparable programs. With a pass, fans get into the habit of going to the movies and making it a regular event. They encourage others to get passes, or to come with them. Pass holders are willing to take a chance on a film they may not be sure about. It regularizes movie theater attendance. The chains have made good starts and now need to shift into higher gear. Smaller theaters must build their own cooperative networks.

4. Quality movies that are not sequels and do not have special effects.

Most of the films that have brought fans back are big-budget sequels with lots of effects. This has been a worrisome issue for some high-quality films without an established fan base from a sequel and no special effects. In the past six months, The Fabelmans, Tar, and She Said had big stars with quality scripts, but underperformed in the theater. Air with Matt Damon and Ben Affleck may be on the same path.

Some are claiming these quality dramas are permanently moving to streaming. It is too early to write them off. A case cannot be made, at least yet, that the audience distinguishes between movies for the theater and those watched on streamers. Some real audience research needs to be done to understand if something is changing and, if so, how it can be prevented.

5. Make better use of data.

Movie theaters (especially chains), sit on some of the most valuable data anywhere. Other media business would sell their soul for the quality of data available to theaters! Like many big industries, they don’t make good use of what they know about their audience and their habits. One of the most valuable periods in the film release process, the time between viewing trailers and purchasing a ticket (if they do), is lost and has to rely on audience memory and interest. Data can build this relationship and keep a constant flow of communication between theaters and fans.

6. The tech companies.

Apple, Amazon, and Google change everything. Rupert Murdoch, the most powerful man in the entertainment industry over the past 20 years, easily competed with Warner, Sony and Universal, but decided it was too much to go against the tech companies. He sold his studio to Disney.

The tech companies are now outbidding the broadcast networks for sports and have claimed Thursday Night Football, Sunday Ticket as well as some baseball and soccer. While they could easily buy one of the movie chains or build hundreds of their own theaters, that seems unlikely. Netflix has bought a few theaters, and Amazon has one as well, but those seem to be for testing purposes. What they will do is make more movies for the theater. Amazon intended Air for its Prime streaming service. The test results were so good they moved it to theatrical release-another example of the importance of the theater at the top of the distribution chain.

Amazon has announced it will make 12-15 movies a year. Apple is making similar moves. Rather than a threat as tech has been to so many others, it should be viewed as an enormous opportunity for theatrical. Anything that puts more good movies into distribution is good for theaters and fans. The exhibitors should welcome the tech companies’ increased production. They can be cooperative partners rather than competitors.

The movie theater faced oblivion and survived. That’s good news for all of us.

Now that the existential threat has passed, exhibitors must be quick to recognize these post-COVID issues and problems. Confronting them head on will get the business on a firm footing and ensure they are around for another hundred years or more.
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Jeffrey Cole is the founder and director of The Center for the Digital Future at USC Annenberg.

 

 

See all columns from the center.

April 19, 2023