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Long Story Short: Will Streaming Be The End Of Movie Theaters?
Going to the Movies? A Theater or Stream?
(Note: companies that could be impacted by the content of this article are listed at the base of the story [desktop version]. This article uses third-party references to provide a bullish, bearish, and balanced point of view; sources are listed after the Balanced section.)
In the 1930s, over half of the US population were weekly movie theater attendees. Today, the average American goes to the movies just four or five times a year.(1) While a large portion of the decline is due to a loss of novelty, changing demographics, and an explosion in entertainment alternatives, the rise of streaming services is having an impact on movie theaters. Can movie theaters survive the onslaught of streaming?
2018 Was a Record Box Office Year. In 2018, the overall US box office totaled $11.9 billion, a new record, the third record year in the last four.(2) The International box office was slightly off to $29.2 billion, from $29.4 billion in 2017; the first time in 14 years that a new annual box office record has not been set.(3) These results are occurring at the same time streaming services have seen massive expansion.
Still Affordable. Even though average ticket prices have climbed at a compound annual growth rate of 2.6% since 2007, the average ticket cost for a family of four is still just $36. This cost compares favorably to other forms of entertainment such as a baseball game ($130 ticket cost for a family of four), the NFL ($401), or a concert ($520)(3).
If You Want to See It First. Most, if not all, major movie studios still adhere to the theatrical window, a period of 90 days, on average, when a movie plays exclusively in theaters.(4) So if you want to see a movie first, a theater is still the place to be. But Netflix does not always adhere to the policy and with more studios offering streaming services, it will be interesting to see how open the window remains.
Upgraded Experience Like No Other. Theaters have spent considerable sums of capital upgrading the movie experience. From lounge chairs, to improved audio systems, to upgraded food offerings, often available for chair-side delivery.
Streamers Are Moviegoers. According to a study by EY’s Quantitative and Statistics Group, people who go the see movies in theaters more frequently are also the people who consume more streaming content. (5) The study reports that “respondents who visited a movie theater only once or twice in the last 12 months reported an average of 7 hours of streaming per week versus 11 hours of streaming per week for those who visited a movie theater 9 or more times.”(6) So it’s a symbiotic relationship, not mutually exclusive.
Inflation Adjusted Numbers Tell a Different Box Office Story. The number of tickets sold in movie theaters actually peaked in 2002 at 1.57 billion. In 2018 ticket sales were 1.31 billion.(2) Using 2018’s average ticket price, 2002’s box office would have been $14.4 billion, some 21% higher than the “record” 2018 box office year.
And We’re Already Bigger. Over-the-top (OTT) services, or media streaming, is projected to top $46 billion in worldwide revenue in 2019, beating estimated worldwide estimated box office receipts of $40 billion.(7)
Streamer Universe Expanding. While Netflix is a household name in the streaming arena, the leading streaming company is being joined by a number of other firms, including Disney, Apple, and WarnerMedia.(8)
Streaming is Cheaper, and I can Binge Watch. Many consumers prefer to binge watch movies and or tv shows, something difficult if not downright impossible at a movie theater.(9) With many streaming services charging less than $15 per month, consumers have access to hundreds of movies and shows.(1)
In response to streaming services, many theater chains have implemented their own subscription services, enabling consumers to watch a specific number of movies per month for a lower price. Such programs potentially are a more stable, predictable revenue stream, which could increase the number of people in the theater, increasing concession and ancillary sales, the true economic driver of a movie theater.(9) And while streaming services have had an impact on movie theaters, the death knell for the movie theater industry may be premature. Recent technological changes have caused pundits to predict the demise of many mature industries, such as book publishing, which, while having to adapt to a new paradigm, many of these industries remain.(8)
- https://www.breezejmu.org/opinion/opinion-netflix-could-replace-movie-theaters/article_9c376cf6-57f9-11e9-8ac0-17e54bc71d10.html, Josie Haneklau, April 10, 2019
- https://www.reuters.com/article/us-film-theaters/cinema-vs-streaming-the-battle-over-when-and-where-you-can-see-movies-idUSKCN1RM13V, Lisa Richwine, April 10, 2019
- https://www.cnbc.com/2019/04/08/netflix-isnt-killing-theaters-people-who-steam-more-see-movies-more.html, Sarah Whitten, April 8, 2019
- https://www.slashfilm.com/streaming-vs-theaters/, Chris Evangelist, April 10, 2019
- https://www.ibc.org/industry-trends/streaming-vs-cinema-what-does-the-future-hold-for-film/3517.article, Adrian Pennington, January 2019
- https://www.indiewire.com/2019/06/movie-exhibition-distribution-future-1202152832/, Eric Kohn, June 28, 2019
- https://www.forbes.com/sites/danafeldman/2019/07/28/how-netflix-is-changing-the-future-of-movie-theaters/#562a5f0a5f46, Dana Feldman, July 28, 2019