2023 Boxoffice Tops $9B, Falling -20% Short of 2019 But Attendance Was off -33%; Should We Be Worried?
Published Feb 23, 2024
The main headline from 2023 is that we closed out the year topping the $9B watermark; yes, we still fell -20% short of matching 2019 (the last pre-Covid year and the 2nd all-time highest grossing year) but since 2020 we have averaged an incredible +58% annual post-Covid recovery growth rate.
The exciting sub-story is how the diversity of content this past year drove that $9B in boxoffice gross; unlike years past, it was NOT superheroes or Star Wars or franchise films that saved us, it was original scripts, telling fresh and entertaining stories…A Man Called Otto, Super Mario Bros, Sound of Freedom, Barbie, Oppenheimer, and Killers of the Flower Moon; oh, and let’s not forget the Taylor Swift Concert phenomenon. These 7 titles accounted for ~25% of the boxoffice.
Then, just as we were escaping the last lingering effects of Covid, the writers and actors strikes paralyzed the industry for 148 days; production came to a grinding halt, pushing several key year-end holiday titles (Ghostbusters 2 and Dune 2) into 2024…the year ended with -15% LESS wide release titles than 2019 (a painful -22% less from the key distributors); much better than 2022 when we had -37% less titles, but nevertheless, it did have an impact on recovery.
Looking to Q1’24, key titles to keep an eye on include, Mean Girls, Bob Marley: One Love, Ordinary Angels, Dune: Part 2, Kung Fu Panda 4, Arthur The King, and Ghostbusters: Frozen Empire…in smaller markets, look for Ordinary Angels and Arthur the King to over-index performance and let’s keep an extra close watch on Cabrini, from the good folks at Angel Studios.
It’s a bit early to project 2024 with a high degree of accuracy, but once again the lack of wide release content will haunt us [this time as a result of the aforementioned strike], pushing early expectations from industry analysts to circle around $8.5B, and possibly delaying the return to pre-Covid boxoffice levels until 2025.
But, before we get too far ahead of ourselves, we really need to take a quick beat, step back from our laser focus with benchmarking current boxoffice attainment versus 2019 and turn our attention to the happenings with the most important people in Hollywood…our moviegoers.
Our attendance is under attack! Yes, 2023 boxoffice ended down -20% vs 2019 and hitting the $9B mark a HUGE victory, but behind that admissions gross, attendance looks to have totaled 820M, off an alarming -34%. And, as exhibitors, we painfully know a drop in attendance ripples through the theatre PNL like a tsunami, impacting F&B, advertising, gaming, and other revenues.
As a surprise to absolutely no one, we can quickly point fingers and blame our arch nemesis, Home Entertainment, for our attendance woes. While our grosses are down -20% vs 2019, Home Entertainment revenues, primarily driven by streaming, were up an eye-bulging +110% and now top $43B; and while Boxoffice per capita totals an average spend of $26.85, Home Entertainment spends average $127.92 for each and every one of the 336M U.S. population. Home Entertainment’s year-over-year growth rate did finally slow last year to a meager +17%, but the gap between the two has grown significantly over the past 4 years.
The question now on everyone’s mind…is there hope for theatrical exhibition? Will Home Entertainment revenue continue its double-digit annual growth rates, or was this steroid-infused growth of the past four years a bi-product of COVID? I’m thinking the answer is, “yes.”
By nature, I’m an optimist. I tend to be hopeful and confident about the future and have an inherent belief that good will always prevail over evil. So, it’s important to set emotional baggage aside and simply focus on the facts as we know them (and enjoy the really cool, fact-filled chart below)…
First, over the last 117 years, theatrical exhibition has suffered through 12 major recessions and the Great Depression; television raged onto the scene in the 1950’s and home entertainment technology has continued to evolve ever since, now rivaling theatre systems; in-home movie delivery has progressed from Network TV to VHS to DVD to Streaming; and the “window” of time between theatrical release and in-home availability now hovers between same day and 45 days.
Second, Exhibition has battled back with capital investments in megaplex theatres, conversion to digital projection systems, 3D technology, premium screens, recliner seating, enhanced food & beverage options at the concession stand, in-theatre dining, boosted loyalty programs, and added subscription pricing options.
Third, all the hand-to-hand combat over the past 78 years has resulted in admissions revenue growing an average of +2% per year and attendance shrinking at annual rate of -2%...the increase in revenue is entirely a result of average ticket price (“ATP”) rising an average of +4% per year. Oh, and if you’re thinking rising prices have contributed to declines in attendance, consider this: as attractive as a $.42 ATP was in 1946, on an inflation adjusted basis that’s equivalent to $6.56 in today’s dollars. As a matter of fact, in 1976 the ATP was $2.13, which is equivalent to $11.41 today…more than the 2023 estimated $11.00 ATP. Pricing is not a factor. Furthermore, much of the estimated +20% bump in average ticket price since 2019 is due in a very large part to increased attendance in movies viewed on Premium Large Format (“PLF”) screens (IMAX, Dolby Cinema, XD, ScreenX, etc.), which can carry an additional pricing add-on of between $5.00 and $7.00 per ticket.
Having been on the front lines of introducing the Megaplex to the industry, it’s important to remember the life-saving impact it had on countering the debut of DVDs in the mid-90’s. Television coming on the scene in the early 1950’s was devasting...attendance dropped from 3.6B per year to 1.4B, a crushing -60%, then VHS whittled away another painful -19%, bottoming at 1.1B in the 1980's. When DVDs, the 3rd generation of Home Entertainment hit, it could have easily been the final curtain call for theatrical exhibition but for the vision of Stan Durwood (founder, AMC Theatres). Having an incredible front row seat when Stan laid out the development of this concept, I’m ashamed to admit that at the time I felt building a 24-screen, 5,000 seat theatre in Dallas TX, on a patch of dirt shared with the Mary Kay Cosmetics corporate headquarters and NO ONE ELSE, in the middle of nowhere, madness! The Grand 24 played to almost 3 million guests' year one, gave birth to the Megaplex, and changed the industry forever…and perfectly countered the introduction of the DVD, with annual attendance actually increasing +25%, to 1.4B, versus the era of the VHS.
The battle continued with the 4th generation of Home Entertainment, Streaming. Theatres countered with conversion to digital technology, laying the groundwork for premium large format auditoriums and alternative content, and enhanced food & beverage and in-theatre dining. Unfortunately, Streaming slightly grabbed the upper-hand and annual attendance, still up +15% vs the dark days of VHS, declined -8%, to 1.3B, versus the era of the DVD.
2018 and 2019 were back-to-back the #1 and #2 highest grossing years in industry history and attendance was starting to creep back up, but just when exhibitors were enjoying sparks of sustained attendance growth, a global pandemic brought the industry to its knees, turning our greatest asset, social interaction, against us with many theatres around the world shuttered for up to 18 months, teaching both movie studios and exhibitors valuable and humbling lessons. Ugh, then throw in last year's writer’s strike and we just can’t catch a break.
Fourth, the shift in moviegoer behavior is notable. We know the U.S. has an aging population. In 1975 the 12-24 age group accounted for 30% of the population and a remarkable 60% of moviegoing attendance. By 2021 those numbers had shrunk to 20% and 33%, respectively…not good. Picking up a sizeable portion of the slack is the 25 to 39 age group, which in 2021 accounted for 24% of the population and 34% of attendance. Expanding the age band a little further, in 2021, the 25-59 age group accounted for 57% of attendance, up from 37% in 1975.
Fifth, while we seem to be in an epic death match with Home Entertainment, they are not entirely pure evil. Beginning with VHS and continuing through Streaming, the studios' ability to spread financial risk through multiple windows of exhibition has provided for an increase in the quantity of content (sans the production shortage due to Covid and the writer’s strike), with much higher production value, making its way through theatres.
While studios are becoming more and more aggressive with their streaming strategies, and the “window” between theatrical exhibition and release onto other platforms has shrunk to around 45-days, after +15-years of bickering we may have finally reached economic equilibrium and the forces impacting both sides appear in balance…détente!
It's always wise to remember, content is the intellectual property of the studios, and we need to keep in mind they will ultimately act in their own self-interest, which is to maximize shareholder value…which, as they discovered through their day-and-date COVID-related experimentations in 2020-21, can only be achieved by exhibition playing a meaningful role in the release of their content. The theatrical window elevates the street-cred and perceived value of a movie and increases moviegoer awareness and interest, both of which ultimately generate stronger financial results.
Finally, it’s noteworthy that a 2023 Cinema Foundation moviegoer survey found that frequent moviegoer's stream +71% more movies than non-frequent moviegoers. The only thing better than watching movies is watching more movies…
Competition for the consumer's entertainment dollar is fierce and our ongoing fight to remain relevant is only going to be won through laser-focused unit-level operational execution and offering a differentiated movie going experience. The moviegoer is seeking out well-run theatres, offering fresh stories, and premium technologies to tell them...if moviegoers are going to leave their comfy couch to watch a movie, they want something special and have demonstrated a willingness to pay for it.
My expectation is that attendance will return to 2019 levels but theatrical exhibition long ago passed through the emerging and growth phases and is now a mature industry, and attendance has settled in at between 1.1B and 1.3B per year...when there are movies, the audience will be there.
Now, even though the industry forecast may be for flat attendance, that doesn’t necessarily mean the total attendance for the building is without growth opportunities. In addition to ongoing investment of capital to ensure moviegoers enjoy the latest and best technologies, forward thinking and nimble exhibitors like B&B Theatres and EVO Entertainment continue to evolve their facilities into true out-of-home entertainment destinations, augmenting their core theatrical experience with bowling, bocce ball and pickleball courts, high-tech gaming arcades, and restaurants with full-service bars…all part of the effort to secure their current attendance base AND get new consumers off those comfy couches.
Theatrical exhibition still has a lot of challenges ahead, but we are a resilient industry and it’s nice to finally be on the road to recovery. To quote the great Rocky Balboa, “it ain’t about how hard you hit, I t’s about how hard you can get hit and keep moving forward.”
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