Why the Best Month in Theaters Since 2019 Has Everyone So Depressed

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(Welcome to the “Most Important Story of the Week”, my bi-weekly strategy column analyzing the most important (but often not buzziest) news story of the last two weeks. I’m the Entertainment Strategy Guy, a former streaming executive who now analyzes business strategy in the entertainment industry.) 

Want to know my conclusion from reading the news these days? We just can’t have nice things. Even when things are going well, we find reasons to complain. I get it, “If it bleeds, it leads.” But we’ve moved beyond that maxim, and seem to be driving ourselves into misery everyday. 

Consider: an industry that just had its best month in three years is mired in negativity.

So yeah, I’m talking about theaters.

Two things before we get started: Thank you to everyone who re-subscribed to my newsletter. And it’s a LOT of you. Back in May of 2022, I announced a paywall, and at the end of June, I officially started making folks pay to read all my content. That means a lot of you got email notifications that your annual subscription was about to renewed. And you did. And I can’t think you enough. We couldn’t do it without you. 

Also, as we’ve grown in 2023, I’ve started to get a lot more comments and feedback on articles. (Email me here.) My plan is to feature the best of these in my “What I Got Right/Wrong” feature in July, so if you want to be included, send me a note. As a reminder, I read everything, even if I don’t have time to respond. (I’ll definitely ask if I can use your comment in my article, of course.)


Most Important Story of the Week – Theaters Have Their Biggest Month Since 2019

Consider this: June of 2023 at the U.S. box office is on track to be the highest single month of movie going in theaters since 2019. Great news that assuredly everyone is celebrating, right?

What? Every movie is flopping and everything is doomed?

That seems to be the takeaway from some folks after Elemental, Flash, Fast X and Transformers: Rise of the Beasts failed to hit their U.S. targets. And some other negative milestones, like Elemental having the lowest Pixar opening since Toy Story, and The Flash continuing Warner Bros failure to launch more than one film above $100 million since 2017.

So why did these movies all miss expectations? I have a few explanations:

  • First, the box office just isn’t as big as it used to be. (See next section.) This fact really does matter!
  • Second, a lot of these films depend more on global returns than the U.S.. Fast X and Transformers, in particular, are global franchises first and foremost. Indeed, some of the better performers in the U.S. (The Little Mermaid and Across the Spider-verse didn’t perform overseas.)
  • Third, June was really busy. Even a few months backs, analysts saw the deluge of films coming and wondered if all the films could make their budgets back. The answer turned out to be “No, they can’t.”
  • Fourth, there may have been inflated expectations for a few of these films, especially Transformers and The Flash. As The Quorum pointed out in their recent newsletter, not every film can break $100 million at the box office, and The Flash never tracked to a $100 million opening.
  • Fifth, execution. The oldest law of Hollywood is it’s a “hit-driven business”. Hits these were not. Notably, Spider-Man: Across The Spider-verse delivered for audiences and that’s helped its domestic box office.
  • Sixth, some of this is just the tone of the news coverage. Yes, a few of these movies won’t make their money back. But that’s the entertainment industry. It’s a portfolio game and the hits pay for the losses. Why do we forget that when we have a few misses in a row?

But really, we should be looking at the good news here.

Theatrical Revenue Is Still on Track to Surpass $10 Billion in 2023

My go-to source for the health of the box office is The-Numbers, a great website for theatrical data. And they’ve updated their forecast for 2023 (as of 22-June) and…it looks like we’ll still pass “eleven figures” and get $10 billion in U.S. theatrical revenue for 2023.

Of course, that is definitely lower than 2018, but as others have noted, 2018 and 2019 were also the culmination of gigantic franchises (Marvel and Star Wars) at the peak of their powers:

(Note: The Numbers runs two models, one which has box office at $9.2 and the other at $10 billion. I’m referencing the latter here, and it’s their preferred model too.)

If you want to really understand the current market, all you need to know is, “The market is down 16% from its 2018 peak.” Everything else is tied to that fact. Why are films not hitting their openings? In some cases, the market is still down 16%, but it isn’t an evenly distributed 16%. 

For the skeptics, I would add that theatrical attendance is down even further. Ticket prices have increased since 2019, despite reduced attendance, though notably they’re lower than inflation’s increase over the same time period. Using The-Number’s math and NATO’s average ticket price ($10.53 nowadays on average), attendance is down 29-38%, depending if you go with 2019 or 2018.

Still, we could ask, “Well why is box office revenue still down 16% from that 2018 peak and attendance down 25%?” Here are my explanations:

  • First, the theatrical market is smaller than pre-Covid-19. According to one report, 2,000 screens closed due to the pandemic. Obviously, if folks can’t go to as many theaters, there won’t be as much revenue. Anecdotally, my local Regal isn’t running as many screens as it could.
  • Second, I think some customers got out of the moviegoing habit in the pandemic, and they just plan to keep watching Netflix (or Disney+/Max/Paramount+ and their new theatrical movies) instead. Plus, I agree with Pete Doctorow that the streaming experiment trained some customers to wait. In two, different, unprompted recent conversations, friends have said they skipped seeing Guardians of the Galaxy in theaters because it would be on Disney+ soon anyways.
  • Third, there may be some Covid pandemic worriers who just won’t go back to theaters for safety concerns still.
  • Fourth, I’m sympathetic to the “blockbuster fatigue” explanation. When all you have is blockbusters at the theaters, folks who want to see comedies, dramas and romcoms will just stay home.
  • Fifth…nah, I don’t want to say it. Do I have to? Fine, one film may have been hampered by the politic debate its parent company has been dragged into. Do I think that’s going to kill all of that studio’s films? No, but could it lower returns by another 10-15%? Maybe?

Still, we’re only talking 16% in terms of total revenue and 25% in terms of attendance, for an industry wracked by disruption over the last few years. Theaters and studios should be able to account for this new market size going forward.

Where Do We Go From Here?

If you take nothing away from today’s column, have it be this: money doesn’t grow on trees. If it were easy to launch every film as a billion dollar franchise, you’d have a lot more billion dollar franchises. When you have true competition in an industry, you’ll have hits and misses.

If I owned a theater or a streamer, I’d much rather have a crowded June that has huge total box office, with a few films that flopped, than last summer that had a higher ratio of hit films, but a still anemic box office. A crowded release calendar is a good thing, not a bad thing. (Indeed, analysts are already worrying that July looks crowded too. Crowded is good!)

That said studios need to plan for this new reality. As Sonny Bunch pointed out on the Across the Movie Aisle podcast, the issue may just be that movie budgets have exploded too much. When every film needs to gross $500 million domestic to break even, yeah fewer films will break even. When you add that to smaller secondary windows, then the obvious solution is to have smaller film budgets. This is my biggest strategic recommendation for the studios: costs need to get pulled under control for the giant tentpoles.

Plus, I’d relook at the windowing process. When customers know big movies are coming to streaming in a mere 6 to 12 weeks, it hurts theaters. (It’s unclear if it helps or hurts TVOD—Universal clearly thinks it helps—but I don’t think a shorter EST/TVOD window hurts theaters.) As opposed to short windows, I’d go the other way. Yes, it will require some more marketing, but I bet it helps lift all theatrical boats.

Of course, these things don’t change quickly. Some of these films have been in production for years, so it will take years for studios to right size production budgets. But I expect they’ll do it.

Almost Most Important Story of the Week – Tempering Podcasting’s Sky High Hopes

The podcast industry has caught my eye again recently, with some interesting numbers and headlines. (And remember, I wrote a well-received piece for The Ankler back in February.)

Let’s start with the bad news


The rest of this article is for paid subscribers of the Entertainment Strategy Guy, so if you’d like to read about…

– The podcasting industry’s recent woes
– The FTC’s Amazon Prime lawsuit
– The PGA-LIV merger. (And the most important merger trial for entertainment going.)
– HBO Max selling content
– And more…

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The Entertainment Strategy Guy

The Entertainment Strategy Guy

Former strategy and business development guy at a major streaming company. But I like writing more than sending email, so I launched this website to share what I know.


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