Category Archives: movie theaters

TOUGH TIMES FOR THE MOVIE INDUSTRY — HOW IS YOUR DOWNTOWN CINEMA DOING?

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Some Background
As a result of DANTH’s 2008-2013 downtown trend assessment work, we became very concerned about the future of movie theaters in a lot of medium-sized downtowns,so we keep our eyes out for news about the movie industry. In my February 24, 2008 posting, “DOWNTOWN MOVIE THEATERS WILL BE INCREASINGLY IN PERIL”  I noted that according to a PEW survey:
“By a five-to-one ratio Americans view films more at home than they do in movie theaters. Move theaters account for only about 12% of the movie industry’s revenues”

And, according to that same PEW survey, this trend toward watching movies at home was growing. The implicit danger posed by this trend for downtown cinemas, that often are just scrapping by, is a relentless deterioration in attendance and revenues.  

Some Recent Observations in the NY Times
A recent article in the May 29, 2011 edition of New York Times had a title that grabbed my attention: “3-D Starts to Fizzle, and Hollywood Frets,” The reporters, Brooks Barnes and Michael Cieply, state  that: “The box-office performance in the first six months of 2011 was soft — revenue fell about 9 percent compared with last year, while attendance was down 10 percent.” That’s off of a 5.25% attendance decine reported by boxoffice.com for 2010. To give those delines some perspective, remember that a mere six percent drop in attendance back in 2000-2001 pushed most of the theater chains into bankruptcy.  The current drop in attendance and revenues might be explained by our stalled economy and/or rocketing gasoline prices, neither of which promise to soon disappear.

Many Hollywood big wigs, such as James Cameron and Jeffrey Katzenberg, have argued that 3-D movies would save the industry by bolstering audiences and revenues. But Barnes and Cieply also report that now “there is strong consumer resistance to high 3-D ticket prices” and “the novelty of putting on the funny glasses is wearing off.” While the best 3-D feature films still are doing well at the box office, 3-D films of more ho-hum quality are taking a box office beating in the USA.

Barnes and Cieply also reported that rentals in video stores during the first part of the year fell 36 percent. This fact would be consistent with the crumbling of the Blockbuster chain and a substantial growth in the streaming and downloading of films to home TV and computer screens through Internet services such as Netflix, Amazon and iTunes. The latter was a possibility DANTH’s trends assessment feared would be all too likely.

My Take-Aways
With retail gasping for breath in most downtown and Main Streets commercial areas, their entertainment niches have taken on an even greater importance than they have had in the past. Downtown movie theaters are often the cornerstones of these niches and the recent decline in attendance suggests they may be facing substantially increased financial stress.
Strengthening downtown entertainment niches in small and medium-sized communities will probably follow two strategic paths:

  • Buttressing the magnetism of the movie theaters through a package of improvements that includes: 3-D and IMAX screening capabilities; tie-ins with adjacent or in-house restaurants, bars, brew-pubs, ice cream parlors, etc.;  clean theaters, with comfortable seating and audiences displaying civil behavior
  • Developing non-formal entertainments, most importantly in well-activated public spaces and restaurants.

What’s Happening in Your Downtown?  

Please let me know what is happening in your downtown or Main Street district. If there are sufficient responses, I will report on them in special posting to this blog.

N. David Milder

3-D Television

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This past Saturday my wife and I stopped by the Samsung showroom at the Time Warner Center in Manhattan. They were featuring a number of 3-D TVs and we were able, after donning the appropriate glasses, to see what their images really looked like.

I was frankly surprised by how good it was. This technology is worthy of respect.

For downtown theaters it is one more technological improvement that makes home movie viewing their most serious competitor.

That said, it also should be noted that using the glasses is a pain in the butt and one wonders just how many films and TV programs would benefit from 3-D imaging. However, technology for a 3D TV system that does not require special glasses is now in development.


The future is ever present.

Movies Update

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For several years now, I have been arguing that the average downtown movie theater is in trouble as more and more people watch more and more films at home or even on their mobile devices. To counter this trend I have encouraged downtown theaters to rekindle “going to the movies” as a special occasion by adopting modern digital, 3D and IMAX projection systems and/or by

An article in today’s Wall Street Journal shows that 3D and IMAX are indeed having a positive impact on attendance:

  • “After a record-shattering year of revenues last year, when the box office soared beyond $10 billion for the first time in history, revenues are running about 10.3% ahead of the same point last year, with attendance up by more than 8%.”
  • “3-D has helped boost those figures. Last weekend, some theater owners significantly raised ticket prices—mostly on 3-D and Imax showings. In some cases, the price increases ran as high as 26%.”
  • “Consumers, so far, don’t seem to mind the higher prices, as long as they come with premium experiences.” And we are still climbing out of the Great Recession!

The Wall Street Journal: Movie Ticket Sales Mark Easter Records

AVATAR AND DOWNTOWN MOVIE THEATERS

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I have been an avid film buff since my Mom took me to see Anchors Aweigh in 1945. Though I liked James Cameron’s Terminator 2, one Alien was more than enough for me and I could not bring myself to see Titanic. Cameron, in my book, did not belong in the same league as Lean, Ford, Hawks, Lubitsch, Capra, Wilder, Spielberg, Cukor, Hitchcock, Coppola, Scorsese et al.

But, on Christmas Eve I went to see Cameron’s latest, Avatar, a 3D film, in all of its glory on an IMAC screen. I went despite my opinion of Cameron as a film-maker/director because I have been reading that the latest 3D technology would be the savior of movie theaters against the growing trend for people to watch films on their home TV screens, laptop computers and even small mobile devices such as iPods. I was particularly interested in how the 3D technology might impact on downtown movie theaters, many of which are relatively small, with fewer screens and less able to support badly needed investments. The primary question I brought to my viewing of Avatar was: Could the 3D technology produce a movie experience that was so unique that it could draw people off their couches or away from their handheld devices and back to movie theaters – especially those in downtowns?

Avatar plain blew me away! It is a watershed in movie-making and one of the most impressive films I’ve seen since Lawrence of Arabia. Watching it you keep asking yourself what kind of mind conjured this reality up and what technologies are putting it on the screen so realistically and so competently? Your immersion into a totally strange, yet coherent, detailed and comprehensive new world is staggering – so much so, that the storyline, which is too often hokey and filled with 60’s political stances, seems acceptable. I intend to see Avatar on a regular 3D screen to determine how much of this impact was due to the huge IMAC screen and the immersive experience it supports, though published film reviews also report about the strong, unique viewing experience Avatar generates on normal 3D screens.

Avatar definitely created a type of experience that I would abandon my easy chair and ignore the four full length films on my iTouch to enjoy again in other movies shown at my local cinema.

However, this experience may be due as much or more to computer-generated, special effects that are not 3D related. For example, the Na’vi, a humanoid race at the core of the film, are completely realistic, with little evidence of contrivance. The biggest grossing movies for the last 10 years (Transformers 2, The Dark Knight, Spider-Man 3, Dead Man’s Chest, Revenge of the Sith, Shrek 2, Return of the King, Spider-Man, Harry Potter / Sorcerer’s Stone, The Grinch) all were either heavy on computer generated special effects or computer animated. These movies are costly and studios are making about 15% fewer films than last year, probably as a result.

The studios’ emphasis on big budget, high tech films that are sequels or remakes increased attendance at movie theaters in 2009 by close to 8%, according to data published by boxofficemojo.com. With recession restrained ticket prices remaining steady, box office receipts increased by about the same magnitude as attendance. That would place 2009 as the fifth highest in attendance over the past 10 years, still 8% less than the peak in 2002.

It appears that evidence is starting to accumulate indicating that downtown theaters that can show films using 3D and other digital special effects technologies will be able to compete with home theaters and personal film viewers such as the iTouch and iPhone.

But, I doubt that 3D or other digital special effects can be used to enhance the viewing experience for movies such as Casablanca, The Maltese Falcon, On The Waterfront, A Streetcar Named Desire, Annie Hall, The Godfather or the vast majority of lower budget films such as Juno, Education and It’s Complicated, that have recently been turned out by independent production companies. The “indy” films have been a source of strength to some of the most successful movie theaters in large urban neighborhoods and medium-sized downtowns. The audiences at these often packed theaters are overwhelmingly composed of the almost 25 million Americans aged 55 or more who go to the movies every year.

But, the competition is also getting stronger. High tech innovations are also increasing the lure of home entertainment equipment. Tim Bajarin, of Creative Strategies, who I think is the best in the business on computer related markets, sees 3D television taking hold soon, while DVDs rapidly are being displaced by on-demand streaming of movies. (See: http://www.pcmag.com/article2/0,2817,2357490,00.asp).

Consequently, I think that downtown cinemas need to not only be capable of digital projection and showing 3D films, but they also need to:

  • Make watching a movie with others in an audience a very pleasurable and therefore desirable experience. This not only means clean and comfortable seats, clean floors, good sound equipment, etc., but the enforcement of rules that are absolutely intolerant of patrons acting without civility to those around them
  • Integrate the movie-going with unique eating and drinking opportunities such as a quality restaurant, a coffeehouse, a first-rate ice cream parlor or a brew pub
  • Court and pamper the 55 year old + audience. It has accelerating growth.

N. David Milder

Apparently, The Recession Is Not Saving Movie Theater Attendance

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In past blog postings I have argued that movie theater attendance is being significantly eroded by the growing ease of watching movies at home, where — as a Pew survey showed – Americans now watch most of their movies.

But in the first three months of 2009 attendance jumped 13% over the previous year and observers in the news media were claiming that depressions and recessions induce higher movie theater attendance as folks are looking for affordable entertainment. In an April 18, 2009 posting, I cautioned against jumping on this analytical bandwagon, noting that movie attendance in 2008, definitely a recession year, was the lowest since 1997.

More recent attendance data, as reported in an article in the Wall Street Journal, (see:Lauren Schuker, “Summer Box-Office Sales Cool Down – WSJ.com,” http://online.wsj.com/article/SB124924166209699671.html#mod=testMod.) indicates a reversal of this trend: “Attendance for the summer season, beginning on May 1, is down by 4.36% compared to the same time last summer, with revenue edging down by 0.77%.” This means that movie attendance has dropped to a really low level, since the 2008 stats were the lowest in over a decade.

N. David Milder

Eateries That Help Downtown Movie Theaters

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The Cinemart Movieplex in Forest Hills, NY, benefits from being next to a legendary “sweet shop” with homemade ice cream and an old soda fountain on one side and a cafe that is popular with outdoor dinners on the other.

This kind of “context” enables downtown movie theaters to survive. It makes going to the movies a special event, quite different from watching a flick at home. There is a brief slide show below that shows the movie house, Eddie’s Sweet Shop and the Theater Cafe. Eddie’s and the Cinemart have been around for 50+ years.


Is Our Great Recession Saving Downtown Movie Theaters?

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About a year ago, I wrote that downtown movie theaters were increasingly in jeopardy because people were more and more watching movies at home. Lately, I have been asked if I still believed downtown cinemas were in trouble, since recent media reports indicated that:

  • Nationwide, movie attendance was up 21% in the first seven weeks of 2009
  • The National Association of Theatre Owners claims box office numbers climbed in five of the seven economic downturns that occurred over the past 40 years.
  • It is well-known that movie attendance rose sharply at the height of the Great Depression
  • The stocks of the movie theater chains lately have risen substantially.
First, it should be noted that a seven week attendance pattern ought to be treated with caution, especially when it is contrary to a longer term trend.

Total U.S. & Canada Admissions
Year Admissions
2008 1.363
2007 1.400
2006 1.395
2005 1.376
2004 1.484
2003 1.521
2002 1.599
2001 1.438
2000 1.383
1999 1.440
1998 1.438
1997 1.354

Source: National Association of Theatre Owners

Total admissions in the USA and Canada for the full year of 2008 – when we where already in recession – was the lowest since 1997.

But, the primary reason that I still think downtown cinemas are in trouble is the behavior of highly regarded Hollywood moguls such as James Cameron and Jeffrey Katzenberg and the movie theatre chains. Cameron and Katzenberg both believe that the future of the movie theater business rests on 3-D movies because “going to the movies” has to once again become a special occasion, quite different from watching a flick at home. The movie chains have been investing a lot of money in more IMAC screens and now they are trying to raise between $700 million to $1 billion to convert enough screens—at $100,000 a shot –- to 3-D.

Some smaller, but savvy movie theater operators are doing such things as running “dinner cinemas,” where you get both a good film and a quality meal. Others are opening restaurants or brewpubs next door.

The downtown movie theaters that are really endangered – regardless of how they are drawing now – are those that cannot turn watching a movie into a special occasion. That is the key for the future. Dirty sticky floors, uncomfortable seating, inadequate restrooms, uncivil patrons, run of the mill films, etc., are not characteristics of a special occasion that will draw film viewers from their homes, but far too many downtown cinemas have them. Improving these theaters will not be cheap. Nor will it be cheap to provide them with 3-D equipment.

I do not know whether 3-D is the silver bullet. Here in Kew Gardens, we have a six screen cinemaplex that has absolutely no off-street parking, but it has been packed every weekend for many years. It is located in a densely populated neighborhood and features current “indy” films to an audience that rarely has a teenager in it – I’d say most patrons are over 40. Larry Houstoun reports similarly successful small cinemas near him in downtown Philadelphia. Indy flicks for seniors or IMAC or 3-D or whatever that makes going to the movies a special occasion is what counts!

If downtown organizations want their independent cinemas to survive they will have to help the operators again provide a venue where going to the movies is a special occasion.

DOWNTOWN MOVIE THEATERS WILL BE INCREASINGLY IN PERIL

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Our Lustrum Trends Assessments.

For the past 20 years, about every five years (a lustrum) DANTH, Inc. has engaged in a review of the social, economic and political trends that are — or soon will be– affecting the health and well-being of downtown, urban neighborhood and Main Street commercial districts. We do this because it is an essential asset when we work on any kind of revitalization strategy for our clients.

Being a curmudgeon, I must also strongly opine that being aware of these trends and their potential effects is an essential component of any district manager’s job. Unfortunately it is a job function that too many managers ignore.

The results of DANTH’s last trends assessment in 2003 are available free of charge at: http://www.danth.com/pdf/trends_3_25_05.pdf

Below is a “tease” excerpt from the first installment of the 2008 assessment.

Downtown Movie Theaters Are Very Vulnerable.

Downtown movie theater closures are bad news because:
• They are usually important downtown assets
• Closed cinemas are usually large, highly visible spaces, occupying considerable frontage and consequently a huge negative for a downtown’s image. It is also usually very hard to re-tenant an empty cinema — too many stay vacant for numerous years, often for decades. Some of the conversions, e.g., bingo halls and flea markets, are often less than desirable for spaces having prime locations and large size.

Movie theaters are in an increasingly weakened position because:
• Their hold on adult audiences is small and diminishing. By a five-to-one ratio Americans view films more at home than they do in movie theaters. Move theaters account for only about 12% of the movie industry’s revenues.
• Even the most frequent movie goers prefer home viewing
• Many theaters have low operating margins based primarily on revenues from concession stands and screen ads. Just a small drop in the paid attendance can be devastating financially: a mere six percent drop in attendance in 2000-2001 put most of the theater chains into bankruptcy.
• A relatively modest reduction in paid attendance by a small group of frequent moviegoers could easily erase these meager margins. The frequent movie goers do not have to completely stop visiting movies theaters for the impact to be devastating. This is an important point.
• The frequent movie-goers have demographic characteristics that highly correlate with the use of computers and other electronic home entertainment equipment
• Many theaters lack amenities such as many screens, large screens, first run films, stadium seating, clean restrooms and theaters floors. This is especially true of cinemas in small and medium-sized downtowns
• Theaters provide a very small revenue stream for the major movie studios. Consequently, the studios are incentivized to make decisions that will help other film distribution channels although they may hurt the theaters

Rival Home Film Distribution Channels Are Poised To Grab Market Share.

Competing film distribution channels have been improving, many finding formulas that are aimed straight at the three key variables that most impact film viewer behavior — convenience, film selection and cost:
• On-demand cable TV has great convenience, wide household penetration, competitive prices and indications that some large operators will be offering significantly greater film selections. The introduction of HD broadcasts will also improve product quality and enhance competitive strength
• Apple TV and Vudu have a strong films service formula that could really grab market share if they can offer sufficient film variety. They, too, already offer on-demand convenience and competitive prices. Apple, because of iTunes, has a large amount of household penetration and brand loyalty.
• The competitive strengths of the brick and mortar DVD shops and the mail delivered DVD services versus movie theaters has been improved recently by the growing presence of large HD TVs in American households and the final victory of the Blu-ray HD DVD format.

Tipping Point Scenarios.

Below are some scenarios under which a tipping point might occur:
• The cable TV and Internet film services improve their film libraries sufficiently to become real competitors with movie theaters.
• Real household incomes erode to the point that the cost of movie consumption grows in importance in consumer decision-making. The cost advantage of home viewing, popcorn, sodas, baby-sitting, etc, is substantial. Given the recent low growth in median household incomes and the soaring costs of medical services, energy, college educations, etc. and the reduced values of private homes, this scenario is likely to have substantial impact.
• The convenience and comfort of home movie theaters increase to the point that consumers prefer the home viewing experience even more than reported in the 2006 Pew survey. This is occurring now; the question is how big its impact will be.
• The major studios finally go for “simultaneous releases.” In 2006 and 2007 there was a lot of discussion within the major movie studios about releasing films to theaters, cable TV and Internet film services at the same time, with DVDs being released three months later. A major survey of movie audiences in the USA, Japan and Germany, which account for over half of the world’s film market, found that simultaneous releases would enable the studios to increase their revenues by 16%, but cause the revenues of movie theaters to shrink by 40%. More recently there has been some discussion of simultaneous releases for a limited number of films.
• An accumulation of impacts from all of the above.

The Complete Report

DANTH’s complete assessment of the dangers that downtown movie theaters will be increasingly facing will be posted on our website www.danth.com and publicly available by March 24th, 2008. As our current work on trends progresses, I plan to periodically post the complete reports of our findings on our website and excerpts on this blog. Here are some of the other topics we’ve been looking at in our assessment:
• Time-pressured people continue to be downtowns’ best friends
• Retailing is in for much tougher times
• Post-Kelo redevelopment
• Boomers are now seniors and a great market segment for downtowns
• Green redevelopment
• Owners or renters: downtown residential redevelopment
• Downtown crime redux
• Downtown solution trends:
– Mixed-use projects
– Transit-oriented development, getting more important every day
– Place-making
– Niche development
• Downtown organizations: a time to alter missions, roles and responsibilities
• The internet and downtown revitalization

Unfortunately, some of the trends DANTH identified suggest that downtowns will soon be confronting major new challenges. DANTH believes that being forewarned enables downtown organizations to be forearmed. Although proven solutions to these emerging threats do not exist, I will try in my postings to outline some approaches to finding them, while welcoming other members of the downtown revitalization community to share their solution suggestions.