Some knowledgeable folks see the movie theater teetering at the edge of a “doom loop:”
Hollywood is at risk of entering a “negative feedback loop” with fewer wide movie releases and a shrinking theater footprint combining to squeeze box office revenue, a veteran media analyst says.
In his annual assessment of the theatrical sector, billed as a “memo to Hollywood,” TD Cowen analyst Doug Creutz notes that he has taken a “bearish stance” on the theatrical window for some time. Results from 2024, with total grosses slipping 4% from 2023 to $8.57 billion, the number of wide releases down 6% from pre-Covid levels, and other factors have only reinforced his view.
“We have said for several years now that the outlook for a sustained recovery looks questionable, and that we don’t think the existing global theatrical footprint can be supported solely by a handful of blockbusters,” Creutz wrote in the 20-page report.
This strikes me as highly plausible. It’s a continuation of trends that began in the Sixties, when cablecasting became possible, and that have flowed on unbroken since then. If you weren’t around back then, the movie theaters were in the vanguard of the fight against “pay TV.” They sensed the threat quite as clearly as did the over-the-air networks. Time has proved that their premonitions were correct.
Even if we discount the “woking” of Hollywood’s productions – Ace doesn’t, but that’s a separate set of considerations – the laws of economics could not be prevented from operating in the visual-entertainment space. Consider what technology did to that spectrum of products over the past six decades:
The broadcasters were providing a product that could not be customized to personal or family taste. Moreover, there were few of them in any given region, and the smaller ones had to make do with the leavings of the larger ones. To make matters still worse, broadcast signals weakened considerably with distance from the broadcaster, and were subject to all manner of interference. At-home video entertainment was a one-size-fits-all product of irregular quality.
Cablecasting emerged to provide a much cleaner signal, and a widened range of entertainment products from which a household could select. Suddenly the broadcasters had to compete for viewers, and therefore for sponsors. More than that, old movies, a common offering of the cablecasters, could compete with the newer ones in the theaters. Many households preferred the older stuff, as the purchasing decisions were being made by adults.
In time, a subset of content originators migrated to the cablecasters. They provided the cablecasters a way to differentiate their product sharply from that of the broadcasters. Their early original products weren’t better than those vended by the broadcasters – indeed, they were often of significantly lower quality – but the competition had broadened. As of yet, the movie studios hadn’t felt much of a pinch… but they would.
Technology continued to progress. Broadband Internet was the big blow. “Streaming” of video entertainment over the digital wire arose to compete with the broadcast antenna and the analog signal from the cablecasters. The content originators had even more potential customers. Some of them proved as creative as any of those selling exclusively to the Big Three and Hollywood. The studios and broadcasters found themselves under increasing competitive pressure before they’d figured out how to cope with the pressures that had arisen from cablecasting.
Entertainment recorded on DVD was also a player, but that dwindled as the streamers proliferated and it became possible to purchase a digitized movie over the World Wide Web.
More and more sources of entertainment, more and more gradations in quality, variety, and audience appeal, a steadily expanding range of options and prices…. All that was required to complete the picture was customization. The cable vendors made the transition before the streamers, but the streamers had an additional advantage: digital storage of product. Increases in storage density and refinements in digital routing magnified the streamers’ advantage over analog cablecasters. The broadcasters’ viability was threatened; the movie studios were rocked.
So: video entertainment of great variety, much of which was equal in quality to what Hollywood and the broadcasters were producing, had been made available to the American home. It became almost impossible to “miss” what one wanted to see. The viewer could pick and choose according to his budget and his tastes. His reasons for getting off his sofa to visit a movie theater had been sharply reduced, especially in light of the escalating price of in-theater movie viewing.
Content creators were ever more disposed to offer their services and wares to the newer content vendors. Their stuff could reach an audience faster that way. The new vendors were less disposed to demand editorial control. Finally, the barriers to entry that blocked their way to the older vendors were higher than those they faced selling to the streamers.
The Hollywood studios were in big trouble. To stay competitive, they had to offer the viewer something he couldn’t get from the streamers. They could only do so at great cost, especially the movie theaters. That meant fewer new productions per year, and a higher cost per production.
Add the infiltration of the “woke” writers, directors, and producers, the pressures and threats from left-wing activists, stir briskly, and serve.
The economics of the trends appears inexorable. They continue to operate to this day. There appears to be no counter-influence that has the power to restore the prestige of the theaters. The one effect that has endured since the Sixties has been the occasional desire to “get out of the house.”
That desire operated on me and the C.S.O., just this past Sunday. We went to a local movie theater to see A Working Man, Jason Statham’s new offering of blood, guts, and masculinity. He still moves pretty good for a man of fifty-eight, eh what? I’ve read that his movie “won the weekend.” That comes as no great surprise, considering that its major competitor was Snow Woke and the Seven Vertically Challenged Persons.
But as I’ve written before, among the hardest of simple sentences to utter is “I was wrong.” Admitting to having made a major mistake is especially difficult for entertainment executives. They’ll rationalize their decisions even against a waterfall of red ink. Stockholders’ and Boards of Directors’ ability to correct such errors is limited.
What’s that, sweetie? You want to re-watch The Dogs of War this evening? Well, sure! It’s been a while since we last saw that. Christopher Walken really had it back then, didn’t he?
