The smell of buttered popcorn, the cool sensation of frosty Pepsi in my mouth, and an afternoon of escape into a new and exciting world, this is what the movies meant to me. As a kid, I spent endless hours on these magical, plush red seats.
For years, cinemas were our first and most affordable choice for entertainment. Movies were the anchor for some of the best retail in the United States, aping the days when we went downtown for all our entertainment, be it a shopping trip, a movie, a delicious dinner at our favorite restaurant or maybe even a play. While many of us are not old enough to remember those days, they are certainly the model for modern entertainment districts.
Not surprisingly, the Pandemic, streaming, and other technology that allows entertainment and games in the palm of our hands have significantly affected the cinema industry. The North American Box Office Gross (NABOG) in 2023 and 2024 was between $8.5-$9.0 Billion, a drop from the Pre-Pandemic era of $11-$12 billion or approximately 70%. But even before the pandemic, NABOG was not growing, but hovering, as shown below:
North American Box Office Gross 1984-2024
Source: BoxOfficeMojo.com by IMDbPro and JB Research Company
In the last 40 years, 1984-2024, compound annual growth rate of cinema revenue has been 2.8%, while the population of the U. S. has increased only 1.0% on the same basis. As a reference, the North American Amusement and Theme Park gross revenue increased at a rate of 5.0% per annum in the past 26 years. Remember, inflation has been 2.6% in the past 26 years, so the real rate of growth is 2.4% for Amusement and Theme Parks. Adjusted for inflation (2.6% for the past 40 yrs.), cinemas revenue has been fairly stagnant in the period. This is a somewhat disappointing point of view.
What are a few of the reasons for stagnation, even prior to the Pandemic:
- Technology, including television even before streaming became available to all.
- Shifts in consumer behavior and preferences
- Shifting Demographics, including the aging of the U. S. population
- The availability of quality film product and again, preferences of the moving going public
- Over screening
With all of this disappointing news, there are some bright spots on the horizon. First, theaters are seeking to change the business model. While almost half of cinema revenue still comes from ticket sales, other revenue streams are growing. Some new points of differentiation include:
- The availability of premium large format screens
- Enhanced seating
- Enhanced Food and Beverage, including the highly profitable sale of alcoholic beverages
- Adoption of theaters as public assembly facilities offering opportunities for live events, gaming, sports, opera, kids movies and other programming.
I grew up going to the movies as a special treat. In my heart, I hope that theaters can evolve with the times and remain as sparkling, special places where one can lose oneself in a special environment for a few hours. Lord knows we need these safe escapes in our very chaotic world!
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