TV & Movies

Turns Out That Studios Did OK Even with a Pandemic. Theaters, Not So Much.

Revenue declined from theaters, home digital platforms, and physical media in 2020, according to the Motion Pictures Association’s annual report. Worldwide, the year-over-year decrease was 18 percent — $80.8 billion versus $98.3 billion. The organization, which represents the five major studios plus Netflix, paints a picture that on the surface suggests major losses last year.

In his report introduction, MPA chairman Charles Rivkin refers to the comeback stories that Hollywood loves but adds: “Most of us anticipate that things are unlikely to return to what is ‘normal’ anytime soon.”

The numbers reflect a challenging year, but North America saw the best of it. Its decline was was 11 percent, to $32.2 billion, while foreign markets dropped 23 percent, to $48.2 billion. That discrepancy reflects the penetration of alternative platforms; it also may testify to the member companies’ ability to keep losses to a minimum.

Dour news, but not dire. For the genuinely bad news, we have theaters, which saw catastrophic declines. Widespread closures for months in all zones, then the minimal attendance in most areas when theaters reopened (with both lack of product as well as reluctance to venture in as factors), made the theatrical end of the revenue draw by far its lowest share ever.

The MPA’s report for 2019 stressed the dramatic growth of home viewing options as revenues from these increased to 58.3 percent of the worldwide total. It showed flat ticket sales – domestic down 4 percent, foreign up 3 percent. Last year, theater revenue plunged 81 percent domestic, 68 percent foreign, combined 72 percent). The impact of theater closings pushed the 2020 total to 85.1 percent of revenues coming from non-movie ticket sales.

The statistics come from the THEME (Theatrical and Home Entertainment Market Environment) report, which presents both theatrical and nontheatrical statistics. For the fourth year the data, previously called Theatrical Marketing Statistics, suggests how much of their members viability relies on non-theatrical platforms. But that the total amount accrued was reduced by $18 billion also suggests the damage done by a limited theatrical option.

Reports like these often tell only part of the story. But the data included buttresses the assumption that those who produce and distribute movies will have an easier time surviving the setbacks last year than the beleaguered cinema group.

The survey doesn’t report on profits or losses at member companies. But revenues alone tell only part of the story. 2020 saw a severe drop. But between the lines, here are some ways the impact may not have been as severe as they look.

The biggest fall came in the area – theatrical play – from whom studios find their lowest overall return. Domestically, they recoup around 55 percent in film rental, less overseas. But the return on home platforms is usually much high. For domestic video on demand, the take is 70 percent. From the increasing lucrative Premium VOD option, 80 percent.

“Trolls World Tour”

DreamWorks Animation

Along with the drop in revenues, studios clearly spent much less on production last year, released fewer films (thus less marketing expended), cut back other expenses including staff furloughs. Then they took what they had in place already, particularly domestic, in terms of alternative outlets. So, as we saw exactly a year ago when Universal led the way in shifting current first run films to PVOD, they were able to turn on a dime. And as perhaps the biggest benefit, they found themselves free to experiment with new release strategies, most of which are likely to continue.

Theaters of course are resuming now, with elevated release schedules mostly with films intended for 2020 release soon to come. We don’t know how well they will perform in those locations, whether there will be a difference between domestic and foreign, or whether distributors will retreat from some of their aggressive non-theatrical options and limited windows.

Some other items of note among the many items of note:

– While theater revenue plunged, revenues from digital platforms rose 33 percent domestic, 31 percent foreign.

– Worldwide in 2020 there were 1.1 billion to subscription services such as Netflix and Disney+ (the former with the wider reach). That is 26 percent above 2019.

– Physical media sales (DVDs, Blu-Rays) fell around 20 percent worldwide, now representing only 9 percent of revenues.

– 46 percent of U.S./Canada residents age two or older bought at least one movie ticket in 2020. That was down from 76 percent in 2019. With theaters having been open full strength for the first 10 weeks of the year, this isn’t as surprising as it sounds.

– Frequent moviegoers, defined as those who go at least once a month (when theaters are open) comprise 3 percent of the population, but made up 43 percent of total sales. That suggests a group of avid fans were less concerned about attendance risks than the general public.

– None of these figures include pay television platforms like cable outlets like HBO, which of course provide a major source of revenue for studios. These total over 530 million users, but down 2 percent last year.

– 54 percent of American adults watched at least one VOD movie in 2020, up from 49 percent in 2019. That suggests that though a healthy 10 percent increase occurred, the gain in revenue from VOD came from greater frequency of renting among customers.

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