The domestic theatrical exhibition market is taking a hit this year. A big one … as of right now it is not a pretty picture. It comes as no surprise to us as the numbers have been soft long before the summer results were in.
Each week the DVD & Blu-ray Release Report plots year-over-year new theatrical release performance and posts the results. To some that may seem odd when the nature of this publication is the monitoring of the home entertainment packaged media trends … namely, what’s happening with DVD and Blu-ray product releases.
The reason for keeping an eye on trends in the new theatrical release arena is that activity in that quarter invariably translates to subsequent action — good or bad — in the home entertainment market place.
Consumers — mass market consumers — tend to rent and buy (consume) film entertainment that they know. “What’s new?” is the question most asked; rarely, “what’s good?” When they overlap, that’s terrific.
With the arrival of the Labor Day period a certain clarity to what the entire year will look like for new theatrical releases comes into very sharp focus. What remains of the year is all about time and seats available.
The DVD & Blu-ray Release Report tracks, religiously, a specific class of new theatrical releases. Namely, those films grossing in excess of $25 million. Speed to market (Asset Rollover Rate, or simply ARR) is measured in days from a film’s theatrical debut to its subsequent debut on either DVD or Blu-ray represents the “window.” It is slowly being crushed.
Why these films? Films released theatrically that gross in excess of $25 million get there by having the combination of promotional dollars supplied by the studios and theatrical screens (seats to generate sales from exhibitors), plus enough consumer interest to keep the respective candidates in theatrical play long enough to reach this “golden” plateau. These films are “hits” regardless of whether they make money in terms of their production costs. Their costs of production are simply not relevant to home entertainment … consumers don’t care if studios lose money on a film. And, with studio accounting, you can never really be sure if it is a winner or a loser anyway.
This group of films — roughly 100 each year — tend to drive the “what’s new?” sector of the home entertainment market place (rental and retail). They are important … they are the engine that drives the business (like it or not).
All other theatrical releases fall into certain subgroups.
• Abject Failures and Lost Films — consumers either said NO!!! to a wide, studio-backed release (no matter how much money was spent in launching the turkey), or the film got great reviews, but no one saw it; a failure to “ignite” (read that as a terrible marketing campaign). There will be interest when these films are released to DVD and Blu-ray … and often a disaster can be salvaged.
• Limited Releases — arthouse, religious audiences, etc., but with a national presence (consumers are usually aware of these films). They usually exhaust their target audience before reaching “hit” status.
• Promotional Releases — select markets to raise awareness (and to say that the film had a theatrical push).
• Foreign Language imports — targeted for specific audiences … you may not even know that these theatrical releases exist because you simply do not speak the language (think: social event).
• “Other” — a category that has been expanded in recent years as a result of trends in digital exhibition. You need to think in terms of a combination of limited and promotional releases without print costs … digital exhibition can easily elevate a micro-budget film to theatrical status. Often these are films that are being stepped from the festival circuit to home entertainment … they only show up in a few venues (and largely go unnoticed).
Roughly, and this may come as a surprise to some, 65 percent of all new theatrical releases gross less than $1,000,000. Only one in twenty new theatrical releases each year have ticket sales in excess of $100 million and yet they dominated the discussion.
Which brings us to the current status of this particular product category. Anyone following the entertainment industry has likely heard that 2014 is turning into a stinker … box office is down (15 percent and more). It’s a long list of excuses … a rough winter, the loss of “tent pole” releases, high ticket prices, too many of the same films, etc., etc.
Excuses, yes, but they don’t change the fact that “hits” are down this year … and that will have an impact on the home entertainment arena, especially as the summer crop is translated into DVD and Blu-ray product offerings on the run-up to the Christmas-selling season.
As we bump up against the Labor Day weekend (the traditional end to the summer theatrical release season), the industry has generated 58 “hits” on a year-to-date basis. Last year, at this time, the number was 64 … in 2012, 68.
At the other end of the spectrum, we’ve seen 250 films released during the same period that have grossed under $1 million … last year the count was 254. The promotional and limited use of theatrical venues is pretty much unchanged, but the “hits” are MIA.
Overall, theatrical releases (regardless of gross) are likely to be down six percent on a year over year basis. The last time we had such a drop was from 2008 to 2009 (a 13.9 percent decline), which was largely tied to the overall collapse in the economy.
In any case, by the time the Labor Day weekend rolls around the final outcome for the year (in terms of total theatrical releases) works out to about plus or minus three percent of the existing trend at the 34th week of the year. This year the numbers point to 594 films (based on year-to-date comparisons), versus a final count in 2013 of 632 theatrical releases (only films with a reported box office gross are included).
As you run out of weeks remaining, the swing gets narrower and narrower. We could finish the year with as few as 575 new theatrical releases (unlikely) or as many as 613 (a possibility with a rush of digitally-released theatrical entries). But the “hits” will be hard to come by in terms of making up the lost ground … it comes down to a factor of weekends remaining and seats available.
Two “hits” per week is about all the market place can generate … 18 weeks remaining yields 36 possible. Add that number to the current crop of 58 and it is a bleak year-end total of just 94. The final count last year (2013) was 104 … two years ago (2012) there were 106.
Like we said, it is not a pretty picture!
To download this week's complete edition of the DVD and Blu-ray Release Report: DVD & Blu-ray Release Report