Movie industry hits ticket sales decline on the nose: It's put out some stinkers

By Richard Verrier and Ben Fritz, Los Angeles Times

March 30, 2011 12 AM PT

Reporting from Las Vegas and Los Angeles — With movie theater attendance in the U.S. and Canada down a whopping 20% so far this year compared with 2010, cinema operators and some studio chiefs surprisingly agree on at least one cause: The movies haven’t been very good.

“I think it all boils down to the quality of the movies,” said Gerry Lopez, chief executive of AMC Entertainment Inc., the nation’s second-largest theater chain. “This year we just haven’t had those kind of movies that cut across all quadrants of age, race and income.”

Michael Lynton, chief executive of Sony Pictures Entertainment, agreed: “So far there is just nothing terribly compelling about what we’re delivering as an industry.”

It’s an unexpected concurrence among two camps that have increasingly been at odds over changes in the business. But the current downturn in ticket sales — the worst in at least six years — is top of mind for more than 6,000 theater owners, studio executives and vendors gathered in Las Vegas this week for CinemaCon, the exhibition industry’s annual convention.

While audiences have outright rejected such recent movie offerings as “Mars Needs Moms,” “Sucker Punch” and “Take Me Home Tonight,” even hits like Justin Bieber’s “Never Say Never,” “The King’s Speech” and “Battle: Los Angeles” pale in comparison with the early 2010 blockbusters “Avatar” and “Alice in Wonderland.”

All of which has created an undercurrent of concern that changes in consumer behavior combined with the continued tough economic times, higher gasoline and movie ticket prices (driven in part by more premium-priced 3-D movies) could be drawing people away from theaters and toward less-expensive and readily available forms of entertainment such as Netflix streaming, video games and other digital media.

“For anyone in this business to not acknowledge the reality of the current forces at play would be doing the industry a disservice,” said Universal Pictures Chairman Adam Fogelson. “All of us are looking for ways to make sure this isn’t the time when theatrical moviegoing really does go away.”

The industry has gone through box-office slumps before but always has recovered. Many are hopeful that’s what will happen by May, when Johnny Depp sails into theaters with the latest “Pirates of the Caribbean” movie. At CinemaCon, studios are seeking to excite theater owners with previews of some of their highly anticipated summer sequels, including “Fast Five,” “The Hangover Part II” and “Cars 2” as well as fresh event films like the comic book adaptations “Thor” and “Green Lantern.”

“As you look at the lineup of films this summer, there are some fantastic titles,” said Alan Stock, chief executive of theater circuit Cinemark Holdings Inc.

Even so, analyst Barton Crockett at Lazard Capital Markets predicted in recent research that a strong summer and holidays would still leave attendance down 2% for the full year.

Of course, the flip side of that optimism is that if the summer would-be blockbusters don’t deliver, attention on systemic problems will escalate.

“A weak summer is going to amp up everybody’s concerns,” Universal’s Fogelson said.

The decline in admissions is troubling Hollywood. The number of tickets sold per person annually in the U.S. and Canada has steadily fallen for most of the last decade to 4.1 last year, the lowest since 1993. In a recent presentation, Bob Pisano, president of the Motion Picture Assn. of America, attributed the trend in part to declining attendance among baby boomers.

Overseas, where Hollywood studios make most of their money and the largest U.S. theater chains have a growing presence, the news does not appear to be as bad. Although complete statistics are unavailable, Lynton estimated that international box-office receipts so far in 2011 are roughly flat with 2010.

The U.S. remains the largest movie market, however. To grow their business here and further differentiate it from the improving home experience, theater owners continue to pour millions of dollars into upgrading their auditoriums with new digital systems capable of projecting in 3-D.

Higher 3-D ticket prices have been a boon to theaters — generating some 20% of box-office revenues last year — but some in the industry believe it may be backfiring, especially at a time when families are cutting back on discretionary spending.

The average ticket price at theaters in the U.S. last year rose to an all-time high of $7.89, up 5% from 2009, according to the National Assn. of Theatre Owners. The increase is largely attributed to 3-D screenings, for which consumers pay surcharges of $2.50 to $4 per ticket. Most of this summer’s biggest films will be in 3-D.

“We believe that exhibitors’ core strategy of raising prices through 3-D premiums and pushing concession pricing as far as humanly possible is a dangerous strategy,” wrote Richard Greenfield, an analyst with BTIG Research in New York.

But others doubt cost is the problem.

“There’s nothing in the research that suggests rising prices are keeping moviegoers away,” Lynton said.

In a sign that the status quo may not be acceptable, theater chains have been taking steps to expand their businesses. Many now offer live events such as operas and sports. AMC and Regal Entertainment Group — the two largest chains — recently launched a joint venture to acquire and distribute movies in an effort to grow their supply at a time when the big Hollywood studios are cutting back on the number of films they make.

The move is also widely viewed as a response to the studios’ plans to start offering movies in the home as soon as eight weeks after they open in theaters — instead of the usual three-month wait — in a bid to stem declining DVD revenue. Exhibitors are outraged by the idea of “premium video-on-demand.” “Premium video-on-demand will definitely be a dagger in the business,” said Lyndon Golin, president of Regency Theatres in Calabasas.

Beyond the latest crop of high-profile flops, 2011 has also seen a number of movies come in on the low end of expectations based on pre-release polling. That has some worried that the habit of heading out to theaters may be slipping.

“When the audience is in a moviegoing mood, you pick up a head of steam,” Lynton said.

Still, exhibition executives express confidence that they know how to get that momentum back.

“I believe we have long-term systemic challenges that we must work to overcome,” AMC’s Lopez said. “But I like our chances as an entertainment option of the future.”

If there’s one thing nobody at CinemaCon will dispute, it’s that Lopez’s prediction must come true.

“I see no path to a healthy future for our business,” Fogelson said, “that doesn’t include vibrant, growing theatrical moviegoing attendance.”

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