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June 28, 2005
In the wake of Grokster, NPR's Morning Edition carried a good piece this AM on the ongoing slump in box office sales. Titled "Movie Industry Refocuses Amid Box-Office Slump" the piece examined the current decline in US box office ticket sales.
The current movie year is not being good to Hollywood. Last week was the 18th straight week in which year-over-year ticket sales were down (that is, comparing 2005 to 2004). Since spring and summar are traditional big movie-going times for Americans this is somewhat surprising. What's also surprising was that Kim Masters' story didn't just point the finger at P2P and shout "piracy."
Indeed, there are two fairly direct explanations for the decline in revenue, which amounts to about USD300 million. One is that there are fewer movies coming out. Six fewer than last year. On average, a big Hollywood movie will make $50 million in ticket sales. The math adds up. Two is that last year at this time a big box-office seller was Mel Gibson's The Passion of the Christ. I've seen ticket figures for this movie ranging from $330 million to $390 million. In addition, this movie appealed to an audience that doesn't traditionally go to Hollywood movies. Losing that revenue this year also explains the change.
So, what to do about it? Masters reports on a number of experiments in altering traditional distribution methods, including shorter times to release DVDs (where movies make most of their money), simultaneous release, or even releasing big budget films direct to DVD.
All of these are responding to the changing demographics and finances of the box office business. In particular, a large segment of the audience just don't go out to movies as much because they're older, have kids, and have a harder time getting out. Couple this with the change in financing, where DVD prices are going down (now often below $20 even for first releases) and ticket prices are going up. Two tickets alone are $20; add in costs for babysitting, parking, and snacks and you've created an equation that doesn't favor the box office.
Of course, all of these changes and proposals are causing heartburn for theater owners, who see Hollywood as using the piracy claim as a smokescreen for shifting money away from the box office. The owners want to see more movies, better movies, and better promotion.
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