The big news of the last week—besides you know all the stuff below—is that I’m putting up a paywall for my content. It hasn’t started yet, but it will on 16-June. In particular, my “Streaming Ratings Report” will mostly live behind this paywall.
What about my other content? My regular (bi-weekly) strategy column—what I call the “Most Important Story of the Week”—will alternate between being free or behind the paywall. Or sometimes it will have the first part free, but the rest will live behind the paywall.
If you want to read it all every week, now is the BEST time to sign up. If you sign up now, you’ll get my lowest possibly price ($10 a month) for now and forever. And you’ll never see a price increase. So sign up now before this offer goes away.
On to the stories!!!
Most Important Story of the Week – Will 2022’s Box Office Break $8 Billion?
The term “dead” gets thrown around wayyyyy too often in the entertainment and tech industries. There’s nothing we love more than reading about some new disruptor and immediately leaping to, “Such and such is dead.”
This probably reached a fever pitch when Disney+ launched, and Netflix bulls accused Disney+ bulls of saying Disney+ would “kill Netflix”. I always found this attack a pinch disingenuous when, for example, I was the biggest Disney+ fan in the world (strategically speaking) and I knew Netflix wasn’t going anywhere. Even as a Netflix bear, I didn’t think Netflix would “die”, if “death” meant going out of business. (A point I’ve hit on before.)
I bring this up because a few different podcasts have warned me that linear TV is dying. In some cases using even more apocalyptic language like “collapsing” or “imploding”.
But is linear TV dying?
Here’s Samba TV charting linear TV viewership year-over-year:
So linear TV viewership, for one quarter, is up 1%. That’s “collapsing”?
Of course, just last week Leichtman Research Group published their latest update to subscriber losses, and all of MVPDs (including virtual) were down about 2 million subscribers, in line with the last three years’ first quarter losses. (The first quarter is historically the biggest quarter for MVPD losses.) Want to know the sneaky driver behind this phenomenon? Password sharing. Lots of vMVPDs can be shared just like a Netflix password, so I think a lot of younger folks cut or shaved the cord, but still use other people’s cable subscriptions to access live TV.
Bottom line: Linear TV isn’t growing, but isn’t “dying” as fast as some would have you believe.
Now that we have that primer on “death” out of the way for context, let’s talk theaters.
One of the most fascinating questions for movies/films is what happens to this key pillar in the film distribution model. We all know that 2020 to 2021 was a disaster for theaters (and studios relying on theaters) because of Covid-19.
For those not keeping track, after averaging around $11 billion from 2017 to 2019, in 2020 the U.S. box office plummeted to $2 billion and only rebounded to $4.5 billion last year.
The question is what happens next? Can theaters get back to something even within the ballpark of eleven figures ($10 billion+) in America? Or is the future of U.S. box office between $5 and $8 billion?
If I knew I’d tell you. What I can say is that it feels like each month is getting us closer to a fully-back theaters. The “Overton window” for what is possible really seems to have shifted since December, when I called Spider-Man: Into the Profitverse the most important story of December, because it proved that mega-box office smashes could still exist, even at the height of lockdowns.
Since then, we’ve had a few more films push the window of the possible even further. Dr. Strange 2 and the Multiverse of More Profits proved that the MCU was back to its old self. (After Eternals and Shang-Chi and the Legend of the Ten Rings each grossed $164.8 and $225.4 million at the box office, respectively, Dr. Strange 2 did $187 million in just its first weekend and has already reached $342 million overall.)
And Sonic the Hedgehog 2 proved that kids films were back. So did The Bad Guys’ success the week after. Even Everything Everywhere All At Once proved that indie films could have a pretty good run, as it’s now A24’s biggest film of all time. (Though it has sci-fi, action and comedy elements, so it may not be the best example of an indie flick…)
So mega-hits, MCU films, indie breakouts, and kids films, check. What don’t we have?
Older audiences.
Among industry observers—like, say, Morning Consult and The Quorum—the consensus seems to be that about 5-10% of movie goers aren’t coming back. That Morning Consult poll says 30% over moviegoers still aren’t comfortable coming back. (This number feels high to me.) This includes those worried about Covid and some older folks who have just aged out of theater-going. As a result, even the boffo performance of something like Dr. Strange 2 still ended up about 10% lower than it was tracking right before its opening. (Instead of getting to $200 million, again it ended up with *only* $187 million.)
Or take Top Gun: Maverick. Coming out of CinemaCon the buzz felt tremendous. But current tracking has it on track for only $90 to $130 million this weekend.
Taking all that in mind, this is the current projection of The-Numbers for 2022’s box office haul:
Do I think this number is accurate? Yeah, I do, with the caveat that it is as accurate as it admits. Meaning the average of their scenarios is about $6.5 to 7 billion in box office, but the high range is way above that and the low is way below.
Which makes sense. All it takes is two huge films in November and December to match their previous film’s numbers—say Avatar 2 and Black Panther 2—and that’s two films adding alone $1.4 billion to the box office. Maybe Jurassic World 3 and Thor 15 each add another billion. Meaning I could see a world where, in success, the top films help the market blow past $6.5 billion.
But to truly get back to the “above $8 billion range”, we need to see two other things:
– First, older folks have to finally return to theaters. This is why Top Gun: Maverick feels so important. If it can have a long, profitable run, that could help expand the pool of potential moviegoers.
– Second, the lower tier of films needs to have some breakouts. This summer is packed with blockbuster titles; just see above. I haven’t even mentioned Buzz Lightyear, Super Pets, or Black Adam. But the top 25 films have lately accounted for something like 50 to 60% of total. Meaning, to truly return to normal, theaters can’t just rely on blockbusters, they need mid-tier.
Partly, though, I just feel like ever The Number’s projections are still too bearish. I mean, last year, with tons of theatrical titles delayed into 2022 and few blockbusters in the first half of the year, the box office was still $4.5 billion. With tons more blockbusters are we really only going to see numbers just $1.5 billion higher? That feels too low. This isn’t saying The Number’s forecast is low, just maybe conservative. This year is loaded with blockbusters, and to not turn in a nearly normal performance would cause major worries.
And I still think 2022 has the caveat that in January theaters were in many cases shut or dealing with dealing with Omicron lockdowns. That may be the new normal until Covid-19 is truly endemic.
Here’s another Axios chart showing how through May box office lagged past years:
So theaters and studios need some hits to make up the gap.
If the domestic box office ends up between $7 and $8 billion, there will probably be some contraction in theaters, but overall blockbusters could still justify their existence. (Well, most of their existence. There is the China issue, but that’s a story for another time.) If its over $8 billion, or well over, there will be optimism. As I say a lot, we will see.
What Would I Do?
I wouldn’t be me, of course, without a few recommendations for theaters, and/or thoughts on how they could try to recoup that missing $2-3 billion. So here goes:
– Variable Pricing: It just makes sense, especially for Friday/Saturday evenings. Spreading around customers also eases some operational burdens. Does this mean we’ll see the type of price movements like in airplane ticket sales? Hardly, but we will see pricing differences.
– Subscriptions. Third-party movie subscriptions (cough MoviePass cough cough) made zero sense. Theater-operated subscriptions, especially with better deals in off-times, make a lot more sense for theater owners. I can tell, for example, that my local super-mega-plex still hasn’t returned to full capacity. Subscriptions could help that.
– Premium. As long as ticket prices are going up, up, up, theaters will probably cater to higher-end customers as well, including more alcoholic drinks and better food a la Alamo Drafthouse. This is probably a “If you build it they will come”, while theaters are thinking “If they come, then we’ll build it.” If 2022 does say get over $8 billion in U.S. box office, I think you see more premium offerings. (Or should.)
– Virtual Reality. Overall, I’m fairly bearish on the V.R. revolution, because the most exciting “killer apps” that get close to full-Ready Player One-style immersion need movement. The vast majority of households don’t have room for that movement. Theaters do.
– Last recommendation: Um, release more films in theaters? Is this a self-fulfilling prophecy? The reason that middle-tier films aren’t performing is that they’re not headed to theaters, and they’re not headed to theaters because box office is down. (More coming soon…)
In Case You Missed It
I dropped a data-loaded deep dive at The Ankler last week. You may have heard that Formula 1 has seen a mini-renaissance over the last few years. What’s driving it? Most folks say Netflix. I say multiple factors, and show you the data so you can make up your own mind.
I was also quoted over in the Chicago Tribune by Nina Metz on Netflix and whether they’ll mimic broadcasters. (Non-paywall version here.) And I was quoted at The Federalist by Josh Shepherd on niche kids SVOD services.
Almost Most Important Story of the Week – Theme Parks are Back!!!
I mostly write for the “Hollywood” crowd, with “entertainment” being sort of synonymous with “filmed video”. I wish I had more time to explore some ofter forms of entertainment, though, since I’m not the Filmed Video Strategy Guy, but the “Entertainment” Strategy Guy.
Take a series of headlines I saw recently:
That’s four new park concepts! (All based on pre-existing IP, including one based on a TV series and two based on movies. In other words, filmed video is big business for theme parks.) But that’s not the biggest takeaway:
Theme parks are back in a big way.
Disney fans are spending 40% more at the parks, and that’s up from 20% more the year before.
Again, theme parks are back!
I remain slightly amused because this flies so contrary to headlines circa March of 2020 that said “This changes everything everywhere forever.” It turns out “everything and forever” meant “barely” and “not for long”.
As for the strategy, while Disney is obviously a beneficiary here, Comcast via Universal via Universal Studios has the most room for growth. They can essentially target the entire universe of IP that isn’t Disney-owned, whereas Disney is somewhat constricted to their own properties. (Though Disney mints so much money, I doubt they care much.)
M&A Updates – Televisa-Univision Buys Pantaya
Last most important story edition, I discussed the Televisa and Univision merger closing for $4.8 billion, and mentioned that this could be a quiet powerhouse in Spanish-language streaming, which could impact streamers from America down to Argentina. That left Pantaya and Vix+ (TelevisaUnivision’s streamer) as the two leading Spanish-language streamers.
And guess what? Televisa-Univision bought Pantaya!
The single biggest explainer for why this happened is that Televisa/Univision has a private equity owner (Searchlight Capital), and if P.E. knows one trick, it’s rolling up an entire industry. In this case, Spanish language television. Since valuations are higher for English-language companies/libraries, I like this deal a lot.
Long-term, I think each country/region will have all the major streamers in it (Netflix, Prime Video, Disney/Hotstar, HBO Max), and then at least one local streamer who understands local tastes. For Spanish language countries, this will be Televisa-Univision-Pantaya. For the U.K., this will be the BBC. Australia has Foxtel. (I don’t know each country well enough yet, but that would be a fun project to map out.)
Other Things to Listen or Read
This is a pinch old, but I finally listened to NPR’s podcast Planet Money’s “We Bought a Super-Hero” series, and it’s worth your time.
