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Movie Business Shrinking

A curious occurrence took place in the wake of the Aurora, CO, mass killing on the opening night screening of the latest Batman release, The Dark Knight Rises. Revenue from opening weekend ticket sales was $211.8 million, slightly less than the $222.2 million for The Dark Knight.

This was the highest box office gross for a conventional 2D movie for 2012.  While the large turnout for the movie can be linked to a response to the shootings as much as the appeal of the movie, the numbers hide a darker truth. The movie business is shrinking.  Ticket sales and DVD sales are declining annually but streaming revenues, while growing, are doing so at a rate insufficient to make up the difference.

Based on data from both the MPAA and the.numbers.com, movie ticket sales peaked in 2002 at 1.57 billion (MPAA) or 1.58 billion (numbers). Over the last decade, attendance has steadily eroded to the 2011 level of 1.28 billion (MPAA) or 1.29 billion (numbers).  the-numbers projects 2012 tickets to further erode to 1.28 billion. This is audience shrinkage of nearly a fifth (19%) over 10 years.

Like a bad Hollywood movie with lots of CGI fireworks for distraction, reporting about the movie business focuses nearly exclusively on box office receipts.  Since 2002, B.O. sales have risen to $10.2 billion from $9.1 billion, a 12 percent increase.  However, the MPAA reports that during this period the average ticket price jumped more than a third (37%), to $7.93 from $5.81.

Compounding the decline at theatres, stored media continues to erode. According to the market research firm the Digital Entertainment Group (DEG), Blu-ray systems are replacing DVDs. Consumers spent $18 billion buying and renting discs and on digital movies in 2011, a 2 percent decrease from 2010. While Blu-ray discs sales were up 19 percent from 2010 (and topped $2 billion for the first time), up DVD sales dropped 20 percent to $6.8 billion.

Netflix offers a telling insight of the stagnating fortunes of the movie business. As Will Richmond reports in his helpful blog VideoNuze, Netflix Q2 ’12 results show how the company is plagued by “modest growth in streaming undermined by significant DVD losses.”

At the time of its ill fated repricing and rebranding disaster in 2011, Netflix had 23.8 million in Q3 2011. As of Q2 ‘12, the company had a total 26.4 million subscribers. More significant, over the last four quarters, while its DVD-only subscribers have modestly increased (to 2.5 million from 2.3 million), its streaming-only subs have more than doubled, to 17.3 million from 6.7 million. Those availing themselves of both DVDs and streaming subs has shrunk by nearly half, to 6.7 million in Q2 ’12 from 11.6 million in Q3 ’11.

The further erosion of sales for both movie tickets and stored media will only add to the challenges facing indie makers. Peter Elson, founder of Global Cinema Group, an international sales agent, warns that “the decline in the U.S. of DVD values has increased the difficulty of funding indie productions today.” Advances or minimum guarantees are being squeezed or, all too likely, are nonexistent.

Indie makers and distributors are reshuffling distribution windows. While streaming has yet to replace ticket sale and stored media, it is offering indies a new launch platform to test marketing and sales strategies.  If the movie attracts a meaningful audience through iTunes or one of the growing numbers of indie streaming services, a targeted theatrical release and DVD campaign might be appropriate.

That technological change is realigning the film business as the U.S. and European economies are in crisis, only makes making an indie film that much more of a challenge.

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David Rosen is a writer and business-development consultant. He is author of the indie classic Off-Hollywood: The Making & Marketing of Independent Films (Grove), originally commissioned by the Sundance Institute and the Independent Feature Project. He can be reached at drosennyc@verizon.net. For more information, check out www.DavidRosenWrites.com and www.DavidRosenConsultants.com.

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