[ EEPI-Discuss ] Why are movie theatre revenues declining?

[Lauren Weinstein <lauren@vortex.com>]

------- Forwarded Message

From: David Farber <dave@farber.net>
Subject: [IP] Why are Movie Theatre Revenues Declining?
Date: Tue, 19 Jul 2005 17:42:04 -0400
To: Ip ip <ip@v2.listbox.com>

Begin forwarded message:

From: Barry Ritholtz <britholtz@maximgrp.com>
Date: July 19, 2005 2:32:15 PM EDT
To: "Dave Farber (E-mail)" <dave@farber.net>
Subject: Why are Movie Theatre Revenues Declining?


Hey Prof,

For IP, if you like . . .


Why are Movie Theatre Revenues Declining?
http://bigpicture.typepad.com/comments/2005/07/declining_movie.html

There's been plenty of chatter about declining movie theatrical  
revenue. You just know the MPAA is itching to tie this onto piracy  
somehow and thus get some favorable legislation.  Let's nip this one  
in the bud, shall we? 5 factors are hurting theater revenue:

     1) Social factors eroding theater environment (talking, cell  
phones, babies crying, etc.);
     2) Sacrificing long term relationships with theater goers for  
the increase in short term profitability (commercials, no ushers, etc.);
     3) Higher quality experience elsewhere (Home theater);
     4) Declining quality of mainstream movies;
     5) Easily available "Long Tail" content alternatives (Netflix,  
Amazon).

While content quality has indeed worsened over the years, it  
shouldn't be much of an issue this Summer:  As of late, there have  
been a spate of movies which have been either well-reviewed (Batman  
Begins) or had good word-of-mouth (Wedding Crashers) or incredible  
special effects perfectly suited to the big screen (Revenge of the  
Sith, War of the Worlds).

So what else might be the source of declining theatrical fortunes?

How about the movie-going experience itself? The adventure of heading  
to a cineplex is becoming a less and less pleasant ordeal. Many of  
the headaches involved have been painfully detailed by Bob Lefsetz'  
readers (see below).

Note that we are not even discussing content quality at this point.

Then there are the adverts. A recent L.A.Times article -- Now  
playing: A glut of ads -- points out that even studio executives were  
stunned by 15 minutes of commercials theatre goers had to endure  
after paying their 10 bucks:

"As head of production at New Line Cinema, Toby Emmerich is not your  
typical moviegoer. So when he wanted to see "War of the Worlds" the  
other night, his choice was between seeing the film in a theater with  
a tub of popcorn or watching it in a screening room at Jim Carrey's  
house, with a private chef handling the culinary options. Despite  
this seemingly loaded deck, Emmerich opted for a real theater.

"I love seeing a movie with a big crowd," he says. "But I had no idea  
how many obnoxious ads I'd have to endure - it really drove me crazy.  
After sitting through about 15 minutes of ads, I turned to my wife  
and said, 'Maybe we should've gone to Jim Carrey's house after all.' "

When DreamWorks marketing chief Terry Press took her young twins to  
see "Robots" this year, she said, "My own children turned to me and  
said, 'Mommy, there are too many commercials!' Now, when the lights  
go halfway down, I'm filled with dread. The whole uniqueness of the  
moviegoing experience is being eroded by all the endless  
ads."  (emphasis added)


So while the industry laments piracy, consider if you will why going  
to the theatre has become so much less enjoyable than watching DVD  
films on your own big screen in the comfort of your home theatre.

The theatres have adapted Radio's disasterous Hamburger Helper  
approach: Short term increases in profitability in exhcange for  
alienating your core audience, who eventually seek out a better  
substitute. Quite frankly, I'm astonished the film industry has  
(contractually) allowed theatre owners to degrade their copyright  
protected product by diminishing the experience so dramatically.

As Radio has so painfully learned, the end result is a big fat Buh-bye!

To a large degree, this is  a zero sum game: The theatre chains  
losses are Best Buys' gain; Is it any surprise that high quality home  
sound systems and large screen TV sales have gone through a ginormous  
growth spurt over the past 5 years? Even as the lowest common  
denominator productions falter, Netflix (and its rivals) allow home  
theater owners to enjoy a Long Tail orgy of content.

Yo, theatre owners, when a segment of retail electronics called HOME  
THEATRE explodes in sales, that is your wake up call. You seem to  
have been oblivous, and missed the bell ringing.

Good luck getting the toothepaste back in the tube!


Sources:
Now Playing: A Glut Of Ads
The Big Picture
Patrick Goldstein
L. A. Times, July 12, 2005
http://www.latimes.com/business/custom/admark/la-et- 
goldstein12jul12,1,35978.story

Lefstz Letter
June 5, 2005


Barry L. Ritholtz
Chief Market Strategist
Maxim Group
405 Lexington Avenue,
New York, NY 10174
(212) 895-3614
(800) 724-0761
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The Big Picture: Macro perspectives on the Capital Markets, Economy,  
and Geopolitics
http://bigpicture.typepad.com/comments

**********************************************************************

This message is intended only for use by the intended party and may  
contain information that is privileged and/or confidential. If you  
are not the intended recipient, then any review, dissemination,  
replication or distribution of this communication is strictly  
prohibited. If you have received this communication in error, please  
notify us immediately and delete this message and all attachments.

Electronic communications routed to any employee of Maxim Group LLC  
("Maxim") are for business purposes only. While messages are  
confidential, authorized  management, legal and compliance personnel  
may review electronic messages. Electronic messages are also retained  
and would be provided upon request to an authorized regulatory body.

Do not use email or instant messaging to request, authorize or effect  
the purchase or sale of any security, to send fund transfer  
instructions or to effect any other transactions. Maxim does not  
accept responsibility for transmission via electronic means of trade  
orders. No guarantee can be made by Maxim of timely execution of any  
trade order transmitted via electronic means including email and  
instant messaging.

Information included in this email does not constitute a trade  
confirmation or an offer or solicitation of an offer to buy/sell  
securities. Past performance is not indicative of future returns.

Any attachment(s) to this electronic communication that was not  
prepared by Maxim Group, LLC ("Maxim") has been unaltered, and is in  
its original form.  Any recommendation, opinion, or advice regarding  
securities or markets contained in any documentation that was not  
prepared by Maxim does not necessarily reflect the views of Maxim,  
and Maxim does not verify any information included in such material.   
Lastly, Maxim and/or its employees or affiliates may have an interest  
in, or from time to time trade or make markets in the securities (and/ 
or related derivatives) of the issues discussed in any attachment  
annexed hereto.

**********************************************************************

------- End of Forwarded Message
_______________________________________________
EEPI-Discuss mailing list information:
http://lists.eepi.org/mailman/listinfo/eepi-discuss