The Future of Media Consumption, Part 1

Theaters Aren’t Dead – Yet.

I’ve been thinking a lot about the future of media consumption. What are we going to watch, where will we watch it, and what does that mean for content providers, service providers, and content creators.

For some parts of the media industry, the Golden Age is just beginning, while for others, troubled times lie ahead, or have already started. 

But not all that glitters is gold, and not all gloom is doom. 

Let’s start with theaters. 

Theaters, as an endpoint in the distribution of content, are not dead – yet. But recent pandemic-related events may be a harbinger of things to come. 

After spending most of my life in a sort of love affair with the movie-going experience, I stopped going to movie theaters. The notable exception was a visit to the TCL Theater in Hollywood during the TCM Classic Film Festival in 2019. The film was 1989’s “Steel Magnolias.” I didn’t go for the movie – though I enjoyed it. I went to experience a classic theater, and to hear the screenwriter Robert Harling talk about the genesis of the film.

I’m not alone in forgoing theaters. Both revenue and attendance at theaters were down for 2019 – 4% and 4.6% respectively. That’s not the full story – theater attendance was still an astonishing 1.244 billion – yes billion – in 2019. With an average ticket price hovering just over $9, theaters are still big business. 

Which is probably why AMC, followed by Cineworld (parent to Regal Theaters) decided to go to war with Universal and ban that studio’s movies from their theaters after NBCUniversal CEO Jeff Shell, when discussing Premium/pay video on demand platforms (PVOD), told the Wall Street Journal “As soon as theaters reopen, we expect to release movies on both formats.” I don’t see how this battle helps Regal or AMC, whose stock jumped at the mere potential for Amazon to consider buying them. For the record, we’ve heard this song before. I’ll talk more about Amazon in another post.

Netflix already got into the theater game when they purchased the last single screen theater in New York, the Paris Theatre, last year. Netflix followed that move with the purchase of the “legendary” Egyptian Theater in Los Angeles this year. Netflix isn’t buying a theater chain because they don’t need one. All they need are theaters in which to premier their own films, largely so they can be eligible for Academy Awards. (Although this is another change brought on by the pandemic). It helps that Netflix seems to have a genuine fondness for nostalgic venues.

Ticket prices are up, attendance is down, and people are scared. Right now, and for the foreseeable future, data indicates people would rather watch a first run movie at home then go to a theater. This consumer attitude will persist, even if re-opened cinemas take extra precautions – like limiting capacity to 60% or less. The trend runs against growth in the theater business.

The decline is not unique to the U.S. market. As recently as November 2019, the Chinese box office was predicted to exceed America’s, becoming the largest in the world. With hundreds of theaters already out of business, it’s been a “bitter winter” for the industry in mainland China, while consumers flock to alternatives, like Netflix. (UPDATE: my original post did not include the link to the CNBC article I used as source material for this assertion. My point, although Netflix is not officially available in China, was that Netflix is creating content for, and delivering content to, China and the broader Mandarin language market via a multi-faceted strategy, and viewers who would otherwise visit a theater are consuming content available on streaming services).

After all, when you can release an animated sequel that hauls in $100 million in three weeks, and only cough up 20% to the PVOD platform, the studio’s likely to take that same risk again with future releases. Disney’s decision to release its $75 million film version of “Hamilton” direct to consumer via its Disney+ platform, while based on multiple factors, further supports this notion. 

Money talks, it’s just that simple. 

But the theater experience isn’t dead, and it doesn’t have to die. Like everyone else in the business, theaters need to adapt. It’s too soon to tell if the recent drive-in movie revival will be sustained, but the success of these offerings, right now, is a good sign. People will get off their sofas and go see a movie, if conditions are right. 

Companies like AMC and Regal need to stop fighting with studios and figure out what those conditions are, or should be.

Here are some ideas to kick around:

 – Reduced capacity isn’t just a good idea during a pandemic – it’s a good idea in general. Watch people fill in seats at a theater and you’ll notice something important – people don’t want to rub elbows with strangers if they can avoid it. It’s the same reason no one likes the middle seat on an airplane. We like our personal space.

 – Lower ticket prices. This may be the third rail, but ticket prices have been going up for years – how’s that worked out so far? You don’t have to slash and burn – just offer up incentives like multi-ticket discounts for families or friend groups, or deep discounts for matinees – remember those? And I mean real matinees, not just shows before noon. Get creative! You can make it up on concessions. 

 – Lower prices at the concession stand, and deliver smaller portions. I don’t need a gallon of popcorn and two gallons of soda, or a pound of candy. I quit buying concessions long before I quit going to theaters. When the all-in cost of seeing a movie in a theater hits $25, or more, per person, staying home just makes economic sense. Add this to the logistics of going to a theater, and it’s easy to see the picture developing. 

 – Don’t just think outside the box – get outside the box. Drive-ins may not be the answer, or maybe they are. It’s worth considering, if for no other reason than to gain a better understanding of today’s movie-goer. 

Just some ideas to consider. 

Theaters aren’t dead yet, but they’re wounded. Now is not the time for theater companies to take up new fights, especially ones they can’t win. It’s also not the time to ignore the changing wants and needs of the consumer, not to mention the changing economics of the industry. No matter what, this industry will not come back completely from the pandemic-induced decline. Shrinkage was already happening and will continue, even after the current situation normalizes. Independent theaters and small chains won’t be the only ones to shutter – the big players are going to feel the pain too.

My suggestion to theaters – find new opportunity in the changing environment, and, more importantly, refocus laser-like on the consumer experience.

Because technology is already finding ways to create a shared viewing experience from the comfort of one’s home. Hulu is already testing their “Watch Party” feature, while a browser plug called Scener enables co-watching of Netflix (with potential expansion to HBO) by up to 20 users. Even Plex is getting in on the act with their new Watch Together feature.

Create something that exceeds expectations, and can’t be recreated in the living room, and the current trend could change.

But keep in mind, TV’s are getting bigger, better, and less expensive, every year. 

Up Next – Linear TV Is Going Places 

UPDATE: 4/26/2024 – I decided to revisit this series and see how my thoughts held up over time. In this instance, I’d say I did ok. The War With Universal ended with what I view as a win-win-win agreement, one that benefited both sides as well as the consumer. And it only took three months, so good on both sides for sorting it out. Also, I went to a local theater for the first time in years and all it took was “Barbie” and my sister-in-law. It was a new Showcase Cinema and I was glad to see 1) Lower priced options at the concession stand, 2) Moderately lower ticket price ($13 vs $15) with a Tuesday discount option of $5 for any movie, 3) Big comfortable seats with ample elbow room 4) Absolutely perfect audio, and 4) A full bar, which I did not visit but will in the future, perhaps one Tuesday evening.