(Welcome to the Entertainment Strategy Guy, a newsletter on the entertainment industry and business strategy. I write a weekly Streaming Ratings Report and a bi-weekly strategy column, along with occasional deep dives into other topics, like today’s article. Please subscribe.)
I have somehow yet to write about the buzziest entertainment story of the year so far.
I speak, of course, of Backrooms and Obsession.
Is it because I don’t see how this is great news for the theatrical box office? Actually, no, I totally get that. Almost out of nowhere, two new films from young directors dramatically over-performed. One became a blockbuster and one is very popular. That’s absolutely terrific. And the box office is up compared to 2025, and closing in on the pre-pandemic average.
Of course, a number like “two” is a small sample size, which naturally leads me to worry:
Are we overhyping this trend?
Because Hollywood loves to overhype trends. For example, we all remember just four years ago when a certain East Asian nation came to conquer Hollywood. I speak of South Korea, right after Squid Game became a global phenomenon for Netflix. Everyone rushed to South Korea to find their next global hit.
So how’s that going?
Yikes.
That’s right: the South Korean film industry is struggling. The streaming boom faded, and it turns out South Korean TV shows didn’t take over America. This is why precision in data analysis matters: the success of Squid Game showed that the ceiling of success of foreign language TV shows had been raised in America. But the data showed that the hit rate of foreign language shows had not. (I tried to tamp down the hype for foreign TV shows in 2022. Did folks listen? The opposite, if anything.)
You could add concert films, anime, faith-based films and maybe musicals to the list of potential box office saviors that never saved the box office.
I worry, writing all of this, that I’ll come across as too negative, but there’s been quite a bit of hype around the relative successes of Backrooms, Obsession, Iron Lung and Amazing Digital Circus and the relative failures of Star Wars: The Mandalorian and Grogu, Supergirl, Disclosure Day, Masters of the Universe, Minions & Monsters, and the live-action Moana. I don’t want to be a downer here—which is ironic, because I’ve long been bullish on theaters, pushing back against the “theaters are in structural decline” narrative for years—but right when almost everyone in town is ecstatic, I’m worried.
I don’t want Hollywood to learn the wrong lessons from the terrific success story of movies in 2026. (See this fun article for past times Hollywood has done just that.) I’m going to break down the box office data from this year and past years to answer what may or may not have changed based on the success of Backrooms and Obsession. As usual, expect loads of nuance, moderation, history and caveats. And I’ll try to be honest when I say we don’t know or can’t say for sure.
More than anything, I want to write the most comprehensive analysis of the Obsession and Backrooms (I’m calling them O&B from here on out) that you’ll find on the internet. This article is over 5,500 words long, with 20+ images.
If you want hype, I can’t help you. If you want a much-too-long very deep dive through a bunch of box office trends, stay tuned.
Today I’ll look at…
- Why I’m actually worried about the box office, despite these successes…
- Quantify how important popular and blockbuster films are to theaters…
- Look at the ceiling for YouTuber-helmed films…
- Explore what has and mostly hasn’t changed for the horror genre in the 2020s…
- Dive into A24’s recent hit rate…
- See if Blumhouse has their mojo back (and if they ever lost it)…
- Discuss why the potential death of superheroes and Star Wars worries me…
- Ask whether “original” stories have actually taken over the box office…
- Explain how important IP is for the box office, even today…
- And run through some scenarios on what went well and poorly at the box office this summer.
And a whole lot more. But let’s start by defining terms…
Defining Terms
Before we can get to the data, let’s define some terms. And start with a funny contradiction:
Horror films aren’t nearly as profitable as superhero films. That said, horror films are very profitable compared to superhero films.
How can both things be true?
As I’ve written about before, when box office analysts or journalists use “profitable”, they often mean different things. I wish everyone talked about box office (and streaming) success in terms of the “five factors” of box office:
- Total revenue
- Total profit (profit in amounts)
- Profitability (profit in percentages)
- Hit rate (the number of hits in a genre/category divided by the number of attempts)
- Ceilings (the height a genre can hit in success)
For an individual film, I use the first three categories to evaluate success. For a genre, I use the bottom four, replacing revenue with ceiling.
These factors matter for every genre, studio and classification in Hollywood. But not equally. Horror films, for example, have always had very high profitability (since they’re cheap to make), but they never match the ceiling of genres like superheroes or family films. For example, either Avatar: The Way of Water or Avengers: Endgame may have grossed more in profit than every profitable horror film put out since 2018. Maybe longer.
Let me repeat: just the profit for either film may equal an entire genre’s profit for nearly a decade. For Hollywood to have fundamentally changed in 2026, this is the bar that O&B need to hit.
These five factors also apply to both domestic and global performance. For example, superhero, science fiction and family animated films do well globally; comedies and horror tend not to.
This is why I can write, “Horror films aren’t that profitable compared to superhero films” and someone else can write, “Horror films are very profitable compared to superhero films” and both sentences are true. One is about total profit; the other is about profitability. Both matter, but the distinctions often get lost.
I’m also going to use a few terms today, and I want to define them, because they matter to be precise. When I say something is “popular”, I mean it’s actually popular as in the dictionary definition:
“commonly liked or approved.”
Not just liked by some, but actually genuinely popular. And for something to be a “blockbuster” it needs to actually bust blocks. When it comes to feature films, I use the following totals for domestic box office, and double them for global numbers:
- Super-blockbusters: Films grossing over $500 million (extremely rare)
- Blockbusters: $250 to $500 million
- Popular: $100 to $250 million
- Meh: $50 to $100 million
- Not: Anything less than $50 million
Yeah, I know some folks will bristle at labeling certain films “not popular”, even if they have fans or were made on the cheap. But again, this analysis is for everyone in the value chain, not just fans of certain films. Take Iron Lung. Did it have fans? Absolutely. Was it a great ROI hit? Yes. Is it popular? Not really. $40 million in domestic box office just isn’t broadly popular.
Lastly, one logical fallacy I’m trying to fight today is the “availability heuristic”. This is the idea that it’s easier to recall prominent examples than less notable examples. Classically, everyone remembers when a plane crashes, but they don’t hear about car crashes nearly as much, so folks fear planes more than cars, even though they’re likelier to die in a car crash than a plane crash. Examples of plane crashes are more “available” to the brain when coming up with examples of deadly vehicle accidents.
This happens all the time with less popular films. In horror, everyone remembers the successes (think Backrooms and Obsession) but they don’t remember the silent failures (think Busboys, Hokum and Keeper). By the way, if you don’t know what those last three films are, that’s my exact point! But if you’re asking about hit rates, all the data points matter.
I used box office data from The-Numbers, and stopped updating data after last weekend. I also used FranchiseRe’s analysis in multiple spots.
Okay, with that out of the way, let’s start off with a summary of my concerns.
Bottom Line Up Front – I’m Actually Worried About the Box Office and Theaters
While heaping doses of moderation are coming at you, I do, obviously, have a thesis today. Here it goes:
- The success of Backrooms and Obsession was terrific news for the box office in May.
- In fact, the best news this year was the success of Project Hail Mary, Michael and The Devil Wears Prada 2—all based on popular IP—which are about as traditional as Hollywood productions get. (And you know, Toy Story 5 and The Super Mario Bros. Galaxy Movie.)
- Looking at these films, that means success has come in the form of original films, sequels and new franchises based on popular IP. All three need to work together to elevate the box office.
- That said, it would have been even better if Hollywood had produced two or three more blockbusters this summer.
- The success of the new franchises (O&B) hasn’t offset the struggles of existing franchises. If both were performing well, we’d be seeing tremendous box office success.
- The box office (and hence theaters) need IP/franchises and original films to do well.
- The box office also needs original, non-IP films that aren’t horror films to succeed, and we haven’t really seen that. This is what worries me the most.
- Disney is relying on IP too much, and their poor execution in the 2020s is hurting the box office.
Again, I want to be positive about this moment and this year’s box office, but to be blunt, the lack of blockbusters this summer has me worried. I’m more worried about the decline of superhero films (without a blockbuster-level replacement for them) than I am optimistic about the rise of more horror films.
Okay, now, time for the specifics and the data…
Why This Matters: Theaters Need Hits
Let’s start with what has me so worried.
Each year, I pull data for the top 100 films and look at the top performing flicks. And I categorize them by budget level, using categories I define below. Three charts will show you just how important popular and above films are to the box office.
See, here’s the count of films by budget category:
That’s a lot of “not popular” and “meh” films, right?
So now we take those levels, and instead of just counting films, we add up all the box office. Here are those totals:
In other words, blockbusters and popular films earn over five billion of the domestic box office each year. I mean, we’ve only had a handful of “super blockbusters” (literally six) that grossed over $500 million since 2022, but they’ve combined for nearly $4 billion in box office grosses.
Here’s that same data, but as a percentage of the top 100:
Films that gross over $100 million at the box office accounted for 64% of the domestic box office over the last four years. Adding in films that made over $50 million gets you to 80%. And yes, before you ask, the top 100 films at the US box office make up the near majority of total box office.
Here’s a table with total box office as well:
So we can look at the current counts through the third week of July 2026…and I’m not sure we’re really up. As of this moment, we haven’t had a super-blockbuster, though The Odyssey, Spider-Man: Brand New Day and Avengers: Doomsday could all cross the $500 million mark. (At this point, The Odyssey would need a very strong hold to get there.) We have five blockbusters, and I’d say the three just mentioned films will all likely break that barrier too. But we’re light on popular films, with only ten right now. (Maybe eleven if Moana can break through to $100 million.)
Yes, on one hand, it’s only halfway through the year, but on the other hand, summer is the box office’s most valuable season. And that’s not great news for theaters.
If the box office sees fewer and fewer blockbuster films each year without a huge (and I mean very, very large) increase in “Meh” or “Popular” films, theaters will go out of business. Again, a blockbuster film makes anywhere from $250 to $500 million. You’d need, then, five to ten extra Iron Lungs to replace each missing blockbuster. We’ll enter the structural decline the streaming bulls have been warning about. (Something they’ve been warning us about for ten years, but hey, it could still happen.)
Let’s dig into the data to see what has really changed (or not) with theatrical films, starting with the buzzy genre of the moment.
What O&B Indicates About the Box Office
Okay, let’s dive in, ranking everything by whether the current data for 2026 changes the trajectory of a category/studio up, down or flat, and by how much.
Trending Steady – Horror
The rest of this article is for paid subscribers of the Entertainment Strategy Guy, so please subscribe.
We can only keep doing this great work with your support. If you’d like to read more about why you should subscribe, please read this post about the Streaming Ratings Report, why you need it, and why we cover streaming ratings best.
