What’s Actually Happening to the Movie Business, and How to Fix It (supported by charts!)
I think we measure box office success in the wrong way. If you take a look at your favorite box office reporting site, you’ll see that rankings, and thus perceived success, are measured by domestic gross — or the total monetary value of all tickets sold in the US. That’s sort of like measuring the success of a basketball team by wins without showing losses or games played. Better yet, it’s like measuring the success of a basketball team by conference wins, a mere subset of the relevant contextual information. How can we judge a movie’s commercial success without factoring in the budget? Without factoring in the international gross? A $20m opening weekend is a massive success for a film with a production of budget of $10m, but an enormous flop for a superhero movie that cost $150m to make. Alternatively, a movie could slump in the US, but thrive overseas (eg. The Great Wall). Why don’t we differentiate? Why isn’t this information presented first in the form of budget multiple or worldwide gross? Anyways, this opening premise sent me down a pretty deep data wormhole trying to make some sense of what is actually happening in the movie industry. I’m not going to show a revised ranking of movies from the past 10+ years (…well, maybe another time). What I will do is present some arguments that I’ve made or heard, and support or negate them with digestible data.
With the help of some kickass Upwork contractors, I put together some data on the top 100 movies by domestic box office from 2006–2017, and added columns for things like budget, budget multiple, foreign gross, after-market home video sales, etc. In cases where I couldn’t find a piece of information, I would skip that movie — this happened very rarely, maybe 2–3% of cases, not enough to impact trend lines here. All data is from a combination of BoxOfficeMojo.com and The-Numbers.com. Marketing budgets (often an additional 50% on top of budget cost) are not publicly available so they are not factored in here.
“The movie industry is dead, no one goes to the movies anymore”
Had to start with a heat check attention grab. High level numbers can deceive here because, if you’re looking at worldwide box office gross, you would think the industry is OK, growing steadily albeit very slowly. But when you factor in rising ticket prices (from $6.55 average in 2006 to $8.97 average in 2017), you end up with a ‘number of tickets sold’ chart that looks like this:
This is troubling. Ticket sales are the lifeblood of the movie industry as we know it. The streaming genie is out of the bottle and the in-home viewing experience is exceptional. Great content is abundant. Theater chains have begun to specialize in the experience surrounding the movie (reclining seats, wine, in-seat dining) but that’s a band-aid. The streaming/in-home attack is two-fold: not only are you drowning in the movies and television shows that you’ve been recommended but haven’t yet seen, diverting your attention in the near term, but the risk of missing the movie in theaters has been reduced to a 3-month wait. Movie releases once thrived under the premise of scarcity: if you didn’t go, you missed your chance. That no longer exists. Waiting 3 months and knowing that the movie will be readily available reduces the FOMO and the impulse to go. How many times have you seen a trailer and thought “I’ll probably wait until that comes out to see it”?
“No one makes the medium-budget movie anymore, only the blockbuster and the micro-budget”
With the drawing out and re-spawning of superhero franchises and existing properties on one side, and then the occasional word-of-mouth/guerrilla success of these smaller-budget originals (eg. Get Out, Hereditary) on the other, I understand where this idea comes from. The data shows that micro-budget movies (under $15m) are becoming more common, increasing from 10 to 15 of the top 100, and blockbuster movies (over $150m) are too, growing from 4 to 14 of the top 100.
That said, however, the middle ground hasn’t been lost. The $25-$75m budget has been reduced slightly, but I think more important is that it’s taking a new form. The $50m McConaughey Rom-Com and the $40m Will Ferrell slapstick have been subbed out for safer, more predictable properties with existing fan bases like Baywatch, Molly’s Game, and It. Original concepts are being funded less frequently, and with less money. In 2006, 8 of the top 20 movies were original/non-sequel/non-adaptations. In 2017, that number is 4. Where are all of the original storytellers? Have we become so homogeneous as an audience that we’ve suffocated the creativity out of the movie industry? We claim we want new and interesting stories, but we pay to watch The Rock and Vin Diesel and 60 car explosions (…which is also awesome).
“When was the last time you bought a DVD or Blu-Ray?”
For me, I’d conservatively say 7+ years ago. The after-market/home video sales business has played a critical role in the movie industry for years — let’s call it ‘the kicker’. When a movie had finished its run in theaters, studios and financiers could bank on additional proceeds from home video sales — in many cases that would be the difference between a profit and a loss. That number has dropped significantly, from over 28% in 2006 to just under 8% in 2017. By 2022, I would expect it to be under 3%. The falling home sales have been combated by a growing international box office, as you can see in the chart. The two lines are nearly symmetrical — and while I think there is further growth potential in foreign markets, their ticket sales will inevitably be hamstrung by the streaming/in-home experience as ours have.
“So…what now?”
Ah, glad you asked. As I see it, there are two directions that studios and distributors can go here: one is in resistance to the change — realize that the home sales are becoming insignificant and increase the time between a theatrical release and a digital one, maybe turning 3 months into 9 months is enough of a gap to coerce the ‘show me now’ world we live in. Resistance is probably a bad idea (see: Music Industry, Taxi Industry, etc). So the progressive thing, and I know people have been talking about this for years now — is to release digitally at the SAME DAMN TIME as the release in theaters, and charge $50. Yes, this would shrink the movie theater business to more of a niche experience (maybe similar to going to a play — higher ticket price, elevated experience, less venues) — but art shouldn’t be chained to the medium through which it is displayed. Art isn’t any less valuable in one setting vs. another. The Mayweather vs. Pacquiao fight grossed $600m in one shot and people paid $99 for it. Maybe it could start as something like that, show it once, live, at a certain time.
OK, boom, solved the box office woes — you’re welcome, Hollywood. But there is another lever here to kick this thing into high gear — movie budgets. The original Hangover movie had a budget of $35m, but the second one cost $80m, and the third cost $103m. Did the third one incorporate some CGI battle with the Autobots? No, I’d estimate it was about the same production quality as the first. So what’s the difference? Actors and actresses become more expensive as the series progresses, and rightfully so. Salaries go up, profit margins go down. In a more extreme case, a movie like Downsizing can lose the studio $20m, but Matt Damon still gets his $10m+ quote (I don’t know how much he was paid for that movie, but let’s assume he was paid well — I’m also a huge Matt Damon fan, so this isn’t a knock on him specifically, but rather commentary on a broken system). Why aren’t all members of a movie production in the same boat? Why is there a case where investors lose money but actors make money? Why not try this (shouts to Blumhouse Productions for being at the forefront here): pay actors a small wage for their time, and then align their big payout with the success of the movie — like startup companies do with equity for early employees. “Damon, we’re paying you $500k for 6 weeks of work, but on top of that we’re giving you 10% of the gross of the movie after we breakeven.” A few things in play here: Matt Damon is strongly incentivized to help promote the movie — even above and beyond the criteria of his contract; the production budget is lower without the anchor of a star salary so it becomes much easier to breakeven to begin with; and Damon’s monetary success or failure is directly tied to the movie’s. A change like this could have flipped Downsizing’s outcome to a successful one (lower starting budget, more promotion, etc) — but even cooler for the movie stars out there, smash box office success would lead to smash payouts. For example, if Matt Damon had a deal like this for the movie The Martian, he would have made $50m+. This ‘points’ structure exists in Hollywood already, but is used more as a bonus incentive than a primary one.
Anyways, I’m excited to see how it all pans out— there will always be a place for storytellers, and good content has a way of finding an audience. It’s fun to dive into this stuff. Hope you gained a few talking points, and I’d love other opinions and potential solution ideas for these shifts.
