Industry Insider: Economic Hurdles in the Film Industry

simu Liu (Barbie), Esai Morales (Mission: Impossible - Dead Reckoning Part One), and Zendaya Coleman (Dune: Part two)

After the box office success of “Barbenheimer” in 2023, it would not be unusual to believe that the film industry, specifically movie theaters, are once again on the rise, bridging the gap that has been growing between traditional theater and streaming. The advent of this two-film phenomenon created a massive media frenzy: people wanted to go to the theater to support both films, dress up, and create witty discourse on social media. However, Kaare Eriksen, media analyst for Variety Intelligence Platform, writes in the report “Film Industry Hurdles 2024” that despite this large turnout there is an “even colder reality that creating truly ‘event’ launches that get people to the theaters is harder than ever” and things are likely never going be the way they were pre-2019.” Including the struggle to get people back into theaters, this report highlights the main economic hurdles that the entertainment industry is facing in 2024. 

The film industry is a large ecosystem that comprises media conglomerates, consumers, international partners, talent and everything in between. However, the conversation of hurdles in the film industry have recently been dominated by streaming and the effects it has on all areas of this entertainment sector, including the economic impact. First, it is important to note the box office trends. Globally, theatrical income has been steadily falling off the charts with a 20% decline in 2023 from 2019 — which is where the global gross was at an all time high and down 24% in domestic gross since 2018 — which is where the domestic gross was at an all time high. While films such as Barbie and Oppenheimer give theater-loving cinephiles a hope that theater will make a comeback, it is very unlikely. Does 2024 allow theater a chance at redemption? Most likely not. 

Although it is the beginning of the year, 2024 films have struggled to keep up with the weekly grosses of films in 2023 with the exception of Dune: Part Two. In any case, there is still a catch-up game Hollywood needs to play in order to have this hurdle fully cleared: In 2023 the gross was down $3 billion from the 2018 peak of $12 billion. In order to compete with streaming this gap needs to be filled. Ultimately, with these theatrical struggles, streaming seems to be the best route for media executives to maintain a relatively stable flow of income without the risk of losing money if the film doesn't perform well.  

This, however, does not mean streaming doesn't come with its own financial hurdles. According to Eriksen, “No traditional studio is turning a meaningful profit from streaming. Warner Bros. Discovery has occasionally staved off SVOD losses, but it has done so by removing content from Max as well as writing off finished projects for tax purposes.” Countless streaming companies are creating ways to maintain profit while creating new strategies to compete with other streaming companies. For example, Netflix has had to revert back to listening agreements, embrace ad tiers, and start cracking down on sharing passwords, which ultimately, has helped it reduce its stock decline from its loss of subscribers. It is clear that media executives are lumbered with streaming: “two-thirds of U.S. adults prefer watching films on streaming services.”

With streaming becoming the norm, windowing has created new challenges for studio executives. While Christopher Nolan’s Oppenheimer ran for four months, Mission: Impossible and The Boogeyman ran for less than two months. Mission: Impossible run-time was likely due to Tom Cruise’s back-end gross deal for the film and  The Boogeyman was likely due to average popularity of horror films and its unlikely success on streaming such as Disney+. The varying times makes it difficult to predict how long a movie should be in theaters and the likelihood of its success in and out of the theater.  

The international film industry also plays a major role in Hollywood, specifically China. China’s box office in 2023 was close to matching their own box office peak in 2019, making it a huge market for media companies to make profit from U.S. films in another territory. China’s strength in box office numbers is due to the production of their own films and large population. The United States can greatly benefit from the large market in China if their films are released there, which is often not the case. Additionally, Hollywood is at the mercy of China’s scheduling: Chinese YOLO made $500 million while Dune: Part Two only made $50 million due to the similar release times. 

When talking about hurdles in the entertainment industry, it is imperative to discuss the strikes. While the WGA and SAG-AFTRA strikes took place in 2023 and ended in the fall, the effects of it will be felt for many years. Release dates, such as the sequel to The Batman, will be pushed back, ultimately causing films to lose their lucrative release spots, fan interest, and increase in post-production costs. 

While there are a multitude of economic hurdles facing the film industry, Kaare Erkisen highlights those that seem to be pressing to the major media companies. The unremitting battle between theater and streaming seems to be a the forefront of the economic hurdles, as executives struggle to balance between using streaming services and utilizing the box office to make profit.