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Monday, July 8, 2019

Disney and the Changing Movie Business

by Ray Keating
July 8, 2019

Is Disney dominating in a declining industry? Yes and no. To be exact, Disney is dominating where the movie business is in decline, while working to position itself as a leader where growth looks promising. That’s a nice position to be in for any business.

With the Fox merger, and a collection of Disney hits versus flops from other studios so far this year, there’s been a good deal of chatter about Disney’s formidable market share in terms of the domestic box office. 

For example, according to BoxOfficeMojo.com, through the first six months of 2019, Disney claimed a whopping 36 percent of the box office gross. Consider how much things have changed from a decade ago, when for all of 2009, Disney raked in 12.1 percent of the domestic box office and ranked fifth among studios. So, the past decade has been good to Disney – right?

Yes, but there’s a reason why Disney is investing so much in its Disney+ streaming service launching later this year, as well as in Hulu. The movie theater business based on the number of tickets sold has been on a decline since 2002. (See the following chart.)

But there’s even more to this story than served up in this chart. Consider the longer haul. For example, there were approximately 3.1 billion movie tickets sold in 1950, 2.1 billion in 1960, 920 million in 1970, and then climbing back to just over 1 billion in 1980. After this period of dramatic decline, a return to growth occurred over a 15-year period of 1987 to 2002. But the movie business never got back to where it was in 1960, for example. And now, the industry is in the midst of a 15-plus-years slide.

Also, keep in mind that the U.S. population has more than doubled since 1950.

So, what happened and is happening?

Television arrived. In 1950, only nine percent of American homes had a television. That had jumped to 87 percent in 1960 and 95 percent in 1970. More people stayed home to be entertained, in their own living rooms, as opposed to journeying out to the theater. 

Also, a dramatic change occurred in the movie business as the Hollywood Hays Code broke down in the late 1960s, resulting in an unleashing of gratuitous sex, violence and language. For many Americans, that was an attack on their values. Consider that with the end of the code, movie attendance in one year, from 1966 to 1967, dropped by more than half. Yikes.

And in recent years, we’ve been in the midst of another dramatic change in video entertainment – just as dramatic arguably as during the dawn of television. Broadband, digital and computer technologies have transformed the creation, delivery and consumption of video entertainment. Obviously, mobile technology and enhanced in-home viewing have vastly improved convenience and quality outside the movie theater. 

This same technological revolution has expanded opportunities for creators and consumers of video content, while also boosting the quality and immersive nature of video games. So, competition has multiplied.

Finally, there is the cost factor of going to the movies. Tickets are expensive – hence the increase in revenue even as the number of tickets declined – as are the food and snack options at theaters. Consider that the monthly cost of Netflix or Disney+ is or will be around the same price as one movie ticket. Toss in cheaper beverages and popcorn at home, cheaper and better quality big screen televisions, and no (or far fewer than in theaters) rude people to deal with in your own living room, and the advantages of the theater experience continue to be diminished.

We’re entering the age of expanding options and opportunities for consumers and creators, with established studios and theaters working to adapt.

Indeed, this all converges into a kind of perfect storm for the movie theater business. Disney and others in the industry all recognize this by now. Some are positioned well to capitalize on such changes – with Disney arguably best positioned – while others seem to be struggling to find their place.

Ray Keating is the editor, publisher and economist for DisneyBizJournal.com, and author of the Pastor Stephen Grant novels. He can be contacted at  raykeating@keatingreports.com.

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