Industry Insider: Are People Going Back to Movie Theaters?
Felipe Bustillo
You take your seat in a comfortable red armchair, the smell of buttery popcorn in the air. The lights go down, the chit-chat fades away, and a child-like excitement pervades the room while everyone gets ready to be completely immersed in the story that is about to unfold on the big screen in front of you.
For many people, going to the movie theater is an experience that goes beyond the act of watching a movie, an experience that the Covid-19 pandemic nothing short of robbed us of for almost two years. In the meantime, streaming platforms and social media more than eagerly filled up the seemingly endless time that we had to spend in our homes. Many bought better TVs, projectors, advanced surround sound systems, with the looming thought that no one really knew when the pandemic was going to end. Thankfully, the return to our “normal” lives eventually did happen, and now it begs the question: will people go back to watching movies at the theater?
At the 2023 Academy luncheon, the annual event that honors the Oscars nominees before the Awards, a video went viral of Steven Spielberg telling Tom Cruise that with Top Gun: Maverick he “might have saved the entire theatrical industry.” Very strong words, pronounced by one of the most eminent figures of the industry. In order to analyze the premise behind this statement, it is essential to first understand how box office revenues are split among exhibitors (the movie theaters) and the distributor.
During the first weekend of a blockbuster release, most of the box office revenues go to the distributor, up to even 70% - which is why studios push for huge opening weekends with incessant marketing. From then on, every weekend the percentages progressively align, and after a few weeks exhibitors and distributors split box office revenues half and half (sometimes even in favor of the exhibitor), which provides a huge incentive for theaters to keep successful movies showing for as long as possible. On the other hand, independent movies have a completely different deal. Independent movies do not have the same bargaining power as huge blockbusters, meaning that exhibitors are able to take higher percentages up from the very start especially because they know that these movies might not attract audiences for more than a few weeks.
Top Gun: Maverick was first released on May 27th, 2022, and ran in theaters for almost 7 months, until mid-December 2022. This abnormally long theatrical window effectively brought in major revenues for the exhibitors, thus helping recoup the deep losses that they incurred during the pandemic - hence, it unofficially “saved the theatrical industry”. The continued success of Top Gun: Maverick at the theater was also possible thanks to its delayed release on Paramount+, which turned a blind eye to its usual rule of releasing film on the platform 45 days after the theatrical opening. In fact, Head of Paramount Pictures Brian Robbins reportedly said that Top Gun: Maverick would be released on the streamer only after the “home entertainment window” had played out, which used to be the standard system for pre-pandemic releases, which let movies exhaust their full potential in various markets in different time “windows”.
Additionally, during the May 2022 MoffettNathanson Media & Communications Summit in New York, Paramount Global’s CFO Naveen Chopra added:
“There are certain movies that are really made for the theatrical experience. Top Gun [Maverick] is a great example of that. You should see that movie in a theater, and it will stay in the theater for a longer period of time.”
This sentence could be the key to understanding what the short-term future of movie theaters will look like.
Global box office numbers have been steadily rising from the slump of 2020, but they are still far away from returning to their pre-Covid levels. In 2019, the worldwide yearly box office stood high at more than $11 billion, while in 2022 it totaled only a bit more than $7 billion. However, it is in the last two years that some of the biggest box office successes have been registered. Avatar: The Way of Water (2022) has earned $2.3 billion until now, making it the third highest grossing movie ever in only 4 months from its release. Spiderman: No Way Home (2021) is yet another huge success with $1.9 billion, and Top Gun: Maverick (2022) with $1.5 billion. These incredible successes figure among the first positions of the highest grossing movies ever, and were all released either during, or after the pandemic. Other recent notable successes are M3GAN (2022), which grossed $176 million against a budget of $12 million, Cocaine Bear (2023) with $81 million, Academy Award Best Picture Everything Everywhere All At Once (2022) with $135 million, and two movies that are still playing in theaters: Creed III (2023), which already stands at $249 million globally, and John Wick: Chapter 4 (2023), with $157 million after only week from its release.
Total yearly gross box office
Even though most of these movies were widely marketed and anticipated sequels, all of them share a specific characteristic that may be the reason why people have actively gone to the theater to watch them: the experience of seeing them in the theater substantially differs from the one of watching them at home. These movies promise, as part of their marketing strategy, that watching them on a big screen will fully let the audience experience stunning visuals, special effects, and sound effects (of course with some variation between one movie and the other). The excitement that the combination of these technical elements puts on the screen cannot yet be reproduced in the average living room, much less on a computer or, worse, a smartphone with wireless earbuds. The audience, maybe subconsciously, recognizes that watching them at home would simply not incite the same thrill. It is indeed possible that the cinematic experience will further divide into two main categories: action-packed, visual effects and CGI-filled movies that are elevated by watching them on a big screen, and smaller movies that found their core value in other elements of production that do not require the same setting to be enjoyed. Of course, this reasoning stands when not counting in the collective experience that it is to go to the cinema.
The latest news on the movie theaters' front is that of an interest on part of Amazon to purchase AMC Entertainment Holdings (NYSE: AMC), the largest movie theater chain in the world operating 950 theaters for a total of 10,500 screens. On March 28th, AMC’s stock price spiked by 21% after the rumor spread. This potential acquisition is possible thanks to the repeal of the Paramount Decree of 1948, which prohibited distributors to own exhibitors due to antitrust concerns. The fact itself that Amazon is interested in purchasing a theater chain means that the death of physical cinemas is nowhere near, but it might also amplify the artistic (and financial) gap between movies made for a theatrical release and films created for the streaming platforms.
After the pandemic, going to the movies has become much more of an event than a habit. The movie theater experience is not going anywhere - simply, the model will change. As streaming content at home is becoming every day more of a form of consumerism, going to the cinema less often may elevate it, and make it a true occasion. Covid-19 accelerated a digital development that would have nonetheless occurred, but the child-like excitement of the lights dimming down, the chit-chat fading away and the smell of buttery popcorn in the air, will always stay.
