..Gary Dretzka
..Noah Forrest
..Leonard Klady
..R.J. Matson
..David Poland
..Douglas Pratt
..Ray Pride
..Michael Wilmington

Market Share … and Share Alike

From a business perspective, this is the time of year when pundits sum up the past 12 months by saying: I've got good news, and I've got bad news. The good news is that box office was up and the bad news is that fewer people went to the movies.

It's the equivalent of the report card mantra: Johnny is a very good student, but he's capable of doing better.

The fact of the matter is that it's quite possibly not a good news/bad news scenario and Johnny may have done about as well as best efforts are concerned.

For the record 2004's final box office tally was ever so slightly more than $9.4 billion and approximately 1.5 billion tickets were sold in U.S. and Canadian multiplexes. Comparatively speaking gross revenues crept up by 2% from 2003 and admissions declined by almost 6%. I've probably written a comparable scenario 15 times in the last 20 years.

There are unquestionably pluses and minuses on an anecdotal basis. There were great successes for individual movies and, if not fiascos, certainly significant disappointments to recall. There were achievements worth chronicling on an individual and corporate level and artistry worthy of acclaim and refute.

However, let's put those matters aside momentarily and first focus on the bigger picture. .

The bottom line is that were it not for The Passion of the Christ and Fahrenheit 9/11, there would be no boost in the box office. The significance of these two films is that each managed to bring out an audience that doesn't typically go out to the movies. The two films drew heavily on adults that essentially feel disenfranchised from the film going experience. One group has virtually given up on it altogether because its perception of the movies in cinemas is antithetical to its sense of what the medium should be producing. The second group wants to be challenged and engaged and finds little at the multiplex that does either.

The dilemma for either group is that - assuming their experience was positive - having seen something that rekindles their interest there is nothing comparable for them to subsequently see a week or a month later. And that lack of reinforcement essentially means the film industry will once again lose that audience.

There is a potential that's being squandered to reach about 5% of the population that is not naturally prone to go further than the neighborhood video outlet to select a movie. There's a homogeneity to the vast majority of movies being produced and the decisions being made are heavily targeted at young audiences that are already inclined to see predictable fare as part of the dating ritual or simply to have something to say in the lunchroom or around the office.

It should come as no surprise that catering to one sector of society translates into a relatively consistent audience base that in any given year will see 20 or 30 films. The size of the audience increases every so often as the result of population growth. But it also declines when the aging process skews the overall demographics older. One can only wonder why some savvy executive has failed to grasp the obvious and connect with a part of the crowd that's being underserved. Is the fear of failure so crushing, that obvious and banal choices dominate the conference room?

An additional blatant fact that's probably been either missed or ignored is that the core audience is shrinking even faster than anyone's willing to admit. The biggest gains in recent years have been in unconventional areas while the slam dunk forms of entertainment aren't as big as their antecedents. The problem is that one isn't developing nearly as quickly as the other is declining and as long as that situation exists, there will be gradual erosion that will have a catastrophic impact within the next five to 10 years in what has to be viewed as an already precariously perched industry.

The good news is that a larger proportion of the nation is seeing movies. They may forego the stadium seating experience in favor of the coach potato environment but thanks to DVDs and pay-Cable they are enjoying access to current movies. So the potential exists to at least occasionally bring this audience out of its cocoon to sample what's on offer in first run cinemas. But the lure has to be considerable.

In the past 20 years the ratio between revenue generated theatrically and those from ancillaries has shifted away from the former to the latter. It's resulted in a new financial equation that appears to be working at least for the present. Nonetheless there appears to be a correlation that figures more positively for popular theatrically pictures. It's also worth noting that the monies that can be retrieved are far better proportionally from second and third tier exposure than from initial theatrical release. In so far as performance benefits are concerned, studio executives have to be dancing on air about the shift with some likely mapping out ways of pushing it to greater extremes.

What ought to be of uppermost concern is the neglect of the primary industry. It is the theatrical window that propels everything that follows and while one can argue about the capacity and potency of the engine, no one is yet suggesting that it be removed.

In a typical year at the movies in this country the majors (including their specialized divisions) account for about 94% of the annual box office. What's apparently eluded most people's radar is that in 2004 that percentage slipped back to just shy of 90%. While by no means cause to pass around the collection plate for Paramount, it not only underlines a desire for an alternative that even studio classic divisions rarely provide but also the fact that the independents have the capacity to run the distance when they tap into the zeitgeist.

The Passion of the Christ became the all-time top grossing non-studio release in 2004 and Lions Gate had its best ever year (and an almost $100 million grosser save for Alliance acquiring Canadian rights to Fahrenheit 9/11) with an unusually appealing combination of high art and cutting edge visceral horror movie fare.

The other major growth area was in large format exhibition. That arena appeared primed for an explosion several years back with ramped up production and a spurt of new venues. But it wasn't until matters leveled off and new options were introduced that the fruits began to blossom. Only a few new titles were introduced into the arena in 2004 but a groundswell was created with day and date engagements of conventional-format movies, particularly the 3-D version of The Polar Express that's proven to be, pound for pound, 10 times more potent than its 2-D incarnation.

Another telling aspect of the year was the lackluster results experienced by both Miramax and New Line. The Miramax situation was certainly abetted by constraints put upon it from its Disney parents. The mother company doesn't quite know how to assess its adoptee. The ambitions of Harvey Weinstein to make bigger and more costly adult fare run counter to the initial decision to acquire a scrappy, low budget production company.
The thorny issue is not a matter of replication for the mother company isn't producing prestige pictures and Miramax has effectively offset its losses with cheap, high concept genre movies. Still, the absence of one of its cash cow franchises on the 2004 release schedule demonstrates the vulnerability of a company that has grown to a size that requires very big hits to stay afloat.

Everyone expected the absence of a Ring to put a ding in New Line's economic profile. However, the past year didn't even have an Elf or Mask or Ninja Turtles or any one of a number of inspired commercial choices that have marked the company's history. Again, the scrappy indie has assumed the travails of a studio as its grown and will likely have to weather the cycle of corporate scrutiny that asks do we have too many companies doing the same thing.

Conversely, most of the more clearly defined specialized divisions of the majors had excellent years with the exception of Paramount Classics that is lumbering under the weight of imminent redefinition and leadership. With the exception of Sony Classics the group that includes Focus, Fox Searchlight and Warner Independent is comparatively nascent in development and definition. Fox Searchlight is the one with Miramax-sized ambitions and with it comes the potential dilemma of losing sight of what's made it a viable antidote to big Fox.

Focus appears to have its sights clearly trained on an eclectic alternative mix and now simply has to put the mechanism in place to produce or acquire 10 to 12 films annual from its current output of six to eight films. The big conundrum is not surprisingly the year old WIP. In addition to acquisition, its mandate also includes servicing the more offbeat interests of the likes of Castle Rock and Section 8 and the commercial potential of Warner overseas productions. What is unclear is just how much discretion the division has and whether the mix of pickups will prove symbiotic.

A considerable amount has been written about the explosion of non-fiction movies in American theaters and while it tends to paint the situation in hyperbole, there is unquestionably a current receptivity that hasn't existed for decades. Putting aside the anomaly that is Fahrenheit 9/11, one has to be impressed by the commercial tenacity last year for pictures such as What the $%^& to We Know? and Super Size Me and the niche appeal of Control Room, Story of the Weeping Camel and Riding Giants among others. Again it's a very clear indicator that a sizeable part of the viewing audience is looking to be challenged, engaged, even enlightened when it goes out to the movies and is considerably more attentive to what's on the marquee then the people empowered to make decisions affecting thousands of screens.

Next: A Closer look at the majors in 2004

The 2004 Domestic Box Office List
The 2004 International Box Office List
The 2004 Market Share

- by Leonard Klady