(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. Please subscribe.)
By the time this comes out, big news may have broken about the owner of the last studio lot that’s still in Hollywood proper. (Technically, Netflix has its headquarters in Hollywood, but not a studio lot.) Unfortunately, I gotta stop collecting/reading news stories at some point so I can write and think, and that’s usually by about 0800 the day before it goes out. So maybe we’ll talk Paramount Global/Skydance, if/when it happens, next time. (Right now, from leaks, Skydance has a new proposal, but Shari Redstone still needs to approve it.)
Instead, I’m going to do something I usually try to avoid: writing about the topic de jour of the week. If every columnist and pundit in town covers the same issue, I want to write about something else. (My readers read a lot of other smart people too, so why cover the same ground?) Unless, of course, I have a really spicy take or the coverage feels particularly suboptimal.
Like, for example, May’s poor box office numbers.
In the past week, the news coverage felt particularly hyperbolic. So hyperbolic. The Guardian coined the term “megaflop” and the BBC called it “Biblical” in scale. I’ve seen “apocalypse”, “doom”, and “existential” quite a few times too. Let’s dial it back, shall we? I know we all want them clicks, but do we need them that badly?
So that’s the topic for the day. And since I have a lot to say on just this one topic, I’ll save extra topics—like my spicy thoughts on Ticketmaster-Live Nation antitrust suits—for next issue.
Most Important Story of the Week
To be clear, I’m not here to offer a hot take that May wasn’t bad for theaters and the studios. The word “grim” was also in a lot of headlines and I’d agree with that description. Here’s FranchiseRe’s breakdown of the first four months of the year:
May’s returns were way, way, way down compared to past May’s performances. Either 31% (compared to last year) or 43% (to 2019). That’s bad. But what do we do with that knowledge?
The news coverage emphasized the pessimism, which was dialed up to 11, but that coverage either:
- Neglected to emphasize/explain why May was so bad or…
- Extrapolated May’s bad numbers into predict the future.
You can’t do number 2 if you don’t get number 1 right. There’s a genuine debate about what’s driving the May numbers, with two competing schools of thought. Call them Team Supply and Team Demand:
- Team Supply: The theatrical box office in May is so weak because the strikes drastically reduced the number of big tentpole films coming out in May (and earlier in the year). Since going to theaters is a habit, just like what happened during Covid-19’s shutdown, that habit has been broken.
- Team Demand: The theatrical box office is so weak this year because the studios aren’t making the right kind of films. They’ve made too many franchises and sequels and superhero films and, oh by the way, customers just don’t want to go to the movies (“theaters are hellholes”) and want to stream everything instead. And movie theaters are dying or dead.
I like this framing because instead of talking past each other, you can see that the two sides just have two different visions of both the present and the future. Team Supply is focusing on what caused this May to (drastically) underperform. Team Demand is taking this bad May and extrapolating out the future of cinema. That’s two different theories of the case that are also focused on two different time frames.
Cards on the table, I’m “Team Supply” and the data makes it seem not particularly close. In the interest of making the strongest case possible, though, I want to lay out both arguments today.
Then you can decide which team has the better case. And I’ll tell you what it means. Plus, I’ll give a few other explanations for the weak box office that I find persuasive.
Team Supply
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