At the Movies: Battling Box-Office Blues in an Age of Streaming

Episode Summary

Executive Summary: The episode examines the U.S. and global movie business through the lens of box office trends, theater economics, and streaming disruption. Goldman Sachs’ Drew Borst argues that blockbuster franchises, international markets, and theater upgrades are sustaining the industry, even as attendance weakens, revenue becomes more concentrated, and new models like MoviePass and premium VOD challenge the traditional release window.

Main Topics: U.S. box office performance and volatility (Priority: 5/5): The domestic box office is up year to date, driven largely by a few outsized hits, but Goldman expects the full-year market to end roughly flat. The discussion emphasizes how box office results swing sharply quarter to quarter depending on the release slate. Attendance decline vs. rising ticket prices (Priority: 5/5): While box office dollars have grown modestly over the long term, attendance has declined and ticket prices have risen. The transcript frames attendance as the cleaner measure of consumer demand and flags the decline in moviegoing frequency as a key concern. Concentration of revenue in top films (Priority: 5/5): An increasingly large share of box office revenue is coming from the top 10 and top 20 films. The conversation explains this as evidence of consumer selectivity, blockbuster dominance, and cannibalization of smaller titles when major releases perform strongly. Theater upgrades and changing audience behavior (Priority: 4/5): Reclining seats, reserved seating, and improved theater experiences are helping draw more people to theaters, but they also reduce auditorium capacity and can crowd out smaller films on peak weekends. The audience is broader, yet visits per person are falling. Streaming, home entertainment, and shorter release windows (Priority: 4/5): Streaming has weakened DVD/home video economics and intensified debate over premium video on demand and theatrical window compression. Studios want to monetize movies sooner, while theaters resist changes that could reduce box office exclusivity. MoviePass and subscription disruption (Priority: 4/5): MoviePass is presented as a disruptive but potentially unsustainable model that lowers the effective ticket price and pressures exhibitors. The service gains subscribers quickly, but its economics look unfavorable unless costs fall or new revenue-sharing arrangements emerge. Globalization and franchise strategy (Priority: 4/5): International markets, especially China, are a major reason studios keep backing large franchise films. These titles travel well, support licensing and theme-park businesses, and provide more stable earnings than standalone films.

Key Arguments: The U.S. box office is mature but still growing modestly; Goldman expects 2018 to be flat overall despite a strong first half. Revenue growth has outpaced attendance because ticket prices have risen, suggesting that consumer demand is not actually strengthening at the same pace as box office dollars. Quarterly box office results are highly volatile because a few major films can dominate comparisons from one period to the next. When top films do very well, non-top films often suffer, implying a limited pool of moviegoing demand that gets redistributed rather than expanded. Moviegoing frequency is falling even as the share of the population that goes to movies at least once a year is rising. The rise in premium home entertainment, streaming, and abundant TV content is making consumers more selective about which films they see in theaters. International audiences, especially in China, are helping justify blockbuster and franchise-heavy studio strategies because those films travel better and can generate ancillary revenue. MoviePass is attracting demand by discounting heavily, but the business model appears economically challenged at current usage levels. Theatrical exhibitors are responding with seat upgrades, reserve seating, online ticketing, and their own subscription offerings to defend attendance and loyalty.

Data Points: U.S. box office year to date: Up 5% - Domestic box office performance at the time of the interview, driven mainly by Black Panther and Avengers: Infinity War. U.S. box office forecast for 2018: Flat - Goldman’s expectation for full-year 2018 domestic box office. 10-year U.S. box office growth: 1.4% - Long-term growth rate cited to show the market is mature. 10-year attendance trend: Down 1% - Attendance has fallen over the past decade even as box office dollars grew. 10-year ticket price trend: Up 3% - Higher prices explain some of the box office growth despite lower attendance. Black Panther domestic gross: Nearly $700 million - Cited as one of the biggest U.S. box office hits of all time. Black Panther domestic ranking: 3rd highest grossing U.S. film of all time - At the time of the episode, behind Star Wars: The Force Awakens and Avatar. Avengers: Infinity War domestic gross after three weekends: $550 million - Used as an example of exceptional blockbuster performance. Avengers: Infinity War domestic ranking: 8th highest movie of all time in the U.S. - Rank at the time of the interview. 2017 U.S. box office growth: Down 2% - Illustrates recent volatility and a weak comparison year. 2016 U.S. box office growth: Up 2% - Part of the recent trend showing modest overall movement. 1Q17 box office growth: Up 5% - Strong quarter driven by multiple hits including Beauty and the Beast, Logan, and Get Out. 2Q17 box office growth: Down 4% - Shows how quarterly results can reverse sharply. 3Q17 box office growth: Down 14% - Reflects a particularly weak summer and sequel underperformance. 4Q17 box office growth: Up 3% - Another swing quarter in a volatile year. 2Q18 expected growth: About 19% - Goldman expected a big rebound because summer 2017 was unusually weak. 1Q18 box office growth: Down 2% - Despite Black Panther, the quarter compared against an even stronger 1Q17. 2017 moviegoer share of population: 76% - Percentage of the population that went to the movies at least once during the year; the highest on record in the survey. Typical moviegoer share in prior years: 66% to 68% - Historical range before the recent increase in moviegoers. Average annual movie trips per moviegoer in 2017: 4.7 - Down from prior years, showing reduced frequency. Average annual movie trips per moviegoer in 2016: 5.3 - Comparison point for the decline in frequency. Nine-year average annual movie trips per moviegoer: 5.8 - Longer-term benchmark for theater attendance frequency. Growth in moviegoers driven by older and prime-age adults: 60+ and 25-39 both grew by double digits - These two cohorts accounted for 85% of moviegoer growth in 2017. Growth in 12-17 demo: High single digits - Teen moviegoing still grew in 2017. Declining demos in 2017: 2-11, 18-24, 50-59 - These age groups posted declines in moviegoers. Ticket sales share for ages 12-24: Roughly 50% - Young audiences still account for about half of U.S. ticket sales. Prior ticket sales share for ages 12-24: About 55% - Shows a gradual decline in youth concentration. Top 10 films share of box office (recent 3 years): 34% - Average share of total box office over the past three years. Top 10 films share of box office (prior 5-6 years): 26% - Comparison showing increased concentration. Scripted original TV series in 2009: 200 - Used to illustrate how much TV content has expanded. Scripted original TV series this year: Close to 500 - Shows the explosion in TV and streaming competition. Home video market decline: More than 50% over the past decade - Streaming has hurt a historically high-margin revenue stream. Theatrical exclusivity window: 90 days - Standard period before films become available for home video or digital viewing. Historical release window: About 6 months - Earlier industry standard before the window shortened over time. Share of U.S. box office earned in first month: About 95% - Supports the argument for shortening the theatrical window. MoviePass subscription price: $9.95 per month - Price cut that accelerated subscriber growth. Previous MoviePass price: $30 per month - Earlier, less disruptive pricing model. MoviePass subscribers in the U.S.: Over 2 million - Scale of the service at the time. AMC average spend per MoviePass ticket: $12 - AMC’s estimate for ticket cost in larger markets. MoviePass average usage: 2.7 visits per month - AMC statistic cited to show heavy subscriber usage. AMC implied monthly ticket expense per subscriber: About $32 - Calculated from average spend and frequency; far above subscription revenue. Major theater circuits refurbished with reclining seats by end-2017: Roughly one-third - Shows progress in theater upgrades. Expected refurbished share by end of 2018: About 45% - Expected continuation of seating upgrades. China box office growth last year: 22% in local currency - Highlights rapid growth in the Chinese market. China box office CAGR over 5 years: 26% - Long-run growth rate for Chinese box office.

Pivotal Quotes: "The hits are getting bigger and bigger in the United States, but also globally." — Drew Borst: Summarizing the central thesis that blockbuster films are increasingly dominating both domestic and international box office performance. "There's really nowhere for a bad movie to hide." — Drew Borst: Explaining why consumers have become more selective amid ratings, reviews, and social-media word of mouth. "The one-liner is that in television, the hits keep getting smaller and smaller." — Drew Borst: Contrasting TV fragmentation with movie-industry concentration and blockbuster growth.

Implications: The movie business remains durable, but success is tilting toward fewer, bigger franchises. Theater operators must upgrade and digitize to retain audiences, while studios will keep chasing global, merchandisable hits. Streaming and subscription models will keep pressuring the traditional release window.