Sun Sentinel Palm Beach Edition
Rosy numbers mask underlying challenges
LOS ANGELES — Hollywood is headed toward another record year at the box office thanks to a lineup of blockbusters.
But while projections of $11.3 billion in U.S. and Canada ticket sales would seem like a cause for celebration, the rosy numbers mask underlying challenges.
Higher costs of making and marketing big movies, as well as plummeting home video revenue, have dragged down studio profits. Oncebankable home entertainment sales — including DVDs and video on demand — have dropped more than 30 percent since 2010, according to Digital Entertainment Group.
The home video falloff has made theatergoing even more vital to the studios’ bottom line. With expanded streaming and video game options in the home, fewer young consumers are watching movies on the big screen. And the box office has increasingly become a winner-take-all game, with grosses hoarded by a handful of dominant films such as Disney’s “Finding Dory” and Universal’s “The Secret Life of Pets.”
“It’s deceiving,” said Adam Goodman, a film industry veteran who previously led production at Paramount Pictures. “If you look at the box office, it looks healthy. But it’s just a couple of titles that are having this success.”
Profits among the seven biggest studios fell 17 percent during the first nine months of the year to about $3 billion, according to a recent research report by investment firm Cowen & Co. More than half those profits went to just one studio — Disney — the report by analyst Doug Creutz indicated.
While international growth remains a bright spot for the industry, Hollywood’s largest foreign market — China — experienced a dramatic slowdown in box office receipts this year.
In the U.S. and Canada, box office revenue is expected to grow 2 percent this year, but the increase is deceiving, inflated by ticket prices, not by more people going to the multiplex.
The number of tickets sold is expected to remain flat, at about 1.3 billion, according to industry estimates. That would be down 6 percent from 1.4 billion tickets sold in 2006, according to the Motion Picture Association of America.
The headwinds have pushed studio executives and theater owners to rethink one of the fundamental pillars of the movie business: so-called theatrical windows.
Warner Bros. Pictures and Universal Pictures have engaged in talks with theater chains to shorten the gap between a movie’s theatrical release and when people can watch it on home video.
One proposal would make new movies available in the home two to four weeks after theatrical release for about $50 each, people familiar with the talks say. That would be a dramatic shift from the current 90-day wait.
Film executives have long looked for ways to shorten the time consumers have to wait to buy or stream movies once they’re mostly out of theaters — a gap known as the “dark zone” when studios lose billions to piracy.
This year the Walt Disney Co. has focused almost entirely on big-budget blockbusters such as “Finding Dory” from its Pixar unit, “Doctor Strange” from Marvel and “Rogue One: A Star Wars Story.”
Rival Warner Bros., meanwhile, has put its energy and money into growing its DC Comics movie series, along with the Harry Potter spinoff “Fantastic Beasts and Where to Find Them.”