Why Movie Watchers Are Abandoning the Multiplex
Don't blame ticket prices: Multiplex attendance is down noticeably this year. Box office receipts are off by 4% at this point relative to 2010 -- and that's even with exhibitors charging slightly higher ticket prices. Actual movie theater attendance is down 6% year to date.
Don't blame the economy, either: Box office receipts actually grew during the recent recession. Escapism in cinematic form seemed to be the right medicine for an economic lull a couple of years ago. Why should it be any different now?
And it's not the content: This is the year, after all, in which we got the eighth and final installment in the Harry Potter movie series. Other popular franchises -- Transformers, Cars, Pirates of the Caribbean, The Hangover -- kicked in with fresh sequels.
Something's wrong -- and don't go telling me that folks finally got tired of paying $8 for a tub of popcorn.
The Adjustment Bureau
A popular theory for the slide in ticket sales is that folks have been outfitting their home theaters with high-def flat screens that continue to get cheaper.
The industry's push over the past two years has been for 3-D televisions, giving movie buffs one less reason to pay a premium for 3-D screenings. The growing popularity of Netflix (NFLX) -- Qwikster fiasco notwithstanding -- is also encouraging more couch potatoes to hook up their televisions to the Internet to stream video. Netflix alone now has more than 20 million subscribers paying to stream content.
There are some holes in that theory:
- For starters, folks have been snapping up plasma and LCD flat screens for years. Why are box office receipts shrinking now?
- Consumer electronics retailers are also having a hard time selling 3-D sets, and folks are still enjoying the immersive experiences on the big screen. 3-D outfitter RealD (RLD) is expected to post its first annual profit this fiscal year on a 19% spike in revenue.
- Streaming services such as Netflix and Hulu have also been more popular for television shows than movies, largely because studios aren't allowing their freshest retail releases to be made available on all-you-can-stream websites.
Another popular theory is that release windows are narrowing. The time between a film's theatrical release and its availability on DVD and pay-per-view is now just a few months. Cable and satellite television providers are pushing to narrow the gap.
This theory also isn't foolproof. If release windows are such a big concern, why did The Lion King -- Disney's (DIS) animated classic -- rule the box office during its recent two-week multiplex run? The film was rereleased on Blu-ray, DVD, and new to Blu-ray 3-D the day after its theatrical run came to a close.
Then again, maybe content is a problem if a 1994 rerelease is enough to outdraw brand-new flicks.
If you think things are bad now, you're probably going to have even more elbow room in the future. Seriously. Use both drink holders next time!
National CineMedia (NCMI) -- the leading advertising network placing annoying commercials before your movie trailers begin -- had some bad news for investors last week. Its stock got crushed after the company warned that its results for the new quarter would come in below earlier expectations.
In other words, advertisers are already starting to adjust their marketing campaigns for thinner movie audiences.
If you think that the defections can't get any worse, wait until next year. Not only will there be no Harry Potter to save the day, but going to see a 3-D movie may get even more expensive -- and inconvenient.
Sony has recently told theater operators that it will no longer be paying for 3-D glasses come May. Studios in this country have historically footed the bill for 3-D specs, but now the industry may be moving to an ownership model. If exhibitors don't agree to absorb the hit, your corner multiplex may force you to buy your 3-D glasses -- and that's on top of paying an extra couple of bucks for the 3-D ticket over the traditional 2-D showing.
If this happens, forget about simply doubling up on cup holders. Bring your bedroom slippers and lie down. You may have the entire multiplex to yourself.
Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Netflix and Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney and Netflix.